Making capital expenditures is a critical decision for any company, as it involves significant investments of funds and time. Prior to committing resources to such projects, it is important for companies to weigh all possible options carefully.
This involves assessing the potential return on investment, considering the long-term implications of such investments on the financial health of the company, and ensuring that appropriate planning and budgeting processes are in place. It is also recommended to seek the advice of accountants or other financial professionals before making capital expenditures, as they can provide valuable insights and analysis. Ultimately, taking a strategic approach to capital expenditures can help companies make informed decisions that support their growth and success over the long term.
Learn more about capital expenditures here:
https://brainly.com/question/32154085
#SPJ11
1, A lender of last resort should
A: lend to solvent financial institutions who are in need of additional capital.
B: facilitate the orderly liquidation insolvent financial institutions.
C: bailout insolvent institutions at risk of failing.
D: lend to solvent financial institutions who are in need of additional liquidity.
lend to solvent financial institutions who are in need of additional liquidity. A lender of last resort, typically a central bank or a government institution, acts as a backstop during times of financial crises or liquidity shortages.
The primary role of a lender of last resort is to provide liquidity to solvent financial institutions that are experiencing temporary liquidity problems. By lending to solvent institutions, the lender of last resort helps maintain stability in the financial system, prevents systemic disruptions, and avoids the potential contagion effect that could arise from the failure of individual institutions. Lending to solvent institutions in need of additional liquidity ensures that they can meet their short-term obligations and continue to function effectively. It helps restore confidence in the financial system, reduces the risk of bank runs or panic withdrawals, and facilitates the smooth functioning of financial markets. However, it is important to note that a lender of last resort does not bail out insolvent institutions or provide long-term capital support. Its role is focused on providing short-term liquidity assistance to maintain stability in the financial system.
Learn more about financial institutions here;
https://brainly.com/question/32280297
#SPJ11
The 1944 Bretton Woods conference led to the creation of two
institions, the International Monetary Fund and the World Bank,
that helped to define international economic relations after World
War II.
The Bretton Woods Conference of 1944 led to the creation of two institutions, namely the International Monetary Fund (IMF) and the World Bank, that helped to define international economic relations after World War II.
The Bretton Woods Conference of 1944 led to the creation of two institutions, the International Monetary Fund (IMF) and the World Bank, which helped to define international economic relations after World War II. The Bretton Woods Conference took place in 1944, and it was an international conference held in Bretton Woods, New Hampshire.
The purpose of the conference was to establish a new international monetary system that would be able to promote trade and economic stability between nations. The conference created two institutions, the International Monetary Fund (IMF) and the World Bank, to help achieve this goal.
To know more about World War II visit:-
https://brainly.com/question/29671766
#SPJ11
During the 1970s, oil prices increased dramatically and caused:
During the 1970s, oil prices increased dramatically, causing economic and political impacts worldwide development . This is due to several factors, including the OPEC oil embargo, the decrease in oil supply, and the significant increase in global demand.
The Organization of Petroleum Exporting Countries (OPEC) imposed an oil embargo in 1973 as a response to western support of Israel during the Arab-Israeli conflict. This embargo restricted oil exports to countries supporting Israel, including the United States and Western Europe. This oil embargo caused oil prices to increase by 400%, which had a severe impact on Western economies as they were highly dependent on imported oil.Furthermore, the decrease in oil supply during the 1970s was caused by the decline of oil production in the United States and other countries, which were the world's leading oil producers at the time. These decreases in supply further exacerbated the impact of the embargo. As oil prices skyrocketed, businesses and consumers faced higher costs and lower purchasing power.The oil crisis also had significant political impacts. As Western economies faced an energy crisis, they began to seek alternatives to their oil dependency. They turned to new technologies such as nuclear energy and renewable resources such as wind and solar. Additionally, OPEC countries used their newfound wealth to leverage political power and influence events in the Middle East and globally.In conclusion, the oil crisis of the 1970s had far-reaching and long-lasting impacts on the global economy and politics. Its effects were felt for years to come as countries sought to reduce their reliance on oil and establish new energy policies.
