Predatory pricing is considered an economic inefficiency in a perfectly competitive market because it undermines the principles of fair competition and distorts market dynamics.
By setting prices below cost with the intent of driving competitors out of the market, predatory pricing can create barriers to entry and hinder the functioning of a competitive market.
In a perfectly competitive market, firms are expected to compete based on factors such as quality, efficiency, and innovation, rather than engaging in predatory practices. Predatory pricing disrupts this balance by artificially manipulating prices to eliminate competition. This can lead to reduced consumer choice, decreased product diversity, and a less efficient allocation of resources.
Furthermore, predatory pricing can discourage potential entrants from entering the market, fearing the possibility of sustained losses if they compete against predatory pricing strategies. This limits competition, innovation, and overall economic growth. It can also create a monopoly or dominant market position for the firm engaging in predatory behavior, which can result in higher prices and reduced consumer welfare in the long run.
Overall, predatory pricing undermines the fundamental principles of a perfectly competitive market by distorting price signals, deterring entry, and harming consumer welfare. It is considered an economic inefficiency because it leads to suboptimal market outcomes and limits the benefits that competitive markets can provide.
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Diane Buswell is preparing the 2022 budget for one of Current Designs’ rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2022.
Quarter 1: 2,900 kayaks
Quarter 2: 3,300 kayaks
Quarter 3: 2,700 kayaks
Quarter 4: 2,700 kayaks
Current Designs’ policy is to have finished goods ending inventory in a quarter equal to 30% of the next quarter’s anticipated sales. Preliminary sales projections for 2023 are 1,100 units for the first quarter and 3,300 units for the second quarter. Ending inventory of finished goods at December 31, 2021, will be 870 rotomolded kayaks.
Production of each kayak requires 56 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2021, is 21,800 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits.
The polyethylene powder used in these kayaks costs $1.40 per pound, and the finishing kits cost $180 each. Production of a single kayak requires 4 hours of time by more experienced, type I employees and 5 hours of finishing time by type II employees. The type I employees are paid $18 per hour, and the type II employees are paid $15 per hour.
Selling and administrative expenses for this line are expected to be $43 per unit sold plus $8,300 per quarter. Manufacturing overhead is assigned at 150% of labor costs.
Diane Buswell is including sales predictions, inventory policies, material and labor costs, selling and administrative expenses, and manufacturing overhead in the 2022 rotomolded kayak budget.
Diane Buswell is creating Current Designs' 2022 rotomolded kayak budget using the available information. Quarterly unit sales predictions are given. Current Designs requires 30% of the next quarter's sales in finished goods inventories. Also offered are 2023 sales estimates. 870 kayaks were in stock on December 31, 2021. Each kayak requires 56 pounds of polyethylene powder and a finishing equipment. The corporation stocks 25% of the next quarter's polyethylene powder. Polyethylene powder ended December 31, 2021, with 21,800 pounds. As needed, finishing kits are constructed.
Polyethylene powder costs $1.40 per pound while finishing supplies cost $180. Type I employees labor for 4 hours and type II workers 5 hours to make a kayak. Type I workers earn $18 per hour, whereas type II workers earn $15. Selling and administrative costs for this line are $43 per unit and $8,300 per quarter. Manufacturing overhead is 150% of labor.
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how much will a $100 tax cut increase disposable income? how much will it increase consumption? (hint: mpc
A $100 tax cut would raise disposable income by $80 and would increase consumption by $64. MPC is frequently used to estimate the impact of a tax cut on disposable income and consumption.
The marginal propensity to consume (MPC) refers to the proportion of a person's additional income that they devote to consumption. To calculate how much a $100 tax cut will increase disposable income and consumption, we need to know the MPC. We'll assume an MPC of 0.8 for this example.
The formula to calculate the increase in disposable income is given as:
ΔYD = ΔY(1-t)
Where,ΔY = Change in income and t = tax rate.
Substituting the values in the above formula,
ΔYD = $100(1-0.2)
ΔYD = $80
The increase in consumption can be calculated using the formula below:
ΔC = MPC x ΔYD
Where, ΔYD = Change in disposable income
MPC = Marginal propensity to consume
Substituting the values in the above formula,
ΔC = 0.8 x $80
ΔC = $64
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EarthX produces EarthBike, the expected sales for the first three months of 2017 are as follows:
January: 500; February: 400; March 300, April 800
The company has a policy of having 10% of the next month’s sales in the ending inventory.
Required: generate the production budget for January and February.
It takes 2 kgs of gold to produce one unit. The company has a policy of having 20% of the next month’s production need in the ending inventory.
Required: generate the raw material budget for February.
1. Production Budget for January and February:
To generate the production budget for January and February, we need to calculate the number of units EarthX needs to produce based on the expected sales and the ending inventory policy.
Given sales forecast:
January: 500 units
February: 400 units
March: 300 units
Ending inventory policy: 10% of the next month's sales
Calculation:
January Production = January Sales + (February Sales * Ending Inventory %)
= 500 + (400 * 0.10)
= 500 + 40
= 540 units
February Production = February Sales + (March Sales * Ending Inventory %)
= 400 + (300 * 0.10)
= 400 + 30
= 430 units
Therefore, the production budget for January is 540 units, and the production budget for February is 430 units.
2. Raw Material Budget for February:
To generate the raw material budget for February, we need to calculate the amount of gold required for production based on the production budget and the ending inventory policy for raw materials.
Given:
It takes 2 kgs of gold to produce one unit.
Ending inventory policy: 20% of the next month's production need
Calculation:
February Production Need = February Production
= 430 units
Raw Material Requirement = February Production Need * Gold per Unit
= 430 * 2
= 860 kgs
Ending Inventory for Raw Materials = February Production Need * Ending Inventory %
= 430 * 0.20
= 86 kgs
Net Raw Material Requirement = Raw Material Requirement - Ending Inventory for Raw Materials
= 860 - 86
= 774 kgs
Therefore, the raw material budget for February is 774 kgs.
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You can buy a property today for $2.6 million and sell it in 6 years for $3.6 million. (You earn no rental income on the property) a. If the interest rate is 6%, what is the present value of the sales
If the interest rate is 6%, the present value of the sales proceeds from selling the property in 6 years for $3.6 million would be approximately $2.54 million.
To calculate the present value of the future sales proceeds, we can use the formula for the present value of a future cash flow.
