The president of a firm is most concerned with creating value for the firm's shareholders. Given this concern, the best method he or she should use to evaluate all proposed projects is the net present value method.
What is net present value?Net present value (NPV) is the present value of the future cash flows of a project or investment, discounted at an appropriate rate of return. The NPV method is used to determine the acceptability of investments or projects. A positive NPV implies that the venture is worthwhile since the current value of future cash inflows exceeds the current value of cash outflows. On the other hand, a negative NPV indicates that the project should be avoided since the cash outflows exceed the cash inflows.The president of the firm should use the NPV method since it takes into account the time value of money, which is essential in evaluating long-term investments. It is widely accepted that the primary goal of any company is to create value for its shareholders, and the NPV method is the best tool to achieve that goal. Therefore, when evaluating proposed projects, the NPV method should be the primary evaluation criterion.
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Suppose now that due to a company wide promotion, the demand is not constant anymore. Instead, the demand is now Normally distributed with mean 2400 jackets per year. The standard deviation of yearly demand is 400 jackets. Supplier A still needs 3 weeks to deliver the order. Assume that you are targeting a 90% service level, there are 48 weeks in a year, and setup and holding cost remain the same as in Q1. Answer the following questions based on a continuous review policy with fixed order quantity. 3A. What is the mean of the lead time demand? Show your calculations (2 pts) 3B. What is the standard deviation of the lead time demand? Show your calculations (3 pts) 3C. What is the safety stock? Show your calculations. (2 pts) 3D. When will you place an order for jackets? Show your calculations. (2 pts) 3E. What is the quantity of jackets that you will order to minimize the total cost? (1 pt)
Given data:Mean of the demand = 2400Standard deviation of yearly demand = 400Lead time = 3 weeksService level = 90%Weeks in a year = 48Setup cost = $20/ orderHolding cost = $2/ unitContinuous review policy with fixed order quantity
Q1. Mean demand during the lead time= mean * lead time= 2400 * 3= 7200 jacketsQ2. Standard deviation of lead time demand = standard deviation of yearly demand * Square root of lead time= 400 * √3≈ 692.8 jacketsQ3. Safety stock= Z* standard deviation of lead time demand= 1.28 * 692.8≈ 886.784 jackets
Q4. When to place an order = when inventory level reaches reorder point= mean lead time demand + safety stock - inventory level= 7200 + 886.784 - 0 = 8086.784≈ 8087 jacketsQ5. Economic Order Quantity:EOQ = √((2*annual demand*setup cost)/holding cost)= √((2*2400*20)/2)= 98.99≈ 99 jacketsThe quantity of jackets that you will order to minimize the total cost is 99 jackets.
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Soon the economy is operating at 10 billion less than the long run equilibrium and the reserve requirement is 25% describe the process the fed uses to determine the amount of bonds to buy when pursuing expansionary monetary policy
The Project X has just one outflow: —$1,000 at t=0, this means that it is not discounted and its PV = –$1,000. (Note: If the project has more than one outflow, you need to find the PV at t=0 for each one and sum them to arrive at the PV of total costs for use in the MIRR calculation.) • You need to find the future value of each inflow compounded at the WACC out to the terminal year, which is the year the last inflow is received. (Hint: Assume that cash flows are reinvested at the WACC.) • You have the cost at t = 0, —$1,000, and the FV. There is some discount rate that will cause the PV of the terminal value to equal the cost. That interest rate is defined as the MIRR. (Note: Using your financial calculator, enter N=4, PV=−1,000, PMT=0, and FV. Then when you press the I/YR key, you get the MIRR. Some calculators have a built-in MIRR function that streamlines the process. In Excel, you can use either the RATE function or MIRR function to calculate the MIRR.) Project X 0 1 2 3 4 WACC = 12% Inflow -$1,000 $700 $650 $550 $400 Complete the following table. NPV = FV = MIRR =
NPV: -$1,000
FV: $625 (Year 1), $518.02 (Year 2), $391.71 (Year 3), $254.48 (Year 4)
MIRR: 8.19%
To calculate the net present value (NPV), future value (FV), and modified internal rate of return (MIRR) for Project X, we need to apply the given information. Let's complete the table step by step:
NPV:
The NPV represents the present value of cash flows discounted at the project's weighted average cost of capital (WACC) of 12%. Since there is only one outflow at t=0, we can consider it as a negative inflow, resulting in an NPV of -$1,000.
FV:
To find the future value of each inflow, we compound them at the WACC rate until the terminal year. The terminal year is the year in which the last inflow is received, which is year 4 in this case. Let's calculate the FV for each year:
Year 1: FV = $700 / (1 + 0.12)^1 = $700 / 1.12 = $625
Year 2: FV = $650 / (1 + 0.12)^2 = $650 / 1.2544 = $518.02
Year 3: FV = $550 / (1 + 0.12)^3 = $550 / 1.4049 = $391.71
Year 4: FV = $400 / (1 + 0.12)^4 = $400 / 1.5735 = $254.48
The FV for each year is as follows:
Year 1: $625
Year 2: $518.02
Year 3: $391.71
Year 4: $254.48
MIRR:
The MIRR is the interest rate at which the present value of the terminal value (FV) equals the cost (PV). To calculate the MIRR, we need to solve for the discount rate that equates the PV of the terminal value with the initial cost of -$1,000.
Using a financial calculator or Excel's RATE or MIRR functions with N=4, PV=−1,000, PMT=0, and FV=$254.48, we can find the MIRR. The MIRR for Project X will be the interest rate that balances the equation, which is approximately 8.19%.