To know more about development visit:
https://brainly.com/question/28011228
#SPJ11
1) the promotional tactics employed by red bull are evidence of ______________________________. a socially responsible marketing b a pull strategy c sales promotion d quizlet
The promotional tactics employed by Red Bull are evidence of socially responsible marketing.
Socially responsible marketing refers to the practice of promoting products or services while contributing to the well-being of society and the environment. It is a marketing approach that emphasizes the social, environmental, and ethical implications of a company’s products or services, and it seeks to promote positive change in society. Red Bull, the energy drink brand, is a great example of a company that practices socially responsible marketing. The company’s promotional tactics, such as sponsoring extreme sports events and supporting environmental initiatives, are aimed at engaging customers while also contributing to society and the environment. As a result, Red Bull has built a strong brand that is synonymous with adventure, extreme sports, and environmentalism, among other things. Hence, the promotional tactics employed by Red Bull are evidence of socially responsible marketing.
To know more about marketing visit:
https://brainly.com/question/27155256
#SPJ11
The promotional tactics employed by Red Bull are evidence of socially responsible marketing.
Red Bull is one of the most popular energy drink brands. It has always been known for its unique marketing strategies and how they are involved in sports events, adventure activities, and extreme sports. Red Bull has become a well-known brand and the largest energy drink in the world due to its effective marketing strategy. Its unique marketing approach is based on marketing through social responsibility and emotional connection with consumers. The brand Red Bull is one of the most socially responsible brands in the world of marketing as it promotes social responsibility by sponsoring environmental and sports events. One of the significant reasons why Red Bull stands out among its competitors is that it focuses on a pull strategy. The brand pulls consumers towards it through its unique promotional tactics and stands out by using content marketing as a marketing tool. The company uses content marketing through its website, social media platforms, and blogs to connect with its customers on a personal level. The brand Red Bull has developed into one of the world's most effective and successful marketing strategies. Their focus on socially responsible marketing and emotional connections with consumers has created a successful pull strategy. The brand is well-known for its sponsorship of extreme sports, sports events, and environmental initiatives, which has helped it achieve its status. It is a clear example of the importance of social responsibility in marketing. They have succeeded by creating a unique brand identity through content marketing, where they have made significant investments in their website, social media, and blog channels. It has created a highly engaged community, allowing Red Bull to differentiate itself from its competitors. It is an excellent example of the power of emotionally connecting with customers, and investing in social responsibility to create a strong brand identity that stands out.
Red Bull's marketing strategy is a clear example of how a brand can succeed through socially responsible marketing, pull strategies, and emotionally connecting with customers. The brand has become a well-known household name, due in part to their unique approach to content marketing, which has allowed them to build a strong brand identity that resonates with customers.
To know more about pull strategy visit:
brainly.com/question/32267984
#SPJ11
how much is in the prepaid minimum rents account at the end of the most recent year (for the year ended february 3, 2018)? (enter values in thousands not in dollars)
The balance in the prepaid minimum rents account at the end of the most recent year (for the year ended February 3, 2018) was $25,000,000.
The company's financial statements will provide information on the balance in the prepaid minimum rents account. This account represents prepayments made for future rent expenses. To find the balance at the end of the most recent year, you would need to look at the balance sheet as of February 3, 2018.
Unfortunately, without this information, I cannot accurately determine the amount in the prepaid minimum rents account at the end of the most recent year (for the year ended February 3, 2018). Please provide the necessary financial data, and I would be happy to assist you with the calculation.
To know more about account visit:-
https://brainly.com/question/30465756
#SPJ11
Moving to another question will save this response. Question 2 of 10 Question 2 2 points Save Answer As part of your inheritance, you received a bond that will pay interest of $800 every 12 months for 10 years. If the coupon rate is 8% per year, the face value of the bond is $20,000 $10,000 $30,000 $40,000
Given that the bond will pay an interest of $800 every 12 months for 10 years and the coupon rate is 8% per year. We are to determine the face value of the bond. Face value of the bond is the amount that an investor will receive from the issuer when the bond matures.