The formula is:
Present Value = Future Value / (1 + r)^n
Where:
Future Value = Sales proceeds ($3.6 million)
r = Interest rate per period (6% or 0.06)
n = Number of periods (6)
Using the given values in the formula, we can calculate the present value of the sales proceeds:
Present Value = 3.6 million / (1 + 0.06)^6
Simplifying the expression:
Present Value = 3.6 million / (1.06)^6
Using a calculator, the value inside the parentheses, (1.06)^6, is approximately 1.4185. Plugging this value into the formula:
Present Value = 3.6 million / 1.4185
Calculating the expression:
Present Value = 2.54 million
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Mr. Chopra decides to sell his business shares to the public to acquire additional finance. Under which component in the balance sheet should Mr. Chopra show the money he obtained from the shareholders?
When Mr. Chopra sells his business shares to the public and acquires additional finance, the money obtained from the shareholders should be shown under the "Equity" component in the balance sheet.
The component in the balance sheet should Mr. Chopra show the moneyEquity represents the ownership interest in a company, and it includes the funds contributed by shareholders in exchange for shares of the company's stock. When shares are sold to the public, the proceeds from the sale increase the equity of the business. This is typically reflected as "Share Capital" or "Common Stock" in the equity section of the balance sheet.
By showing the money obtained from the shareholders in the equity section, Mr. Chopra can accurately represent the ownership stake and financial position of the company.
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University of Massachusetts Boston Microeconomic Theory Problem Set #12 Due May 5, 2022 - . 1. Market demand for a commodity is QD = 12 - P and the short-run cost function for the firm is STC(Q) = Q2 + 1 MC = 20 If the firm behaved as a perfectly competitive firm, determine the equilibrium price and quantity. If instead the firm behaved as a monopoly, what are the equilibrium price and quantity? Determine the change in consumer surplus and the change in producer surplus. . .
There is a deadweight loss of $4 due to the monopoly pricing behavior.
For a perfectly competitive firm, the equilibrium price and quantity are determined by setting the market demand equal to the market supply, which is equal to the marginal cost of production for all firms in the industry.
Market demand: QD = 12 - P
Marginal cost (MC) = $20
To find the equilibrium quantity, we set QD equal to the market supply:
QD = QS
12 - P = 20
P = $8
Substituting this value of P into the demand function gives us the equilibrium quantity:
QD = 12 - P
QD = 12 - 8
QD = 4
Therefore, the equilibrium price and quantity for a perfectly competitive firm are $8 and 4 units, respectively.
For a monopoly, the firm will produce at the level where marginal revenue equals marginal cost, and then charge the highest price that the market will bear. The marginal revenue (MR) curve for a monopolist is below the demand curve since the monopolist must lower its price to sell additional units of output.
Market demand: QD = 12 - P
Marginal cost (MC) = $20
The total revenue function for the monopolist is:
TR(Q) = P x Q
= (12 - Q)Q
= 12Q - Q2
The marginal revenue function is:
MR(Q) = dTR/dQ
= 12 - 2Q
To maximize profit, the monopolist sets MR equal to MC:
MR(Q) = MC
12 - 2Q = 20
Q = 4
Substituting this value of Q into the demand function gives us the monopoly price:
QD = 12 - P
4 = 12 - P
P = $8
Therefore, the equilibrium quantity for a monopoly is 4 units, and the equilibrium price is $8.
The change in consumer surplus is the difference between the original and new consumer surplus. For a perfectly competitive market, consumer surplus is the area below the demand curve and above the equilibrium price, while for a monopoly, it is the area below the demand curve and above the monopoly price.
Consumer surplus with perfect competition:
CS = 1/2 x (12 - 8) x 4
= $8
Consumer surplus with monopoly:
CS = 1/2 x (12 - 8) x 4 - 1/2 x (8 - 4) x 4
= $4
Therefore, the change in consumer surplus is -$4.
The change in producer surplus is the difference between the original and new producer surplus. For a perfectly competitive market, producer surplus is the area below the equilibrium price and above the short-run supply curve, while for a monopoly, it is the area below the monopoly price and above the marginal cost curve.
In this case, the short-run supply curve for the firm is its marginal cost curve:
STC(Q) = Q2 + 1
MC = dSTC/dQ = 2Q
Producer surplus with perfect competition:
PS = 1/2 x (8 - 0) x 4
= $16
Producer surplus with monopoly:
PS = (8 - 20) x 4/2
= -$24
Therefore, the change in producer surplus is -$40.
Overall, there is a deadweight loss of $4 due to the monopoly pricing behavior.
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1.Discuss some of the prominent issues of Corporate Governance. Critically analyse the relevance of these issues with particular reference to the corporate sector in Mauritius.
2. What are the sources of ethical problems in business? How these problems have been exacerbated with the Covid-19 pandemic and how can they be resolved?
1. corporate governance are associated with increases in organisations' operational effectiveness and sustainability, This Code comprises a set of principles and guidance aimed at improving and guiding the. governance practices of organizations within Mauritius.
2. Examples of Ethical issues in business are Discrimination and harassment, Workplace health and safety , Whistle-blowing or social media rants, Ethics in accounting practices, Corporate espionage and nondisclosure, Technology and privacy practices.
By studying management processes to find ways to be more responsible, you can handle ethical challenges as an HR or management expert. This may entail looking over the organization's rules and procedures to make sure they address ethical issues in the workplace. You can choose steps that might aid in the transition and assist develop ecologically responsible goals. Then, you can routinely check on your progress towards these objectives.
Communication and the enforcement of a strict code of ethics for decision-making are daily steps your team may implement to recognise and prevent ethical difficulties. You can make sure it consistently complies with applicable laws on these ethical concerns. To ensure openness and honesty when putting together financial reports for the company, you can also work with accountants.
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– A customer asked a freight forwarder when the cargo will arrive at Rome if the cargo is ready as follow:
Origin City: Buenos Aires, Argentina
Time to Pick Up: December 18th, 2022 4:00 PM, Buenos Aires time
Cargo: The cargo is Beef meat boxes of 20 kilograms each one. The total shipment is 10 boxes to the Marriott Hotel Villa Borghese. The cargo is perishable without refrigeration. The product is required to prepare Christmas and new year dinners at the hotel.
Time to Origin Port: 1.5 hours to the international airport, shipped at the flight at 4:00 PM Alitalia flight direct to Rome (Look for the time of flight from Buenos Aires to Rome – Fiumicino)
Shipping delays: the time from the arrival of cargo to the international airport until the flight takes off if cargo is sent via cargo air transportation.
IBM 1005 Int’l Transportation & Trade S2022 Prepared by Dr. Eduardo M. V. Jasson
If the shipping is by Ship, there is direct shipping to Rome the same day at 6:00 PM, and there is no delay in consolidating in a refrigerated container.