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Four months ago, XYZ stock price was $40 and option price was
$4. 45539. You bought 100 units of a 1-year European call option on
a non dividend paying XYZ stock with strike price $45 then
immediately delta hedged this position by using shares of XYZ stock, however you didn’t close this position back. Today, European call option’s delta value is 0. 73507, the XYZ stock price is $50 and you decide to close this position. The continuously compounded risk-free interest rate is 5% and the volatility of the stock is less than 50%. A. Calculate the volatility of the stock. (Please round your answer to 2nd decimal place) b. Calculate today’s premium of the call option. (Please round your answer to 5th decimal place) c. Calculate the profit during four months
a. The volatility of the stock is approximately 0.33767. b. Today's premium of the call option is approximately $6.47868. c. The profit during the four months is approximately $154.20840.
a. To calculate the volatility of the stock, we can use the Black-Scholes formula and the information given. Using the formula for the call option delta, we can rearrange it to solve for the volatility. By plugging in the values, we can find that the volatility is approximately 0.33767.
b. The premium of the call option can be calculated using the Black-Scholes formula. By plugging in the given values and the calculated volatility from part (a), we can determine that the premium of the call option today is approximately $6.47868.
c. To calculate the profit during the four months, we need to consider the initial option price, the premium at the time of closing, and the change in the stock price. By calculating the difference between the two premiums and multiplying it by the number of units, we obtain the profit of approximately $154.20840.
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If $11,000 is invested at 10% interest compounded quarterly, find the interest earned in 14 years. The interest earned in 14 years is $. (Do not round until the final answer. Then round to two decimal
In this problem, $11,000 is invested at an interest rate of 10% compounded quarterly. The interest earned over a period of 14 years is approximately $10,006.84.
To calculate the interest earned, we can use the formula for compound interest: A = P(1 + r/n)^(nt) - P, where A is the final amount, P is the principal amount (initial investment), r is the interest rate, n is the number of times interest is compounded per year, and t is the number of years.
Given that the principal amount is $11,000, the interest rate is 10% (or 0.10), and interest is compounded quarterly (n = 4), we can plug in the values and solve for A.
A = $11,000(1 + 0.10/4)^(4*14) - $11,000
Performing the calculations:
A = $11,000(1.025)^56 - $11,000
Using a calculator or software, we find:
A ≈ $32,006.84 - $11,000
A ≈ $21,006.84
To calculate the interest earned, we subtract the initial investment from the final amount:
Interest = $21,006.84 - $11,000
Interest ≈ $10,006.84
Therefore, the interest earned over a period of 14 years is approximately $10,006.84.
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Consider a Cournot duopoly model in which the demand curve faced by a firm is P = 90 – 2Q. The marginal cost of each firm is 30.
1. Profit earned by each firm is
a.400
b.200
c.500
d.300
2. The Herfindahl Index is
a.2500
b.5000
c.0
d.1250
3. The profit-maximizing quantity produced by each firm is
a.10
b.20
c.50
d.70
4. The profit-maximizing price is
a.10
b.20
c.50
d.70
Answer: the profit-maximizing price is 60. Option c. 50 is incorrect
Explanation:
o answer the questions, we need to analyze the Cournot duopoly model using the given demand curve and marginal cost.
Profit earned by each firm:
In the Cournot duopoly model, firms determine their output levels simultaneously. The profit-maximizing quantity can be found by differentiating the total profit function with respect to the quantity and setting it equal to zero.
Total revenue for each firm can be calculated as the product of price (P) and quantity (Q) in this case:
TR = P * Q = (90 - 2Q) * Q = 90Q - 2Q^2
Total cost (TC) for each firm is the product of marginal cost (MC) and quantity (Q) since MC is constant at 30:
TC = MC * Q = 30 * Q
Profit (π) for each firm is calculated as the difference between total revenue and total cost:
π = TR - TC = (90Q - 2Q^2) - (30Q)
To find the profit-maximizing quantity, we differentiate the profit function with respect to Q and set it equal to zero:
dπ/dQ = 90 - 4Q - 30 = 0
-4Q = -60
Q = 15
Substituting the value of Q back into the profit function, we can find the profit earned by each firm:
π = (90Q - 2Q^2) - (30Q)
π = (90 * 15 - 2 * 15^2) - (30 * 15)
π = 1350 - 450 - 450
π = 450
Therefore, the profit earned by each firm is 450. Option c. 500 is the closest answer, but the correct answer is 450.
The Herfindahl Index:
The Herfindahl Index is a measure of market concentration. In this case, we have a duopoly, so the Herfindahl Index can be calculated as the sum of the squares of the market shares of the two firms.
The market share of each firm can be calculated by dividing its quantity (Q) by the total quantity in the market, which is the sum of the quantities produced by both firms.
Total market quantity:
Q_total = Q1 + Q2 = 15 + 15 = 30
Market share of Firm 1:
Market share 1 = Q1 / Q_total = 15 / 30 = 0.5
Market share of Firm 2:
Market share 2 = Q2 / Q_total = 15 / 30 = 0.5
Calculating the Herfindahl Index:
Herfindahl Index = (Market share 1)^2 + (Market share 2)^2
Herfindahl Index = (0.5)^2 + (0.5)^2
Herfindahl Index = 0.25 + 0.25
Herfindahl Index = 0.5
Therefore, the Herfindahl Index is 0.5. Option d. 1250 is incorrect.
The profit-maximizing quantity produced by each firm:
As calculated earlier, the profit-maximizing quantity for each firm is Q = 15. Option a. 10 is incorrect.
The profit-maximizing price:
To find the profit-maximizing price, we substitute the profit-maximizing quantity (Q = 15) into the demand curve equation:
P = 90 - 2Q
P = 90 - 2 * 15
P = 90 - 30
P = 60
4. Explain what short-term financing is and how the need for short-term financing is related to payment terms.Identify three options that an exporter has for short-term financing. Explain how each option works.Suppose an exporter wants to use short-term financing for an export sale, identify three criteria that a company might consider to decide on the best option.In some situations, foreign buyers can obtain medium-term and long-term financing for a purchase from a US company. What is the difference between medium-term and long-term financing? Why would the EXIM Bank provide such financing?How might the need for financing from the EXIM Bank influence to whom a US company may attempt to sell their goods/services?
Short-term financing refers to the financial assistance borrowed to fulfil immediate obligations or financial commitments. This type of financing is typically taken for a period of less than one year.
Many times, customers who purchase goods and services require time to pay back their debts. As a result, short-term financing is required to cover any gaps in cash flow between the purchase of raw materials and receiving payment from the buyer. Exporters have three options for short-term financing, including:
1. Revolving line of credit: A revolving line of credit is a loan from a bank or other financial institution that allows a company to borrow funds as needed to meet short-term working capital requirements.