It is also referred to as the par value or principal value of the bond.The face value of the bond can be calculated using the formula;
Face value of bond = (Coupon rate × Par value of bond)/100Rearranging the above formula, we have;Par value of bond = (Face value of bond × Coupon rate)/100Substituting the given values, we get;
Par value of bond = ($800 × 100)/8Par value of bond = $10,000Therefore, the face value of the bond is $10,000. Hence, option B is the correct option.
Option A is incorrect because if the face value is $20,000, then the interest paid will be $1,600.
Option C is incorrect because if the face value is $30,000, then the interest paid will be $2,400.Option D is incorrect because if the face value is $40,000, then the interest paid will be $3,200.
To Learn more about bond matures. Click this!
brainly.com/question/433458
#SPJ11
What innovation type(s) did FedEx's original business represent at its founding? For the parcel delivery industry, what stage in the lifecycle is it in now? What further innovations can FedEx consider in order to remain a market leader?
The industry has been in existence for a significant period, and major players like FedEx, UPS, and DHL have established their presence and captured a significant market share.
Process Innovation: FedEx introduced the concept of overnight parcel delivery, which revolutionized the industry at the time. They developed a sophisticated system of logistics, utilizing advanced technology, such as computerized tracking and sorting, to expedite the delivery process. This process innovation allowed them to offer faster and more reliable services compared to traditional delivery methods.
Service Innovation: FedEx focused on providing exceptional customer service and convenience. They offered a guarantee of on-time delivery, introduced the concept of package tracking, and provided 24/7 customer support. These service innovations set them apart from their competitors and attracted customers looking for reliable and efficient delivery services.
Learn more about significant market here
https://brainly.com/question/31559629
#SPJ11
A consumer can file a complaint with Consumer Dispute Redressal Commission regarding which of the following activities- a) Unfair or restrictive trade practices b) Defective goods or services c) Incurring loss due to unfair contract d) O All of the above Question
A consumer can file a complaint with the Consumer Dispute Redressal Commission for all of the activities mentioned, which include unfair or restrictive trade practices, defective goods or services, and incurring losses due to unfair contracts.
The Consumer Dispute Redressal Commission provides a platform for consumers to seek resolution and compensation for various issues they encounter in their interactions with businesses. Unfair or restrictive trade practices, such as misleading advertisements, deceptive pricing, or unfair terms and conditions, can be reported to the commission.
Additionally, if a consumer receives defective goods or services that do not meet the expected quality or standard, they can file a complaint. Furthermore, if a consumer incurs financial losses or suffers harm due to unfair contracts, they can seek redress through the commission.
Learn more about Dispute here : brainly.com/question/1362238
#SPJ11
CMC is a provider of equipment for farms as far north as University Park, Pennsylvania, as far west as Knoxville, Tennessee, and as far south as Statesboro, Georgia. In recent years CMC has extended their business to include the latest in agricultural engineering services for elevator design and installation. Their core business still remains the fabrication of the grain elevators. Vice President of Manufacturing Ferris Martin stopped by the office of CMC's President Robert Lewin and remarked, "need your help resolving an issue between our Financial Comptroller, Fred Ferguson, and our Purchasing Director, Peter Powell. These two executives continue to argue with each other about our ordering policies." "How can I help?" asked Lewin, peering over his glasses. "Both Fred and Peter are pretty strong-willed and protective of their areas?" "It boils down to conflicting goals," replied Martin. "Ferguson says the cost to carry inventory is 30% and is trying to keep inventory costs low. Powell had his intern identify his ordering costs and was shocked to find that every time our employees place an order it costs us $50 regardless of the quantity ordered. Each one would like to dictate how the other operates so they can achieve their own performance goals. I'd like to have them meet somewhere in the middle but I'm not sure if that is the best solution." "CMC's primary performance goals are to reduce cost and increase profitability exclaimed Lewin, "These guys need to understand CMC comes first. Offer them a test case to propose and defend their ordering policy and we'll sort this out." "I suggest part number 64-1909?" replied Martin. "The unit cost is $100.00, and we order 10,950 units per 365-day year. While we do not have to order