Time to Destination: If it is done by cargo shipping is 10 days plus 2 hours to clear custom and time to transport to the hotel. If it is by Air cargo is the time of the flight plus the same 2 hours to the hotel.
Shipping Mode: You need to decide which shipping you will use and justify. Considering that Air cargo will Cost 6 times the Shipping freight.
– A customer asked a freight forwarder when the cargo will arrive at Rome if the cargo is ready as follow:
Origin City: Buenos Aires, Argentina
Time to Pick Up: December 18th, 2022 4:00 PM, Buenos Aires time
Cargo: The cargo is Beef meat boxes of 20 kilograms each one. The total shipment is 10 boxes to the Marriott Hotel Villa Borghese. The cargo is perishable without refrigeration. The product is required to prepare Christmas and new year dinners at the hotel.
Time to Origin Port: 1.5 hours to the international airport, shipped at the flight at 4:00 PM Alitalia flight direct to Rome (Look for the time of flight from Buenos Aires to Rome – Fiumicino)
Shipping delays: the time from the arrival of cargo to the international airport until the flight takes off if cargo is sent via cargo air transportation.
If the shipping is by Ship, there is direct shipping to Rome the same day at 6:00 PM, and there is no delay in consolidating in a refrigerated container.
Time to Destination: If it is done by cargo shipping is 10 days plus 2 hours to clear custom and time to transport to the hotel. If it is by Air cargo is the time of the flight plus the same 2 hours to the hotel.
Shipping Mode: You need to decide which shipping you will use and justify. Considering that Air cargo will Cost 6 times the Shipping freight.
To decide on the shipping mode for the beef meat cargo from Buenos Aires, Argentina to Rome, the factors to consider are the perishable nature of the cargo, time constraints for Christmas and New Year dinners, and the available shipping options.
The options are air cargo or ship cargo, with the air cargo costing six times the shipping freight.
Given that the cargo consists of perishable beef meat boxes needed for Christmas and New Year dinners at the Marriott Hotel Villa Borghese in Rome, the time sensitivity and preservation of the product are crucial factors.
Air cargo offers a faster transportation time, with the cargo being shipped on the Alitalia flight at 4:00 PM on the same day.
However, air cargo is significantly more expensive, costing six times the shipping freight.
On the other hand, if the shipping mode is by ship, there is direct shipping to Rome at 6:00 PM on the same day, and there are no delays in consolidating the cargo in a refrigerated container.
However, the shipping time for cargo shipping is 10 days, and an additional 2 hours are required to clear customs and transport the cargo to the hotel.
Considering the time sensitivity and the perishable nature of the beef meat cargo, it is advisable to choose air cargo despite the higher cost.
Air cargo will ensure a faster delivery, reducing the risk of spoilage and meeting the deadlines for the Christmas and New Year dinners.
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On January 1, 2021, Norwood borrows $540,000 cash from a bank by signing a five-year Installment note bearing 7% Interest. The note requires equal payments of $131,701 each year on December 31. Requir
The total interest expense over the life of the note can be calculated by subtracting the principal amount from the total payments made. To calculate the interest expense for each year, we can subtract the remaining principal balance at the beginning of the year from the total payment made for that year.
Year 1: Interest expense = Total payment - Remaining principal balance
Total payment = $131,701
Remaining principal balance = $540,000
Interest expense = $131,701 - $540,000 = -$408,299 (Negative indicates a reduction in principal)
Year 2: Interest expense = Total payment - Remaining principal balance
Total payment = $131,701
Remaining principal balance = $540,000 - $131,701 = $408,299
Interest expense = $131,701 - $408,299 = -$276,598 (Negative indicates a reduction in principal)
Year 3: Interest expense = Total payment - Remaining principal balance
Total payment = $131,701
Remaining principal balance = $408,299 - $131,701 = $276,598
Interest expense = $131,701 - $276,598 = -$144,897 (Negative indicates a reduction in principal)
Year 4: Interest expense = Total payment - Remaining principal balance
Total payment = $131,701
Remaining principal balance = $276,598 - $131,701 = $144,897
Interest expense = $131,701 - $144,897 = -$13,196 (Negative indicates a reduction in principal)
Year 5: Interest expense = Total payment - Remaining principal balance
Total payment = $131,701
Remaining principal balance = $144,897 - $131,701 = $13,196
Interest expense = $131,701 - $13,196 = $118,505
Therefore, the interest expense for each year is as follows: Year 1: -$408,299 Year 2: -$276,598 Year 3: -$144,897 Year 4: -$13,196 Year 5: $118,505
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If no other forces are acting on a parcel (a small volume of air), how will the parcel react a difference in pressure?"
If no other forces are acting on a parcel (a small volume of air), it will accelerate in response to a difference in pressure. If a parcel of air is subjected to a pressure differential, it will accelerate in the direction of the lower pressure due to the difference in pressure acting upon it.
A parcel of air with a lower density will experience more acceleration in response to a given pressure differential than one with a higher density because the net force acting on it is greater. Since temperature and pressure are directly related in the atmosphere, the acceleration will cause the parcel of air to rise or fall depending on whether the lower pressure is above or below it.
If a parcel of air is subjected to a pressure differential, it will accelerate in the direction of the lower pressure due to the difference in pressure acting upon it. Since temperature and pressure are directly related in the atmosphere, the acceleration will cause the parcel of air to rise or fall depending on whether the lower pressure is above or below it.
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As we saw in one of the videos shown during the class on Direct Marketing, one of the most important elements of mobile marketing is that it introduces________ as a relevant customer characteristic that marketers can use to deliver persuasive messages.
It can be said that location is a crucial element of mobile marketing that can help businesses deliver persuasive messages to their target audience.
As we saw in one of the videos shown during the class on Direct Marketing, one of the most important elements of mobile marketing is that it introduces location as a relevant customer characteristic that marketers can use to deliver persuasive messages. Mobile marketing has become increasingly popular due to the widespread use of mobile devices worldwide. With mobile devices, consumers can access websites, make purchases, and get location-based information. Location-based marketing, a subfield of mobile marketing, has been a game-changer in terms of delivering personalized messages to customers. By leveraging customers' geographical locations, businesses can send highly targeted messages that are more likely to be relevant to their audience. Location-based marketing strategies involve using GPS-enabled devices to track users' locations and send messages tailored to their specific locations. This technique enables businesses to deliver personalized offers and promotions that are more likely to resonate with their audience, resulting in higher conversion rates. Additionally, location-based marketing can help businesses identify new markets and target new customer segments, resulting in more significant returns on investment. Therefore, it can be said that location is a crucial element of mobile marketing that can help businesses deliver persuasive messages to their target audience.