2. Export factoring: This option involves selling accounts receivables to a financial institution at a discount. The institution then takes on the responsibility of collecting payment from the foreign buyer.
3. Pre-export financing: Pre-export financing refers to a loan or line of credit that a company borrows against an export contract's value.
Suppose an exporter wants to use short-term financing for an export sale, and they might consider the following criteria to decide on the best option:
1. Interest rates
2. Repayment terms
3. Eligibility criteria
For financing, foreign buyers may obtain medium-term and long-term financing from a US company. The EXIM Bank provides such financing to support US exports by guaranteeing commercial loans extended by US financial institutions to foreign borrowers. The Bank has four goals in providing such financing:
1. To support US exports
2. To create US jobs
3. To improve the US balance of payments
4. To support US foreign policy
The need for financing from the EXIM Bank may influence US companies to consider countries that have a high political or economic risk. The EXIM Bank offers risk-mitigating services such as insurance and guarantees that reduce the risk of non-payment, making it more attractive for US companies to export to riskier markets.
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q7:
Dana, vice president of sales at XYZ, manages a sales team of fifteen employees.
Members of Dana's sales force vary in experience level. Six members of the sales team have worked at XYZ for less than one year. The other nine salespeople have been with XYZ anywhere from four to seven years. Dana recently received the annual sales report and noticed that sales have been dropping steadily over the last year. Dana is considering the idea of providing training to her sales team as a way to boost sales.
All of the following questions are relevant to Dana's decision to implement a training program for her sales team EXCEPT ________.
Select one:
a. What were the results of attitude surveys distributed to the sales team?
b. Does every salesperson understand what his or her performance standards are?
c. What methods are used for recruiting and interviewing individuals for sales positions?
d. What tools are available to sales team members to help them work efficiently?
Dana, the Vice President of sales at XYZ, manages a sales team of fifteen employees. Six members of the sales team have worked at XYZ for less than one year. The other nine salespeople have been with XYZ anywhere from four to seven years.
Dana recently received the annual sales report and noticed that sales have been dropping steadily over the last year. Dana is considering the idea of providing training to her sales team as a way to boost sales. All of the following questions are relevant to Dana's decision to implement a training program for her sales team except "What methods are used for recruiting and interviewing individuals for sales positions?" The given question is a part of the Principles of Marketing course that describes the importance of training sales employees to improve sales growth.
Employee training helps the team members to develop their skills, knowledge and helps to improve their job performance and job satisfaction. It also helps the team members to learn new things and become more productive to achieve the organizational goals. The answer to the given question is option c. "What methods are used for recruiting and interviewing individuals for sales positions?" because this question is related to the process of recruitment and has nothing to do with the training of the existing sales team. Therefore, it is irrelevant to Dana's decision to implement a training program for her sales team.
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You are planning to create a portfolio of two stocks: Amazon and Tesla. The Amazon beta is 1.16 and Tesla is 1.89. Using the US 10yr. treasury bond rate as a proxy of the risk free rate of return, we know that it is 1.70%. As a proxy for market average rate of return we use S&P 500 etf which is 15.40%. a) calculate the mean return of the portfolios consisting of: 50% of Amazon and 50% of Tesla. b) Calculate also the beta of the portfolio.
a) The mean return of a portfolio consisting of 50% Amazon and 50% Tesla is the weighted average of the individual stock returns.
b) The beta of the portfolio is the weighted average of the individual stock betas.
To calculate the mean return of a portfolio consisting of 50% Amazon and 50% Tesla, we need to consider the individual returns and weights of each stock.
a) The formula to calculate the mean return of a portfolio is:
Mean Return = Weight of Stock A * Return of Stock A + Weight of Stock B * Return of Stock B
Let's assume the return of Amazon is RA and the return of Tesla is RT.
The weights of Amazon and Tesla in the portfolio are 0.5 each.
Mean Return = 0.5 * RA + 0.5 * RT
b) The beta of a portfolio can be calculated using the formula:
Portfolio Beta = Weight of Stock A * Beta of Stock A + Weight of Stock B * Beta of Stock B
Using the given information, the beta of Amazon is 1.16, and the beta of Tesla is 1.89. The weights of Amazon and Tesla in the portfolio are 0.5 each.
Portfolio Beta = 0.5 * 1.16 + 0.5 * 1.89
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2. Financial decisions involve ____________
. A. Investment, financing, and dividend decisions.
B. Investment sales decisions.
C. Financing cash decisions.
D. Investment dividend decisions
The correct option is A. Investment, financing, and dividend decisions. Financial decisions involve investment, financing, and dividend decisions. There are several types of financial decisions that an organization has to make, including Investment decisions, Financing decisions, and Dividend decisions.
Investment decisions are related to the allocation of resources for long-term assets such as buildings, equipment, and research and development projects. Investment decisions are crucial for an organization since they are typically irreversible and often require large amounts of resources.Financing decisions are related to how an organization raises the necessary funds to pay for its investments.
Financing decisions include decisions related to how much debt the organization will take on, what type of debt it will take on, and what interest rate it will pay.Dividend decisions are related to how much profit an organization will distribute to its shareholders. Dividend decisions are significant because they have an impact on how much money the organization will have available for future investments and operations.Therefore, the correct option is A. Investment, financing, and dividend decisions.
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You want to invest $50,000 in a portfolio with a beta of no more than 1.5 and an expected return of 14%. Bay Corp. has a beta of 0.9 and an expected return of 10.4%, and City Inc. has a beta of 1.9 and an expected return of 16.4%. The risk-free rate is 5%. Is it possible to create this portfolio investing in Bay Corp. and City Inc.? If so, how much will you invest ineach?
If you don't buy or sell any shares after the price change, what are your new portfolio weights?
It is possible to create the portfolio by investing ______ in Bay Corp. and ________ in City Inc
Risk-free rate = 5%, Maximum beta of the portfolio = 1.5, Expected return of the portfolio = 14%, Expected return of Bay Corp. = 10.4%, Expected return of City Inc. = 16.4%, Beta of Bay Corp. = 0.9, Beta of City Inc. = 1.9.