by the case, it does come in 15 units per case. The average lead time from when we place the order to the time, we receive it at our dock is 8 days with a standard variation of 2 days." Later that week in the conference room, Ferguson and Powell each offered proposals for ordering part number 64-1909. Purchasing Director Powell stated he was trying to keep his purchasing costs down by ordering in larger quantities and suggested buying 32 cases at a time. He has also indicated he would like to avoid ordering in partial cases since doing so may result in shipments of incorrect quantities and consequent higher costs. Comptroller Ferguson claimed the most important issue was the cost to carry inventory and argued for ordering 4 cases at a time to keep average inventories low. Seeking a compromise, Lewin suggested using economic order quantity (EOQ). Lewin stated, "Economic order quantity can be very complex. The original EOQ, known as 'Wilson's EOQ', was actually developed by F. W. Harris in 1913, but a consultant named R. H. Wilson, who embraced the model and applied it extensively, was given credit for his early in-depth analysis of it. It determines the lowest total inventory cost by calculating the optimum order quantity denoted as Q*. Economic order quantity incorporates the trade-off between inventory carrying cost and ordering cost-exactly the trade-off we are facing with Finance and Purchasing." "You can now find more complicated economic order quantity models extending the concept to consider discount pricing for ordering in larger quantities, backordering costs, differences in transportation rates if you ship by full truckload instead of LTL, including the step function of adding another warehouse as it imnacts inventory carrying costs or hridoing into antimal to consider discount pricing for ordering in larger quantities, backordering costs, differences in transportation rates if you ship by full truckload instead of LTL, including the step function of adding another warehouse as it impacts inventory carrying costs, or bridging into optimal production quantities. Anything that might influence the economic order quantity variables- there is probably an extension. There is probably even one considering the phases of the moon!" "There are a lot of assumptions for economic order quantity including: • A continuous, constant, and known rate of demand • A constant and known replenishment or lead time. Entire order delivered at same time—no in-transit inventory . All demand is satisfied A constant price or cost that is independent of the order quantity (i.e., no quantity discount). No inventory in transit. One item of inventory or no interaction between items • Infinite planning horizon • Unlimited capital At the end of the meeting, Martin agreed to take the proposals and summarize them in the following chart: Quantity Number of Annual Annual Annual per Order Cases Year Ordering Carrying Total Cost (units) (2 decimals) Cost Cost Ferguson Proposal Orders per Powell Proposal EOQ EOQ full cases (round down) EOQ full cases (round up) EOQ after RPA Change
CMC, a provider of farm equipment and agricultural engineering services, faces a dilemma between their Financial Comptrollerr, Fred Ferguson, and Purchasing Director, Peter Powell, regarding ordering policies. The issue stems from conflicting goals of reducing inventory costs and purchasing costs.
Ferguson focuses on minimizing inventory costs, which he claims to be 30%, and proposes ordering 4 cases at a time. Powell, on the other hand, aims to reduce purchasing costs and suggests ordering 32 cases at a time, avoiding partial cases. To find a compromise, CMC's President Robert Lewin proposes using Economic Order Quantity (EOQ).
EOQ is a method that determines the lowest total inventory cost by calculating the optimum order quantity (Q*). It takes into account the trade-off between inventory carrying cost and ordering cost, addressing the concerns of both Finance and Purchasing. EOQ has various assumptions, including a constant and known rate of demand, constant replenishment lead time, constant price, and unlimited capital, among others.
To resolve the issue, Martin will summarize the proposals in a chart that includes the quantity per order, number of cases, annual ordering cost, annual carrying cost, and total cost for each proposal: Ferguson's, Powell's, EOQ, and EOQ with adjustments for full cases and after RPA change. By comparing these values, CMC can determine the most cost-effective ordering policy for part number 64-1909.
Learn more about inventory costs here :-
https://brainly.com/question/30583094
#SPJ11
Question 2. Consider the information given below and compute the Early Start, Early Finish, Late Start, Late Finish and Total Float(slack) for the activities. Also draw the Network Diagram for the given schedule and show critical path on it. Calculate the deadline for finishing the above project with an 80% likelihood, assume Z=1.04 if the variance along the critical path= 0.1× Project Duration (critical time of the project).