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Kelsy Diner's net income for the year ended November 30, 2020 was $94,000. Additional information is shown below.
Interest expense on borrowing $7,600
Decrease in accounts receivable $13,400
Increase in food inventory $2,600
Increase in accounts payable $3,400
Dividends paid to common shareholders $17,700
Calculate the net cash provided (used) by operating activities using the indirect method.
Do not enter dollar signs or commas in the input boxes.
Use the negative sign for a decrease in cash.
The net cash provided by operating activities, using the indirect method, is $108,200.To calculate the net cash provided or used by operating activities using the indirect method, start with the net income and make adjustments for non-cash expenses and changes in working capital.
Given:
Net income: $94,000 ,Interest expense on borrowing: $7,600,Decrease in accounts receivable: $13,400,Increase in food inventory: $2,600,Increase in accounts payable: $3,400, Dividends paid to common shareholders: $17,700. To calculate net cash provided or used by operating activities, we need to make the following adjustments:
1. Add back non-cash expenses:
Net income+ Depreciation expense+ Amortization expense+ Other non-cash expenses
Since the information provided doesn't include depreciation or amortization expenses, we'll assume there are no other significant non-cash expenses. Therefore, we'll only add back the net income:
Net income: $94,000
2. Adjust for changes in working capital: Increase in accounts receivable- Increase in food inventory+ Increase in accounts payable
Increase in accounts receivable: $13,400
Increase in food inventory: $2,600
Increase in accounts payable: $3,400
Adjusted net cash provided by operating activities:$94,000 + $13,400 - $2,600 + $3,400 = $108,200
Therefore, the net cash provided by operating activities, using the indirect method, is $108,200.
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On January 1, Barone Company purchased as a short-term investment a $1,000, 8% bond for $1,000. The bond pays interest each January 1. The bond is sold on April 1 for $1,125 plus accrued interest. Interest has not been accrued since the last interest payment date. What is the entry to record the cash proceeds at the time the bond is sold?
The entry to record the cash proceeds from the sale of a bond includes debiting Cash for the amount received and crediting Bond Investment for the original cost of the bond. Additionally, Interest Revenue is credited for the accrued interest earned until the sale date.
When a bond is sold, the company needs to record the cash proceeds received from the sale. The entry is typically recorded as follows:
Debit: Cash (proceeds from bond sale)
Credit: Bond Investment (original cost of the bond)
Credit: Interest Revenue (accrued interest)
The Cash account is debited to reflect the increase in cash resulting from the bond sale. The Bond Investment account is credited to remove the bond from the company's asset holdings and reflect the sale. Finally, the Interest Revenue account is credited to recognize the interest earned on the bond from the last interest payment date until the sale date. This ensures that the company properly recognizes the interest income it has earned.
The specific amounts recorded in each account will depend on the details of the transaction, such as the selling price of the bond and the accrued interest. By recording this entry, the company accurately reflects the cash proceeds from the bond sale and appropriately recognizes the interest revenue related to the bond.
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describe the ways in which capital can be transferred from suppliers of capital to those who demands capital
Capital can be transferred from suppliers of capital to those who demand capital through various ways like Stock market, Bank loans, Bonds, Venture capital.
The ways in which capital can be transferred from suppliers of capital to those who demands capital include the following:
1. Stock market: The stock market is one of the common ways of transferring capital from the suppliers of capital to those who demand capital. It's a platform where shares of public companies are bought and sold. A supplier of capital who has excess capital can buy shares of a company, which is seeking to expand its capital base, thus supplying the needed capital.
2. Bank loans: Bank loans are another common way of transferring capital from the suppliers of capital to those who demand capital. In this scenario, the supplier of capital (saver) deposits their capital in a bank, which in turn loans out the capital to borrowers, who need the capital for various reasons. The borrowers pay an interest on the loan, and the bank pays the suppliers of capital some interest on their deposits.
3. Bonds: Bonds are another popular way of transferring capital from suppliers of capital to those who demand capital. In this case, an issuer issues a bond, which is a debt instrument that allows the issuer to borrow capital from the market. The bond issuer then pays interest on the bond until maturity, and then the principal is paid back.
4. Venture capital: Venture capital is another way of transferring capital from suppliers of capital to those who demand capital. Venture capitalists provide capital to startups that require capital for their growth and expansion. In return, the venture capitalists own some shares of the company and expect some returns on their investments in the future.
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Archer Hardware is adding a new product line that will require an investment of $1,500,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $310,000 the first year, $270,000 the second year, and $240,000 each year thereafter for eight years. The investment has no residual value. Compute the payback period.
The payback period for the investment in Archer Hardware's new product line is approximately 5.83 years.It would take around 5.83 years for the cumulative cash inflows to equal or exceed the initial investment of $1,500,000.
How is the payback period calculated for Archer Hardware's new product line investment?To compute the payback period for the investment in Archer Hardware's new product line, we need to determine the time it takes for the cumulative cash inflows to equal or exceed the initial investment of $1,500,000.
Year 1 net cash inflow: $310,000
Year 2 net cash inflow: $270,000
Years 3-10 net cash inflow: $240,000 per year
To calculate the payback period, we will consider the cumulative net cash inflows until the initial investment is recovered.
Cumulative net cash inflows:
Year 1: $310,000
Year 2: $310,000 + $270,000 = $580,000
Year 3: $580,000 + $240,000 = $820,000
Year 4: $820,000 + $240,000 = $1,060,000
Year 5: $1,060,000 + $240,000 = $1,300,000
Year 6: $1,300,000 + $240,000 = $1,540,000
Year 7: $1,540,000 + $240,000 = $1,780,000
Year 8: $1,780,000 + $240,000 = $2,020,000
The payback period is the time it takes for the cumulative cash inflows to reach or exceed the initial investment:
Payback period = Year 5 + (Initial investment - Cumulative net cash inflows at Year 5) / Net cash inflow in Year 6
Payback period = 5 + ($1,500,000 - $1,300,000) / $240,000
Payback period = 5 + $200,000 / $240,000
Payback period = 5 + 0.8333
Payback period = 5.8333 years
Therefore, the payback period for the investment in Archer Hardware's new product line is approximately 5.83 years.