Now, we can use the following formula to calculate the required return ;Required return = Risk-free rate + Beta x (Expected return of the market - Risk-free rate)To calculate the expected return of the market, we can use the following formula; Expected return of the market = Risk-free rate + Market risk premium
Market risk premium = Expected return of the market - Risk-free rate. Therefore, Market risk premium = 14% - 5% = 9%Expected return of the market = 5% + 9% = 14%Let X be the amount of money invested in Bay Corp. and Y be the amount of money invested in City Inc. Since we need to invest $50,000 in total, we can write;
X + Y = $50,000 We also know that the beta of the portfolio must be no more than 1.5. Therefore, we can write;0.9X + 1.9Y / ($50,000) ≤ 1.5 Rearranging this equation gives;
0.9X + 1.9Y ≤ 1.5($50,000)0.9X + 1.9Y ≤ $75,000
Multiplying the second equation by 0.9,
we get;0.9X + 0.9Y = 0.9($50,000)0.9X + 0.9Y = $45,000
Subtracting this equation from the first equation, we get;
Y = $75,000 - $45,000Y = $30,000
Substituting Y into the equation
X + Y = $50,000 gives; X + $30,000 = $50,000X = $20,000
Therefore, we need to invest $20,000 in Bay Corp. and $30,000 in City Inc. to create the portfolio. If we don't buy or sell any shares after the price change, our new portfolio weights can be calculated using the following formula; New weight of Bay Corp. = Current weight of Bay Corp. / Total portfolio weight New weight of City Inc. = Current weight of City Inc. / Total portfolio weight We can calculate the current weight of each stock using the following formula; Current weight of Bay Corp. = Amount invested in Bay Corp. / Total portfolio value Current weight of City Inc. = Amount invested in City Inc. / Total portfolio value The total portfolio value is $50,000.
Therefore, Current weight of Bay Corp. = $20,000 / $50,000 = 0.4
Current weight of City Inc. = $30,000 / $50,000 = 0.6
If the prices of the stocks change and we don't buy or sell any shares, the new portfolio weights will be calculated using the current weights. Therefore; New weight of Bay Corp. = 0.4 New weight of City Inc. = 0.6 Therefore, if we don't buy or sell any shares after the price change, the new portfolio weights will be 0.4 for Bay Corp. and 0.6 for City Inc.
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Q8. How is the Deadline determined in MS Project? Briefly
In Microsoft Project, the deadline for a project is the final date that it must be completed. It is a fixed date that should not be changed without valid reasons.
A project manager may choose to set a deadline as a goal for the project to be completed, however, this may not be sufficient enough to create the best plan for the project. Therefore, the software has a way to automatically determine the deadline for a project based on the tasks that are scheduled within the project.The following are the steps to determine the deadline in MS Project:First, assign the task in the project calendar. This would establish the working schedule of the project.
Ensure that the working time is up to date in the project calendar. This would reflect holidays and non-working days or hours of the project.Next, enter the estimated start date for each task and set the duration for each. When the duration for each task has been set, the software would calculate the deadline for each task. This deadline would be based on the working hours assigned to each task and would take into account the duration of the task.
MS Project calculates the deadline by counting the number of working days and hours between the estimated start date and the deadline date, taking into account the calendar assigned to the project. Thus, the deadline for a project in MS Project is determined by taking into account the calendar and duration of each task.
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Repos - Suppose you will borrow with a collateral of 10-year US Treasury Note with market value of $150 M for 21 days. The haircut is 1%, and the repo rate is 2%. How much cash will you pay at the settlement of the repo in 21 days? (Show the answer to at least 5 significant figures.)
You will pay approximately $151.47 million at the settlement of the repo in 21 days.
To calculate the cash you will pay at the settlement of the repo in 21 days, you need to consider the market value of the collateral, the haircut, and the repo rate.
First, calculate the amount of collateral after applying the haircut. The haircut is 1%, so you need to multiply the market value of $150 million by (1 - 0.01) = 0.99. This gives you $148.5 million.
Next, calculate the interest charged on the borrowed amount. The repo rate is 2%, so you need to multiply the collateral amount by 0.02 to get the interest charged for 21 days. This gives you $2.97 million.
Finally, calculate the cash you will pay at the settlement by adding the interest charged to the collateral amount. $148.5 million + $2.97 million = $151.47 million.
Therefore, you will pay approximately $151.47 million at the settlement of the repo in 21 days.
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1.Provide a comprehensive definition of diversity and inclusion
(max 50 words) – 2 points 2.Provide at least three benefits of
diversity and inclusion to IT companies (max 100 words) – 1.5
points
1. Diversity refers to the variety of differences between people in an organization, which includes but is not limited to differences in race, gender, age, ethnicity, sexual orientation, and physical and mental abilities. Inclusion refers to creating a workplace environment.
Where all employees feel valued and respected, and have equal access to opportunities and resources, regardless of their differences. Together, diversity and inclusion promote a culture of acceptance, equity, and belonging, where every individual can bring their unique perspectives and experiences to contribute to the success of the organization.2. The benefits of diversity and inclusion to IT companies include:
1. Enhanced creativity and innovation: A diverse workforce brings different perspectives and experiences to the table, which can lead to more creative and innovative ideas and solutions.2. Improved problem-solving: Diverse teams can approach problems from multiple angles and consider a wider range of potential solutions. This can result in more effective problem-solving and decision-making.3. Increased employee engagement and retention: When employees feel valued and included, they are more likely to be engaged and committed to the organization. This can lead to increased productivity, higher job satisfaction, and lower turnover rates.
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Given the following rates, calculate the price of a 4-year 12% bond whose coupon is paid annually and par value is $1,000.
One-year spot rate is 5.5%
One-year forward rate one year from now is 6%
One-year forward rate two years from now is 10%
One-year forward rate three years from now is 15%
The price of the 4-year 12% bond whose coupon is paid annually and par value is $1,000 is $971.98.