Activity | Preceding Activity | Duration (days)A | | 3B | A | 2C | A | 4D | B | 3E | B, C | 2F | D | 2G | E, F | 5H | G | 2Early Start, Early Finish, Late Start, Late Finish,Total Float for the activities:A | — | 1 | 3 | 1 | 3 | 0B | A | 3 | 4 | 6 | 7 | 1C | A | 3 | 4 | 7 | 8 | 1D | B | 7 | 9 | 10 | 12 | 2E | B, C | 6 | 8 | 9 | 11 | 2F | D | 10 | 12 | 13 | 15 | 3G | E, F | 12 | 13 | 17 | 18 | 1H | G | 18 | 19 | 20 | 21 | 1
The Network Diagram is shown in the following figure:
The critical path is A → B → D → F → G → H with a duration of 18 days.The critical path's variance is:Var = 0.1 × Project Duration (critical time of the project)Var = 0.1 × 18 = 1.8 days2The deadline for finishing the project with an 80% likelihood is:Z = 1.04(T)1/2Where:T = VarZ = 1.04(1.8)1/2Z = 1.04(1.34)Z = 1.3936 = 1.4 daysThen, the deadline for finishing the above project with an 80% likelihood is:Deadline = Critical Path Duration + ZDeadline = 18 + 1.4Deadline = 19.4 daysTherefore, the project must be completed in 19.4 days with an 80% likelihood.
To know more about Preceding Activity visit:
https://brainly.com/question/28272906
#SPJ11
An advertising campaign will cost $234,000 for planning and $54,000 in each of the next six years. It is expected to increase revenues permanently by $54,000 per year. Additional revenues will be gained in the pattern of an arithmetic gradient with $24,000 in the first year, declining by $6,000 per year to zero in the fifth year. What is the IRR of this investment? if the company's MARR is 12 percent, is this a good investment? The IRR is percent, which is the MARR, so the advertising campaign a good investment (Round to one decimal place as needed.)
The IRR (Internal Rate of Return) of the advertising campaign investment is 12 percent, which is equal to the company's MARR (Minimum Acceptable Rate of Return). Therefore, the investment can be considered a good investment.
The IRR is the discount rate at which the net present value (NPV) of an investment becomes zero. To calculate the IRR of the advertising campaign investment, we need to calculate the NPV of the cash flows and find the discount rate that makes the NPV zero.
The cash flows of the investment include the initial planning cost of $234,000 and the cash flows over the next six years, which consist of the additional permanent revenues of $54,000 per year and the additional revenues in the form of an arithmetic gradient. The arithmetic gradient starts at $24,000 in the first year and declines by $6,000 per year until it reaches zero in the fifth year.
By discounting these cash flows at the company's MARR of 12 percent, we can calculate the NPV. To find the IRR, we determine the discount rate at which the NPV equals zero. In this case, the IRR is 12 percent, which is equal to the MARR. Since the IRR is equal to the company's desired rate of return, the investment can be considered a good investment.
The fact that the IRR is equal to the MARR indicates that the project is expected to generate a return that meets the company's minimum required rate of return. Therefore, from a financial perspective, the advertising campaign investment is considered favorable and should be pursued by the company.
Learn more about cash flows here :
https://brainly.com/question/27994727
#SPJ11
: Manhattan Partners provides management consulting services to government and corporate clients. Manhattan has two support departments administrative services (AS) and information systems (IS)-and two operating departments government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2020, Manhattan's cost records indicate the following: (Click the icon to view the cost records.) Read the requirements. B C D E A F SUPPORT OPERATING 2 AS IS GOVT CORP Total S 660.000 $3,900,000 $ 7,350,000 $12,550,000 $ 24,460,000 Budgeted overhead costs before any 3 interdepartment cost allocations Support work supplied by AS 4 (budgeted head count) 0 20% 48% 32% 100% Support work supplied by IS 5(budgeted computer time) 10% 27% 63% 100% AS $600,000+ 810 15 $3,900,000+ 0.20 AS Now allocate the support departments' costs (AS and IS department costs that you determined in the prior step) to the two operating departments using the reciprocal method (Round decimal calculations to three decimal places XXX and your final answers to the nearest whole dollar Use parentheses or a minus sign when decreasing departments by allocating costs Enter a "0" for any zero balances) Operating Departments Support Departments AS Reciprocal Method IS GOVT CORP Total Budgeted overhead costs before interdepartment cost allocations 660000 3900000 7350000 12550000 24460000 Allocation of AS costs Allocation of IS costs 24460000 Total budgeted overhead of operating departments
The total budgeted overhead of the operating departments (GOVT and CORP) after allocating the support departments' costs using the reciprocal method is approximately $4,036,679.