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What are the factors included in a cash flows analysis for evaluating capital investments? O Capital investment amount, operating expenses, revenue generated. O Sunk costs, operating expenses, revenue generated. Capital investment amount, manufacturing overhead, revenue generated. O Capital investment amount, operating expenses, asset turnover.
The factors included in a cash flows analysis for evaluating capital investments typically include:
Capital investment amount: This is the initial cost of the investment, including the purchase of any assets or equipment needed.
Operating expenses: These are ongoing costs required to operate and maintain the investment, such as labor, materials, utilities, and maintenance.
Revenue generated: This is the income that the investment will generate over its useful life, such as sales revenue, rental income, or other benefits.
Additionally, it is important to consider the time value of money when evaluating cash flows, so factors like the discount rate and depreciation should also be taken into account.
Sunk costs are not typically included in a cash flows analysis for evaluating capital investments because they represent costs that have already been incurred and cannot be recovered. Manufacturing overhead may be relevant if it is directly related to the investment being evaluated. However, asset turnover is not a factor in cash flows analysis but instead measures a company's efficiency in using its assets to generate revenue.
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You have been given the mandate to increase the B2B client base in the hotel sector. Goal: Acquire 10 new clients in the hotel industry by year end 2022. Consider the steps you will take to achieve this goal and complete the action plan below
To increase the B2B client base in the hotel sector and acquire 10 new clients by the end of 2022, an action plan can be implemented. This plan should include strategies such as market research, targeted marketing campaigns, networking, and building strong relationships with potential clients.
1. Market Research: Conduct thorough market research to identify potential clients in the hotel sector. Understand their specific needs, preferences, and challenges to tailor the approach accordingly.
2. Targeted Marketing Campaigns: Develop a targeted marketing campaign to reach out to potential clients. Utilize various channels such as email marketing, social media, and industry-specific platforms to promote the hotel's services and value proposition.
3. Networking: Attend industry events, conferences, and trade shows to network with key decision-makers in the hotel sector. Establish connections, exchange business cards, and engage in meaningful conversations to build relationships.
4. Strong Client Relationships: Focus on building strong relationships with potential clients by providing excellent customer service, personalized solutions, and timely communication. Offer incentives and loyalty programs to encourage repeat business.
5. Collaborate with Industry Partners: Partner with complementary businesses in the hospitality industry, such as event planners or travel agencies, to cross-promote services and gain access to their client base.
6. Referral Program: Implement a referral program to encourage existing clients to refer new businesses in the hotel sector. Provide incentives or discounts for successful referrals.
7. Track and Measure Progress: Regularly track and measure the progress of the action plan. Monitor the number of new leads, conversions, and client acquisitions. Analyze the results to make necessary adjustments and improvements to the strategy.
By following this action plan, the hotel can increase its B2B client base in the hotel sector and achieve the goal of acquiring 10 new clients by the end of 2022.
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E4-16 Recording Four Adjusting Journal Entries and Preparing an Adjusted Trial Balance (L04-2, L04-3) Mint Cleaning Inc. prepared the following unadjusted trial balance at the end of its second year of operations, ending December 31 Account Titles Debit Credit Cash $ 38 Accounts Receivable 9 Prepaid Insurance Machinery Accumulated Depreciation. Accounts Payable $0 9 Contributed Capital 76 4 Retained Earnings Sales Revenue 80 Administrative Expenses 26 Wages Expense 10 Totals $169 $169 Other data not yet recorded at December 31are as follows: a Insurance expired during the year, $5. b Depreciation expense for the year, $4. c. Wages payable, $7. d. Income tax expense, $9. Required: 1. Prepare the adjusting journal entries for the year ended December 31. 0f no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 Insurance expired during the year, $5. Note: Enter debits before credits. Event General Journali Debit Credit a View general journal Record entry Clear entry 6 80 < Prev 3 of 4 2. Using T-accounts, determine the adjusted balances in each account and prepare an adjusted trial balance as of December 31. Cash Accounts Receivable Beg, bal Beg, bal End, bal End. bal Prepaid Insurance Machinery Beg, bal Beg, bal End. bal. End. bal. Accumulated Depreciation Accounts Payable Beg, bal Beg, bal End. bal. End, bal Wages Payable Income Tax Payable Beg, bal. Beg, bat. End. bal End, bal Contributed Capital Retained Earnings Beg. bal Beg, bal End, bal End bal. Sales Revenue Administrative Expenses Beg, bal Beg. bal End. bal. End, bal. Wages Expense Depreciation Expense Beg. bal Beg bal End, bal End. bal Insurance Expense Income Tax Expense Beg. bal. Beg, bal End: bal. End. bal. MINT CLEANING INC. Adjusted Trial Balance December 31 Debit Account Titles Cash Accounts receivable Prepaid insurance Machinery Accumulated depreciation Accounts payable Wages payable Income tax payable Contributed capital Retained earnings Sales revenue Administrative expenses Wages expense Depreciation expense Insurance expense Income tax expense Totals Credit
Journal entries for the year ended December 31 are as follows:a. Insurance expired during the year, $5. This transaction is meant to record an adjustment entry as Insurance was expired during the year which indicates the amount of insurance that has been used.
It results in a decrease in the asset account and expense account will be increased in an equal amount. Journal entry for the same will be as follows:
In case, there is no entry is required for a transaction/event then “No journal entry required” in the first account field will be selected.
b. Depreciation expense for the year, $4. The purpose of this transaction is to record depreciation expense for the year on machinery. It will be recorded as an adjusting entry. The amount of depreciation expense is calculated based on the company's accounting policy and will decrease the asset account (Machinery) and increase the expense account (Depreciation Expense) in an equal amount. The entry for the same will be as follows:c. Wages payable, $7. This transaction is meant to record an adjustment entry for wages payable. This transaction is recorded to record the amount of the wages expense that has been earned but not yet paid. The entry will increase the wages expense account and will create a liability (wages payable) for the company. The entry for the same will be as follows:d. Income tax expense, $9. This transaction is meant to record an adjustment entry for the Income tax expense for the year. The amount of the income tax expense is calculated based on the company's income and tax rate. The entry will increase the income tax expense account and will create a liability (income tax payable) for the company.
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The flow experience refers to
the ultimate involvement in work
a condition of heightened focus, productivity, and
happiness.
both a & b
a design that allows for the flow of ideas, such as
The flow experience refers to both the ultimate involvement in work and a condition of heightened focus, productivity, and happiness.
The concept of flow was introduced by psychologist Mihaly Csikszentmihalyi, who described it as a state of complete immersion and deep concentration in an activity. When experiencing flow, individuals are fully engaged in what they are doing, feeling a sense of timelessness and effortless involvement. It is a state where challenges and skills are perfectly matched, leading to a sense of fulfillment and enjoyment.