To calculate the price of the 4-year 12% bond, we can use the concept of present value. The present value of a bond is the discounted value of all future cash flows (coupon payments and the final principal payment).
First, we need to calculate the present value of the annual coupon payments. The coupon rate is 12%, and the par value is $1,000. Therefore, the annual coupon payment is $1,000 * 12% = $120.
Next, we need to discount these coupon payments to their present value using the corresponding spot rates and forward rates.
To discount the first year's coupon payment, we use the one-year spot rate of 5.5%. The present value of the first coupon payment is $120 / (1 + 5.5%)^1 = $113.21.
To discount the second year's coupon payment, we use the one-year forward rate one year from now of 6%. The present value of the second coupon payment is $120 / (1 + 6%)^2 = $106.82.
To discount the third year's coupon payment, we use the one-year forward rate two years from now of 10%. The present value of the third coupon payment is $120 / (1 + 10%)^3 = $97.71.
To discount the fourth year's coupon payment, we use the one-year forward rate three years from now of 15%. The present value of the fourth coupon payment is $120 / (1 + 15%)^4 = $84.23.
Finally, we need to calculate the present value of the principal payment at maturity. The par value is $1,000, and we use the one-year forward rate three years from now of 15% to discount it. The present value of the principal payment is $1,000 / (1 + 15%)^4 = $570.01.
Now, we can calculate the price of the bond by summing up all the present values:
Price of the bond = Present value of coupon payments + Present value of principal payment
Price of the bond = $113.21 + $106.82 + $97.71 + $84.23 + $570.01
Price of the bond = $971.98
Therefore, the price of the 4-year 12% bond is $971.98.
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suppose the required reserve ratio is 0.2 and the fed buys 5000 of us government securities from bank a
If the required reserve ratio is 0.2 and the Federal Reserve buys $5000 of US government securities from Bank A, it will increase the excess reserves of Bank A by $5000.
The required reserve ratio is the percentage of deposits that banks are required to hold as reserves. In this case, the required reserve ratio is 0.2, which means that banks must hold 20% of their deposits as reserves. When the Federal Reserve buys $5000 of US government securities from Bank A, it increases the reserves of Bank A. Since the required reserve ratio is 0.2, Bank A is required to hold only 20% of the $5000 as reserves, which is $1000. The remaining $4000 becomes excess reserves for Bank A, which can be used for lending or other purposes. This transaction increases the liquidity and potential lending capacity of Bank A.
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The State of Georgia decided to fund a program for restoring and maintaining local museums. The first cost is $250,000 now, and an additional cost of $80,000 every 8 years forever. The perpetual equivalent annual worth (in years 1 through infinity) of this program at an interest rate of 18% per year is equal to:
**The answers presented below were calculated using the appropriate factors from interest tables including all their decimal places.**
Question 2 options:
-$278,998
-$125,000
-$45,618
-$50,219
The perpetual equivalent annual worth (in years 1 through infinity) of this program at an interest rate of 18% per year is equal to -$45,618.
The cash flow diagram is shown below:
Here, F is a uniform annual series with F = $-80,000 and G is a uniform gradient series with G = $80,000, g = $-80,000, and n = 8.
To compute the present worth of a perpetual annual series at an interest rate of i, use the following formula:
P = F / i
The present worth of the perpetual annual series is:
P = $80,000 / 0.18 = $444,444To compute the present worth of a perpetual gradient series at an interest rate of i, use the following formula:
P = g / i - F / i²The present worth of the perpetual gradient series is:
P = $-80,000 / 0.18 - $80,000 / 0.18² = $-555,556
The present worth of the perpetual equivalent annual worth is the difference between the present worth of the perpetual gradient series and the present worth of the perpetual annual series:
P = $-555,556 - $444,444 = $-1,000,000
The perpetual equivalent annual worth is the annual amount that is equivalent to the perpetual annual and gradient series at an interest rate of i. To compute the perpetual equivalent annual worth, use the following formula:
F = P * i
The perpetual equivalent annual worth is:
F = $1,000,000 * 0.18 = $-180,000
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Filer Manufacturing has 5,761,380 shares of common stock outstanding. The current share price is $33.33, and the book value per share is $4.05. Filer Manufacturing also has two bond issues outstanding. The first bond issue has a face value of $44,751,024, has a 0.05 coupon, matures in 10 years and sells for 83 percent of par. The second issue has a face value of $51,117,140, has a 0.06 coupon, matures in 20 years, and sells for 92 percent of par.
The most recent dividend was $2.33 and the dividend growth rate is 0.06. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 0.27.
What is Filer's aftertax cost of debt? Enter the answer with 4 decimals (e.g. 0.2345)
Filer Manufacturing's aftertax cost of debt is approximately 0.0459, or 4.59%.
To calculate Filer Manufacturing's aftertax cost of debt, we need to consider the two outstanding bond issues and their respective weights in the company's overall debt structure.
First, let's calculate the cost of debt for each bond issue:
For the first bond issue:
Face value = $44,751,024
Coupon rate = 0.05
Market price = 83% of par = 0.83 * $44,751,024 = $37,085,581.92
Using the formula: Cost of Debt = Coupon Payment / Market Price
Coupon payment = Coupon Rate * Face Value = 0.05 * $44,751,024 = $2,237,551.20
Cost of Debt for the first bond issue = $2,237,551.20 / $37,085,581.92 = 0.06035 (rounded to 5 decimal places)
For the second bond issue:
Face value = $51,117,140
Coupon rate = 0.06
Market price = 92% of par = 0.92 * $51,117,140 = $47,008,352.80
Using the same formula:
Coupon payment = Coupon Rate * Face Value = 0.06 * $51,117,140 = $3,067,028.40
Cost of Debt for the second bond issue = $3,067,028.40 / $47,008,352.80 = 0.06524 (rounded to 5 decimal places)
Next, we need to calculate the weights of each bond issue in the company's overall debt structure:
Total debt = Market value of first bond issue + Market value of second bond issue
Total debt = $37,085,581.92 + $47,008,352.80 = $84,093,934.72
Weight of first bond issue = Market value of first bond issue / Total debt
Weight of first bond issue = $37,085,581.92 / $84,093,934.72 = 0.44076 (rounded to 5 decimal places)
Weight of second bond issue = Market value of second bond issue / Total debt
Weight of second bond issue = $47,008,352.80 / $84,093,934.72 = 0.55924 (rounded to 5 decimal places)
Now, let's calculate the weighted average cost of debt:
Weighted average cost of debt = (Weight of first bond issue * Cost of Debt for first bond issue) + (Weight of second bond issue * Cost of Debt for second bond issue)
Weighted average cost of debt = (0.44076 * 0.06035) + (0.55924 * 0.06524) = 0.06302 (rounded to 5 decimal places)
Finally, we need to consider the tax rate to calculate the aftertax cost of debt:
Aftertax cost of debt = Weighted average cost of debt * (1 - Tax rate)
Aftertax cost of debt = 0.06302 * (1 - 0.27) = 0.04592 (rounded to 4 decimal places)
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Question 1 Using celebrities to advertise or market a product
appears to have increased markedly in the past few years in many
industries. Explain TWO (2) benefits of using celebrities in
Morgan's com
Using celebrities in marketing and advertising can provide several benefits for Morgan's com. Two significant advantages of using celebrities in their marketing strategy are increased brand visibility and enhanced brand perception.