The flow experience is often associated with activities that provide a balance between the level of challenge and one's abilities. When the demands of a task align with our skills, we enter a state of flow, characterized by a sense of being in the zone, losing self-consciousness, and experiencing a high level of focus and productivity. This state not only enhances performance but also brings about a deep sense of satisfaction and happiness.
So, the flow experience encompasses both the ultimate involvement in work and the state of heightened focus, productivity, and happiness that comes with it. It is a desirable state that individuals strive to achieve in their professional and personal pursuits.
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item 11 a major credit card company is interested in whether there is a linear relationship between its internal rating of a customer’s credit risk and that of an independent rating agency.
The major credit card company is interested in examining whether a linear relationship exists between its internal rating of a customer’s credit risk and that of an independent rating agency.Item 11 in this case would require a regression analysis.
in order to determine whether or not the independent variable (credit rating from independent rating agency) can predict the dependent variable (internal rating of the customer's credit risk) in a linear fashion. This analysis would involve the following steps:Collect the data for the dependent and independent variables.Plot the data on a scatter plot to assess the linear relationship between the variables.
Calculate the correlation coefficient (r) to determine the strength of the relationship.Perform a regression analysis to develop a linear equation that can be used to predict the dependent variable using the independent variable.Evaluate the significance of the regression equation and the individual regression coefficients.A linear relationship between the internal rating of a customer’s credit risk and that of an independent rating agency would be useful for the major credit card company. If such a relationship exists, then the company can use the independent rating agency's ratings to improve their own internal ratings of customers' credit risk.
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The major credit card company wants to determine whether there is a linear relationship between these two variables. There are two variables involved here: internal rating and independent rating.
The major credit card company wants to determine whether there is a linear relationship between these two variables. Linear regression is an appropriate statistical tool for this type of analysis. The company can use regression analysis to determine the relationship between the internal rating of credit risk and that of the independent rating agency. They can collect a sample of customers from their database and compare their internal credit ratings with the ratings given by the independent agency. After obtaining the data, they can then perform a regression analysis to determine the correlation between the two variables and to test whether this correlation is statistically significant. The regression analysis will produce an equation that can be used to predict the independent rating based on the internal rating. If there is a strong linear relationship between the two ratings, the company can use this equation to predict the independent rating of other customers based on their internal rating.
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When writing an executive summary in a formal report, make sure you include definitions of terms Identify the element of a report's introduction that is described. describe your secondary source This section orients readers by previewing the structure of the report. summarize key points Organization Key terms Sources and methods This section identifies the person(s) or organization(s) who commissioned the report. Authorization Background Significance Authorization makes precise suggestions for actions to solve the problem identified in the report Background lists all sources of information, arranged alphabetically Significance contains clear headings that explain each major section The body of a formal report Significance include a works cited section explain what the findings mean in terms of solving the original problem The body of a formal report allow readers to draw their own conclusions The conclusion to a report should
The conclusion to a report should provide a concise summary of the main findings and key points discussed in the body of the report.
In addition, the conclusion may also offer suggestions for further research or actions to be taken based on the findings. It should leave the reader with a clear understanding of the overall message and provide closure to the report. It should restate the purpose of the report, highlight the most important findings or recommendations, and emphasize the significance or implications of the results. The conclusion should reiterate the main findings and present recommendations for action or further research that should be taken based on the findings of the report. It should be concise and clear, as it is the final opportunity to leave an impression on the reader. The conclusion should leave the reader with a clear understanding of what has been presented in the report and why it is significant.The conclusion should be written in a way that allows the reader to easily understand the findings of the report and the significance of those findings. It should be the final opportunity to leave an impression on the reader, so it is important to make it clear and impactful.
Overall, the conclusion to a report should be written in a concise manner, emphasizing the key findings of the report, and presenting recommendations for action or further research that should be taken. It should be a brief summary of the report that reiterates the main points and conclusions.
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Which of the following social skills do many executives find challenging to acquire? A) having a large network in place B) being a good listener C) having empathy for subordinates D) being a good motivator
Active listening is a crucial social skill for executives as it enables them to understand the needs of their employees, clients, and stakeholders.
While having a large network in place, having empathy for subordinates, and being a good motivator are also important social skills for executives, active listening helps build trust, improve communication, and make better decisions that benefit the organization. Many executives find this skill challenging to acquire because they may be used to being in control and talking more than listening.
However, developing active listening skills requires patience, curiosity, and an open mind. Executives who actively listen demonstrate respect, empathy, and a willingness to learn from others. By doing so, they can foster collaboration, innovation, and a positive work culture that attracts and retains top talent. Ultimately, active listening is essential for effective leadership and organizational success.
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Explain the reason behind that the firms production function
alone facing the firm cannot adequately determine the economic
efficiency of the use of the firms resources. (5 marks)
The firm's production function alone cannot adequately determine the economic efficiency of resource utilization.
The reason behind this is that the production function focuses on the relationship between inputs and outputs in the production process, but it does not take into account the relative costs of those inputs. Economic efficiency involves maximizing output while minimizing costs, and this requires considering the prices or costs associated with the inputs.
A production function may show that increasing the quantity of inputs leads to an increase in output, but it does not reveal whether the additional output is worth the cost of the additional inputs. For example, if the cost of labor or raw materials is very high, the production function may suggest increasing their usage to boost output. However, from an economic perspective, it may not be efficient to increase input usage if the additional cost outweighs the benefits in terms of output.
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Your reflection will focus on the course and your performance. Reflect on yourself throughout the course. Address the 6 points below in your reflection. 1. Reflect on your initial attitude prior to starting this Innovation & Entrepreneurship course 2. How would you honestly evaluate your contribution and performance within this course? Use precise examples 3. Reflect on your creative confidence at the beginning and end of the course 4. What area/s of the course did you find to be valuable for your future (brief points) 5. What did you enjoy most in the course? 6. What did you enjoy least in the course?
The Innovation & Entrepreneurship course, undergone a significant personal and professional transformation.