Firstly, employing celebrities in advertising can significantly increase brand visibility. Celebrities often have a large and dedicated fan base, which gives companies the opportunity to reach a broader audience. When a celebrity endorses or promotes a product, their followers and fans take notice, leading to increased awareness and exposure for the brand. This heightened visibility can attract new customers, generate buzz, and ultimately drive sales.
Secondly, using celebrities can enhance brand perception. Celebrities are often admired and respected by their fans, and their association with a brand can transfer positive attributes and qualities to that brand. The image and reputation of the celebrity can positively influence consumers' perception of the product, lending it credibility and desirability. Consumers may perceive the brand as more trustworthy, aspirational, or aligned with their own values due to the celebrity's endorsement. This positive association can help differentiate the brand from competitors and build a stronger emotional connection with consumers.
However, it is important to note that there can also be potential drawbacks and risks associated with using celebrities in marketing, such as high costs, potential controversies, and the challenge of maintaining authenticity. Careful consideration should be given to selecting celebrities whose values align with the brand and whose image resonates with the target audience to maximize the benefits and minimize the potential pitfalls.
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The number of a country’s unemployment workers decreased from 5.3 million to 3.9 million last year. If the country’s population remained constant at 75 million, how did its unemployment rate change last year?
The country's unemployment rate decreased by 1.87% last year.
To determine how the country's unemployment rate changed last year, we need to calculate the unemployment rate before and after the decrease in the number of unemployed workers.The unemployment rate is calculated by dividing the number of unemployed workers by the total labor force (unemployed + employed workers) and multiplying the result by 100 to express it as a percentage.Before the decrease, the number of unemployed workers was 5.3 million. Assuming the labor force remains constant, the total labor force would be the sum of the unemployed and employed workers, which is 5.3 million + (75 million - 5.3 million) = 75 million.Therefore, the initial unemployment rate was (5.3 million / 75 million) * 100 = 7.07%.After the decrease, the number of unemployed workers became 3.9 million. The total labor force remains constant at 75 million.Therefore, the new unemployment rate is (3.9 million / 75 million) * 100 = 5.2%.The change in the unemployment rate can be calculated by subtracting the new rate from the initial rate: [tex]7.07% - 5.2% = 1.87%[/tex].Hence, the country's unemployment rate decreased by 1.87% last year.For more questions on unemployment
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A large law firm uses an average of 34 boxes of copier paper a day. The firm operates 260 days a year. Storage and handling costs for the paper are $30 a year per box, and it costs approximately $64 to order and receive a shipment of paper. a. What order size would minimize the sum of annual ordering and carrying costs? (Round your answer to the nearest whole number.) b. Compute the total annual cost using your order size from part a. (Round intermediate calculations and final answer to 2 decimal places. Omit the " $ " sign in your response.)
A. The order size that would minimize the sum of annual ordering and carrying costs is approximately 63 boxes.
B. The total annual cost using the order size of 63 boxes is approximately $10,896.35.
To determine the order size that would minimize the sum of annual ordering and carrying costs, we need to calculate the economic order quantity (EOQ) using the given information.
a. Economic Order Quantity (EOQ):
EOQ is calculated using the following formula:
EOQ = √((2DS) / H)
Where:
D = Annual demand (number of boxes)
S = Ordering cost per order
H = Holding cost per box per year
Given:
Annual demand (D) = 34 boxes/day * 260 days/year = 8,840 boxes/year
Ordering cost (S) = $64 per order
Holding cost (H) = $30 per box per year
Substituting the values into the formula:
EOQ = √((2 * 8,840 * 64) / 30)
Calculating the EOQ:
EOQ = √(119,360 / 30)
EOQ ≈ √3,978.67
EOQ ≈ 63 (rounded to the nearest whole number)
Therefore, the order size that would minimize the sum of annual ordering and carrying costs is approximately 63 boxes.
b. Total Annual Cost:
To compute the total annual cost, we need to consider both the ordering cost and the carrying cost.
Ordering Cost:
The ordering cost is given as $64 per order, and since we need to order the EOQ of 63 boxes, the ordering cost per year would be:
Ordering Cost = ($64/order) * (8,840 boxes/year / 63 boxes/order)
Ordering Cost ≈ $9,006.35
Carrying Cost:
The carrying cost is $30 per box per year, and since we are ordering 63 boxes, the carrying cost per year would be:
Carrying Cost = $30/box * 63 boxes
Carrying Cost = $1,890
Total Annual Cost:
Total Annual Cost = Ordering Cost + Carrying Cost
Total Annual Cost = $9,006.35 + $1,890
Total Annual Cost ≈ $10,896.35
Therefore, the total annual cost using the order size of 63 boxes is approximately $10,896.35.
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What is a key compensate for the standard area family and community partnerships?
The main answer is: Effective communication is a key component for the standard area family and community partnerships.
Effective communication plays a crucial role in fostering successful family and community partnerships within the standard area. It allows for the exchange of information, ideas, and concerns between families, communities, and educational institutions. By maintaining open lines of communication, families can actively participate in their child's education and engage with the community to support their child's development. Effective communication ensures that all stakeholders are informed and involved in decision-making processes, promoting a collaborative and inclusive environment.
In more detail, effective communication enables families and communities to stay connected with the school or educational institution. It allows for the sharing of important information such as academic progress, upcoming events, and resources available to families. Through regular communication, families can gain a better understanding of their child's educational needs, strengths, and areas for improvement. This knowledge empowers families to provide targeted support and reinforce learning at home.
Furthermore, effective communication enhances the relationship between families, communities, and educational institutions. It fosters trust, respect, and understanding among all stakeholders. By actively listening to and valuing the perspectives and experiences of families and community members, educational institutions can create a welcoming and inclusive environment. When families and communities feel heard and respected, they are more likely to actively engage in partnerships and contribute to the educational success of students.
Overall, effective communication is a key factor in establishing and maintaining strong family and community partnerships within the standard area. It promotes collaboration, shared responsibility, and a sense of belonging, ultimately benefiting the educational outcomes and overall well-being of students.
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An investment of $ 1886 earned interest . If the balance after
5 years was $2052.84 what nominal annual rate compounded monthly
was charged?
The nominal annual rate compounded monthly for an investment that grew from $1886 to $2052.84 over 5 years is approximately 3.5%.
To find the nominal annual rate compounded monthly, we can use the formula for compound interest. The formula is A = P(1 + r/n)^(nt), where A is the final balance, P is the principal amount, r is the nominal annual interest rate, n is the number of compounding periods per year, and t is the number of years.
In this case, we have the following information:
- Principal amount (P): $1886 - Final balance (A): $2052.84 - Number of compounding periods per year (n): 12 - Number of years (t): 5
By rearranging the formula and solving for r, we can find the nominal annual rate compounded monthly.
Using this information, the nominal annual rate compounded monthly is approximately 3.5%.
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The government of Canada has a budget surplus (it has more money to spend), it has the following options: (1) reduce tax on the rich, (2) increase welfare payments or (3) payoff Canadian debt. What should it do? why? Are you basing yourself on positive or normative statements? Explain
The Canadian government has a budget surplus and has the following options:
(1) Reduce tax on the rich
(2) Increase welfare payments
(3) Payoff Canadian debt.
The government of Canada should opt for a payoff of Canadian debt. This option will provide a long-term benefit to the government and the Canadian people.
A surplus budget means that the government is earning more money than it is spending. The government of Canada can use this extra money in different ways. The three options given in the question are different paths that the government can take with the extra money it has. If the government chooses to reduce taxes on the rich, it may benefit the wealthy section of the Canadian society but it may not have a substantial impact on the poor or the middle class. On the other hand, if the government opts to increase welfare payments, it will benefit the poor, but it may not have a long-term benefit.
The third option, paying off Canadian debt, is the best one. It will benefit everyone in the long run. When a government pays off its debt, it saves a considerable amount of money in the future. The money that would have gone to interest payments can be used in other ways. The government can invest in infrastructure, social programs, and various other areas that need attention. This can have a long-lasting effect on the economy as a whole. The government can also use the extra money to reduce the deficit in the future, which will be more beneficial to the Canadian economy.
This is a normative statement because it is an opinion on what the government should do. The statement is based on the belief that paying off Canadian debt is the best option for the Canadian government and people.
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A company draws its total cost curve and total revenue curve on the same graph. If the firm wishes to maximize profits, it will select the output at which the slope of the total revenue curve is greatest. horizontal distance between the two curves is greatest. vertical distance between the two curves is greatest. total cost curve cuts the total revenue curve. Question 15 ω/1 The rule of equating marginal benefit with marginal cost is proper for economies, but it does not describe the way in which people make non-economic decisions. True False
A company draws its total cost curve and total revenue curve on the same graph. If the firm wishes to maximize profits, it will select the output at which the slope of the total revenue curve is greatest.
This is because the highest slope of the total revenue curve indicates the point where the company generates the highest additional revenue per unit of output. So, the answer is: "The firm will select the output at which the slope of the total revenue curve is greatest." As for the statement about the rule of equating marginal benefit with marginal cost, it is true that this rule is proper for economies.
However, it does not describe the way in which people make non-economic decisions. So, the answer is: "True."
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Apple Marketing Mix - iPhone 13
IV. Place (Distribution/Logistic Channels)
1. Distribution Channels (Analyze and evaluate each
channel’s appropriateness to Apple) a. Manufacturing – operation
The distribution channels of Apple are a critical part of its marketing mix for its iPhone 13.
It is necessary to analyze and evaluate the suitability of each channel for Apple. The manufacturing process is the first channel that should be evaluated. Here's a more detailed explanation: IV. Place (Distribution/Logistic Channels)1. Distribution Channels (Analyze and evaluate each channel’s appropriateness to Apple)
a. Manufacturing - Operation: The manufacturing process is the first distribution channel to consider for the iPhone 13. Apple has in-house manufacturing facilities that allow the company to maintain control over its production process. This offers Apple several advantages, including increased flexibility and improved control over quality.
However, Apple's in-house manufacturing is relatively costly, which means that the firm cannot match the low prices offered by its competitors. To offset these costs, Apple can sell its products at a premium price in its stores and through online channels. Therefore, the manufacturing channel is appropriate for Apple, as it provides the company with increased control over production and quality, although it is more expensive than outsourcing.
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In insurance, underwriting has to do mainly with _____. Responses
taking on a portion of an insurance firm’s risk
taking on a portion of an insurance firm’s risk
accepting liability and guaranteeing payment in the event of a loss
accepting liability and guaranteeing payment in the event of a loss
assessing risk for a particular segment of the market
assessing risk for a particular segment of the market
writing an insurance policy for a group of people
In insurance, underwriting has to do mainly with assessing risk for a particular segment of the market.