Reflecting on my journey, I can address the following points:
Initial Attitude: Prior to starting the course, my attitude was a mixture of curiosity and skepticism. I was excited about exploring the world of innovation and entrepreneurship but also had reservations about my own abilities in these areas.Contribution and Performance: I would evaluate my contribution and performance within this course as consistently strong. I actively participated in class discussions, engaged in group projects, and consistently met assignment deadlines. For example, in our group project on developing a business plan for a social enterprise, I took the initiative to conduct market research and contributed innovative ideas for sustainable growth.Creative Confidence: At the beginning of the course, my creative confidence was relatively low. I hesitated to share my ideas and doubted their potential. However, as the course progressed, I gained confidence in my creative abilities.Learn more about Innovation & Entrepreneurship here
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The Akron Police Department has five detective squads available for assignment to five open crime cases. The chief of detectives, Paul Kuzdrall, wishes to assign the squads so that the total time to conclude the cases is minimized. The average number of days, based on past performance, for each squad to complete each case is as follows:
The average number of days is as follows: Days Squad 1 Squad 2 Squad 3 Squad 4 Squad 5 Case 1 20 32 12 28 28 Case 2 28 20 20 16 24 Case 3 16 20 24 32 12 Case 4 24 16 28 16 20 Case 5 16 32 12 28 20.
Problem: The Akron Police Department has five detective squads available for assignment to five open crime cases. The chief of detectives, Paul Kuzdr all, wishes to assign the squads so that the total time to conclude the cases is minimized. The assignment problem is a special case of linear programming problem, in which the objective is to minimize the cost or time.The number of detective squads available is equal to the number of open crime cases i.e. 5. Let the five detective squads be 1, 2, 3, 4 and 5 and let the five open crime cases be 1, 2, 3, 4 and 5. The aim is to assign each detective squad to a crime case such that the total time to conclude all the cases is minimized. The given problem can be represented in the form of a table as:Case/Squad12345Supply 12032122828a1 2820201624a2 162024321212a3 241628161620a4 163228122820a5 Demand 1 1 1 1 1The total time for the given assignment is 244, which is equal to the minimum total time possible. In the given problem, the Akron Police Department has five detective squads available for assignment to five open crime cases. The chief of detectives, Paul Kuzdrall, wishes to assign the squads so that the total time to conclude the cases is minimized. The problem can be solved using the assignment problem. The assignment problem is a special case of linear programming problem, in which the objective is to minimize the cost or time. In the given problem, the objective is to minimize the total time taken to conclude all the open crime cases. The number of detective squads available is equal to the number of open crime cases i.e. 5. Let the five detective squads be 1, 2, 3, 4 and 5 and let the five open crime cases be 1, 2, 3, 4 and 5. The aim is to assign each detective squad to a crime case such that the total time to conclude all the cases is minimized. The given problem can be represented in the form of a table as shown above. The table represents the time taken by each detective squad to complete each open crime case. The aim is to assign each detective squad to an open crime case such that the total time to conclude all the cases is minimized.
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Here is cash flow for a business.
Calculate the Net Present Value (NPV) of
the business! Use 15% interest per
period
The Net Present Value (NPV) of the business, using a 15% interest rate per period, is $2,228,388.32.
To calculate the Net Present Value (NPV) of the business, we need to discount each cash flow to its present value and then sum them up. The formula to calculate the present value of a cash flow is:
PV = CF / (1 + r)^n
Where PV is the present value, CF is the cash flow, r is the discount rate, and n is the period.
Using a 15% interest rate per period, we can calculate the NPV as follows:
Period 0: PV = -$1,800,000 / (1 + 0.15)^0 = -$1,800,000
Period 1: PV = $454,000 / (1 + 0.15)^1 = $395,652.17
Period 2: PV = $681,000 / (1 + 0.15)^2 = $517,486.89
Period 3: PV = $908,000 / (1 + 0.15)^3 = $609,654.19
Period 4: PV = $908,000 / (1 + 0.15)^4 = $526,870.75
Period 5: PV = $908,000 / (1 + 0.15)^5 = $482,532.57
Period 6: PV = $908,000 / (1 + 0.15)^6 = $446,537.66
Period 7: PV = $1,268,000 / (1 + 0.15)^7 = $609,654.19
Now we sum up all the present values:
NPV = PV1 + PV2 + PV3 + PV4 + PV5 + PV6 + PV7
= -$1,800,000 + $395,652.17 + $517,486.89 + $609,654.19 + $526,870.75 + $482,532.57 + $446,537.66 + $609,654.19
= $2,228,388.32
The Net Present Value (NPV) of the business, using a 15% interest rate per period, is $2,228,388.32.
The question should be-
Here is cash flow for a business.
Period Cash flow
0- -$1,800,00
1- $ 454,000
2- $ 681,000
3- $ 908,000
4- $ 908,000
5- $ 908,000
6- $ 908,000
7- $1,268,000
Calculate the Net Present Value (NPV) of
the business! Use 15% interest per
period
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Rina Chan is a Sales Manager with DRAKE, a firm of IT consultants. She receivers a salary of $185,000, an entertainment allowance of $14,000 and a fully maintained company car, an AXA 3. The purchase of cost of the car on 1 April 2013 was $126,000. The total running costs including deprecation are $12,750 pa, the car travels 14,000 km a year, of which 6,000 km are on business. As part of her salary package a superannuation benefit is provided on a 5:10% employee-employer basis. Other benefits form her salary package entitle Rina Chan to have mobile phone ($1560), subscriptions to professional magazines ($1350 pa), professional association subscription ($1210), and use of airport lounge membership ($1460) Because of the long work hours involved with her work Rina Chan is provided with the use of an IMB desktop PC for work at the home. The lease cost of the computer is $1000 per month. As part of an incentive scheme the firm offers a trip to USA to the employees who has made the most sales during the quarter. Rina Chan won this prize for the June quarter. It cost $11,750. Required: Advise Rina Chan and DRAKE as to the tax consequences of the above
Based on the salary, fringe benefits, and various allowances of Rina Chan and DRAKE, the tax consequences will be given in detail as below.
In Australia, the salary package of an employee is subject to tax and other obligations of the employer.
As a Sales Manager, Rina Chan receives a salary of $185,000, an entertainment allowance of $14,000, and a fully maintained company car. Her salary package also includes a superannuation benefit provided on a 5:10% employee-employer basis, mobile phone usage, subscriptions to professional magazines, professional association subscription, and use of airport lounge membership.
Additionally, she is allowed to use an IMB desktop PC for work at home, and she won a trip to the USA as part of an incentive scheme.
The tax consequences of the above for Rina Chan and DRAKE are as follows:
Salary: Rina Chan's salary is subject to income tax in Australia. As a result, DRAKE is required to withhold tax from Rina Chan's salary and remit it to the Australian Taxation Office (ATO) on her behalf. Entertainment allowance: The entertainment allowance received by Rina Chan is subject to fringe benefits tax (FBT). FBT is levied on the employer based on the taxable value of the benefit. The employer is required to calculate the taxable value of the entertainment allowance and pay FBT on it. Car usage: The car usage of Rina Chan is subject to FBT. The employer must calculate the FBT payable on the car and pay it to the ATO on behalf of the employee. Superannuation: Superannuation payments made by DRAKE to Rina Chan are tax-deductible for the employer. Additionally, Rina Chan is required to pay tax on the superannuation payments made by her employer. Other benefits: The mobile phone usage, subscriptions to professional magazines, professional association subscription, and use of airport lounge membership are generally tax-free for the employee and tax-deductible for the employer.Desktop PC usage: Rina Chan's usage of the IMB desktop PC for work at home is tax-free for the employee and tax-deductible for the employer. Incentive scheme: The prize won by Rina Chan is taxable income for her. DRAKE is required to withhold tax from the prize amount and remit it to the ATO on her behalf.To know more about taxable income, visit https://brainly.com/question/1160723
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According to an article in the Wall Street Joumai in early 2019. United States Steel Corp. said it plans to add 1.6 million tons of steelmaking capacity next year by resuming the construction of a new furnace in Alabama as tariffs on foreign metal raise profits on domestic steel." Source: Bob Tita. "U.S. Steel to Expand Under Tariffs," Wall Street Journal, February 11, 2019. a. How does a tariff on imported steel make a U.S. steel company more profitable? O A. Domestic steel firms will be able to lower prices, which will likely increase their profits. B. A tariff on imported steel will raise the prices of those imports, making it likely that some U.S. consumers of steel will shift from buying imported steel to buying domestically-produced steel. OC. A tariff on imported steel will lower the prices of those imports, making it likely that some U.S. consumers of steel will shift from buying imported steel to buying domestically-produced steel. OD. None of the above. A tariff on imported steel will lower the price of steel imports, making it likely that some U.S. consumers of steel will shift from buying domestically-produced steel to buying imported steel, thereby making U.S. steel companies less profitable b. People who had invested in U.S. steel firms are likely to be by a tariff on imported steel. c. Would people in the United States helped by the steel tarifs necessarily support the tariffs? Would people who were hurt by the tariffs necessarily oppose the tariffs? Which of the following statements is true? O A. Some of the people who lose from the tariffs may not understand that the tariffs have inflicted losses on them. For example, a consumer who pays more for a washing machine may not understand that the price of the washing machine has increased because of the steel tariffs. B. People who benefitted from the tariff are likely to support them. We can't say those people will necessarily support the tarifs, though, because their support for free trade unrestricted by tariffs may supersede their monetary gains from this particular tariff. OC. Some people who are hurt by the tariffs may stil support them because, for example, they believe it is a good idea, on normative grounds, to protect jobs in the steel industry. OD. All of the above
The correct answers are B for question a), C for question c), and none of the options provided for question b).
a) The correct answer is B. A tariff on imported steel will raise the prices of those imports, making it likely that some U.S. consumers of steel will shift from buying imported steel to buying domestically-produced steel.
This increased demand for domestic steel allows U.S. steel companies to sell more of their products at higher prices, leading to higher profits.
b) The article does not provide information about the impact on people who had invested in U.S. steel firms, so we cannot determine how they would be affected by the tariff on imported steel.
c) The correct answer is C. Some people who are hurt by the tariffs may still support them because they believe it is a good idea, on normative grounds, to protect jobs in the steel industry. Additionally, some of the people who lose from the tariffs may not understand that the tariffs have inflicted losses on them, which can result in their support for the tariffs. On the other hand, people who benefited from the tariffs may support them, but it is not guaranteed as their overall belief in free trade unrestricted by tariffs may supersede their monetary gains from this particular tariff.
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For the market demand given below and a Marginal Cost of $0 (zero), how many units of consumption are inefficiently excluded by the monopolist? Hint: Compare the monopoly quantity with the perfectly competitive market quantity at zero marginal cost. Price Quantity $5 20 $4 30 $3 40 $2 50 $1 60 $0 70 Select an answer and submit For keyboard navigation, use the up/down arrow keys to select an answer. a 30 units are excluded by the monopolist. b 40 units are excluded by the monopolist. C No consumption units are inefficiently excluded by the monopolist. d 50 units are excluded by the monopolist.
The correct answer is: b) 40 units are excluded by the monopolist. In a perfectly competitive market with zero marginal cost, the quantity demanded at a price of $0 would be the total market demand.
which is 70 units according to the given information. This is because at a price of $0, everyone in the market would be willing to consume the good.
However, under a monopolistic market, the monopolist has the power to set the price and quantity. The monopolist will choose a quantity where marginal cost equals marginal revenue, which is typically less than the perfectly competitive quantity. In this case, the monopolist may choose a quantity of 30 units where the price is $4.
Therefore, the difference between the perfectly competitive market quantity (70 units) and the monopolist's chosen quantity (30 units) represents the units of consumption that are inefficiently excluded by the monopolist. Thus, 40 units are inefficiently excluded.
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The estimated capital investment and the annual expenses) for four alternative designs of a diesel-powered air compressor are shown below, as well as the estimated market value for each design at the end of the common five-year useful life. The study period is five years, and the MARR is 20% per year. One of the designs must be selected for the compressor, and each design provides the same level of service. On the basis of this information, (a) Determine the preferred design alternative, using the IRR method (b) Show that the FW method (i = MARR), using the incremental analysis procedure, results in the same decision. Design Alternative D1 D2 D3 D4 Capital investment $100,000 $140,600 $148,200 $122,000 Annual expenses 29,000 16,900 14,800 22,100 Useful life (years) 5 5 5 5 Market value 10,000 14,000 25,600 14,000
Based on the provided data and using the Internal Rate of Return (IRR) method, Design Alternative D3 is the preferred choice.
To determine the preferred design alternative using the IRR method, we calculate the IRR for each alternative. The IRR is the discount rate at which the net present value (NPV) of the cash flows becomes zero. The alternative with the highest IRR is considered the most favorable.
For Design Alternative D1:
Capital investment: $100,000
Annual expenses: $29,000
Market value: $10,000
The cash flows for each year are as follows: -100,000, 29,000, 29,000, 29,000, 29,000, 10,000
The future worth is calculated by compounding the annual expenses and market value over the useful life of the compressor. By applying the MARR (20%) as the interest rate, we find that the future worth for Design Alternative D3 is the highest among the alternatives, resulting in the same decision as the IRR method.
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