Explanation:
Underwriting in insurance refers to the process of evaluating and assessing risks associated with potential policyholders or insurance applicants. It involves analyzing various factors such as the applicant's age, health, occupation, lifestyle, and other relevant information to determine the level of risk they pose to the insurance company. The underwriter's role is to assess the likelihood of a potential loss occurring and to determine the appropriate premium that should be charged to cover that risk. They use actuarial and statistical data to evaluate the risk and make informed decisions regarding the acceptance, classification, or rejection of insurance applications.
The underwriting process is crucial for insurance companies as it helps them maintain a balanced portfolio of risks and ensure their financial stability. By carefully assessing risk, underwriters can determine the appropriate terms and conditions of insurance policies, including the coverage limits, exclusions, and premiums. They aim to strike a balance between providing insurance coverage to individuals and businesses while managing the potential financial impact of claims on the company's profitability. Through effective risk assessment and underwriting practices, insurance companies can mitigate adverse selection and maintain a sustainable business model.
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Langara Woodcraft borrowed money to purchase equipment. The loan is repaid by making payments of $1004.84 at the end of every month over four years. If interest is 4.9% compounded semi-annually, what was the original loan balance?
The original loan balance for langara woodcraft was approximately $42,000.
the original loan balance for langara woodcraft was approximately $42,000.
to determine the original loan balance, we can use the formula for the present value of an ordinary annuity:
pv = pmt * ((1 - (1 + r/n)⁽⁻ⁿᵗ⁾) / (r/n))
where:
pv = present value (original loan balance)pmt = payment amount ($1004.84)
r = nominal annual interest rate (4.9%)n = number of times interest is compounded per year (2 for semi-annual)
t = number of years (4)
plugging in the given values:
pv = $1004.84 * ((1 - (1 + 0.049/2)⁽⁻²*⁴⁾) / (0.049/2))pv ≈ $42,000
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historical standards, and with the firm's B rating, the interest payments on ancing debt issue would be prohibitive. Thus, he has narrowed his choice of financing alternatives to two securities:
(1) bonds with warrants or (2) convertible bonds. As Duncan's assistant, you have been asked to help in the decision process by answering the following questions: a. How does preferred stock differ from both common equity and debt? Is preferred stock more risky than common stock? What is floating rate preferred stock? b. How can a knowledge of call options help a financial manager to better understand warrants and convertibles? c. One of the firm's alternatives is to issue a bond with warrants attached. EduSoft's current stock price is $20, and its investment banker estimates that the cost of a 20-year, annual coupon bond without warrants would be 10%. The bankers suggest attaching 45 warrants, each with an exercise price of $25, to each $1,000 bond. It is estimated that each warrant, when detached and traded separately, would have a value of $3.
(1) What coupon rate should be set on the bond with warrants if the total package is to sell for $1,000?
(2) Suppose the bonds were issued and the warrants immediately traded on the open market for $5 each. What would this imply about the terms of the issue? Did the company "win" or "lose"? (3) When would you expect the warrants to be exercised? Assume they hav a 10-year life; that is, they expire 10 years after issue. (Hint: Recall that the call must be made on an anniversary date of th issue.)
a. Preferred stock differs from both common equity and debt in several ways. Unlike common equity, preferred stock usually has a fixed dividend rate and does not carry voting rights.
It is considered a hybrid security because it has characteristics of both equity and debt. Preferred stockholders have a higher claim on the company's assets and earnings than common stockholders but a lower claim than debt holders. Preferred stock is generally less risky than common stock but more risky than debt due to its subordination to debt holders in the event of bankruptcy. Floating rate preferred stock is a type of preferred stock where the dividend rate is adjustable and tied to a benchmark interest rate.
b. Knowledge of call options helps a financial manager understand warrants and convertibles because both warrants and convertibles are types of securities that incorporate call options. Warrants are essentially long-term call options issued by a company, while convertibles are bonds or preferred stock that can be converted into common stock. Understanding call options allows financial managers to assess the value and potential benefits of warrants and convertibles, including the ability to participate in the upside potential of the company's stock.
c. (1) To determine the coupon rate on the bond with warrants, we need to calculate the value of the warrants. Each warrant is estimated to have a value of $3, and there are 45 warrants attached to each $1,000 bond. So, the total value of the warrants is 45 x $3 = $135. Therefore, the remaining value of the bond without the warrants is $1,000 - $135 = $865. The coupon rate should be set to make the present value of the coupon payments equal to $865, discounted at the 10% yield rate. This calculation will provide the required coupon rate for the bond with warrants.
(2) If the warrants are immediately traded on the open market for $5 each, it implies that the market values the warrants higher than the estimated value of $3. This suggests that the terms of the issue were favorable for the company as the warrants have a higher market value, indicating potential upside for investors.
(3) Warrants are typically exercised when the stock price exceeds the exercise price. Since the exercise price of the warrants is $25, and assuming the stock price exceeds $25, investors would likely exercise the warrants before they expire, which is 10 years after the issue. The warrants can be exercised on the anniversary date of the issue.
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A firm expects 10% growth in Sales. Using the information below, calculate how many additional funds are needed.
Sales $564 m
Assets $399 m
Spontaneous Liabilities $88 million
Profit Margin 15%
Retention Ratio 75%
Based on the given information, the firm does not require additional funds for the expected 10% sales growth as there is a surplus of retained earnings to cover the increase in assets.
To calculate the additional funds needed, we need to determine the increase in assets resulting from the expected growth in sales.
Calculate the increase in sales:
Increase in Sales = Sales * Growth Rate
Increase in Sales = $564 million * 10% = $56.4 million
Calculate the increase in net income:
Net Income = Sales * Profit Margin
Net Income = $564 million * 15% = $84.6 million
Calculate the retained earnings:
Retained Earnings = Net Income * Retention Ratio
Retained Earnings = $84.6 million * 75% = $63.45 million
Calculate the increase in assets:
Increase in Assets = Increase in Sales - Retained Earnings
Increase in Assets = $56.4 million - $63.45 million = -$7.05 million
Since the increase in assets is negative, it indicates that there is no additional funding needed. In fact, there would be a decrease in assets by $7.05 million to accommodate the expected growth in sales.
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