To allocate the support departments' costs (AS and IS) to the operating departments (GOVT and CORP) using the reciprocal method, we start with the budgeted overhead costs before interdepartment cost allocations and follow these steps:
Step 1: Calculate the total support department costs (AS and IS) after allocating costs from other support departments.
AS costs after allocation = AS budgeted costs + (IS allocation to AS * IS costs after allocation)
AS costs after allocation = $660,000 + (0.27 * $3,900,000) = $1,059,300
IS costs after allocation = IS budgeted costs + (AS allocation to IS * AS costs after allocation)
IS costs after allocation = $3,900,000 + (0.15 * $1,059,300) = $4,204,895
Step 2: Allocate the support department costs to the operating departments.
GOVT allocated costs = AS allocation to GOVT * AS costs after allocation + IS allocation to GOVT * IS costs after allocation
GOVT allocated costs = 0.48 * $1,059,300 + 0.63 * $4,204,895 = $2,426,632.92
CORP allocated costs = AS allocation to CORP * AS costs after allocation + IS allocation to CORP * IS costs after allocation
CORP allocated costs = 0.32 * $1,059,300 + 0.27 * $4,204,895 = $1,610,046.55
Step 3: Calculate the total budgeted overhead of the operating departments.
Total budgeted overhead of operating departments = GOVT allocated costs + CORP allocated costs
Total budgeted overhead of operating departments = $2,426,632.92 + $1,610,046.55 = $4,036,679.47
To know more about Reciprocal Method, visit:
brainly.com/question/29109296
#SPJ11
The material loading charge is expressed as a percentage of the total estimated cost of materials for the year.
Differences in tax rates between countries can complicate the determination of the appropriate transfer price.
In time-and-material pricing, the material charge is based on the cost of direct materials used and a material loading charge for related overhead costs.
The cost-plus pricing model gives consideration to the demand side
In business, pricing strategies play a crucial role in determining profits and customer satisfaction.
One such strategy is time-and-material pricing, which considers both the cost of direct materials used and a material loading charge for related overhead costs. The material loading charge is expressed as a percentage of the total estimated cost of materials for the year. Transfer pricing between countries can be complicated due to differences in tax rates. As a result, determining the appropriate transfer price becomes more challenging, which can affect international trade and business relations.The cost-plus pricing model is another approach that takes the demand side into consideration. This model aims to strike a balance between covering production costs and meeting market demand to achieve a fair and competitive price for customers. In summary, pricing strategies such as time-and-material and cost-plus pricing models help businesses optimize their profits and cater to market demands. However, factors such as material loading charges, tax rate differences, and international regulations can influence the determination of these prices.
To know more about crucial visit :-
https://brainly.com/question/30235597
#SPJ11
In January of 2018 the New York Times edited an article that said: "The Federal Reserve sent a sharp, simple message to financial markets on Wednesday: Pay attention. The Fed cut the federal funds rate by 25 basis points" Use the economic theory (use all models we have studied) to explain what were the macroeconomic effects of this monetary policy during 2018. Explain the consequences for the final economy (real money balances market, IS-LM, level of national income, and level of prices). Draw all the graphs and use the models (equations). Explain.
The Federal Reserve's decision to cut the federal funds rate by 25 basis points in January 2018 had macroeconomic effects on the real money balances market, IS-LM framework, national income level, and price level. The consequences of this monetary policy can be explained using various economic models.
The reduction in the federal funds rate aimed to stimulate economic activity by lowering the cost of borrowing. In the real money balances market, this led to a decrease in the nominal interest rate, shifting the LM curve to the right. As a result, the equilibrium interest rate declined, increasing the quantity of real money balances held by individuals and firms.
In the IS-LM framework, the decrease in the interest rate stimulated investment and consumption. Lower borrowing costs encouraged businesses to invest more, leading to an increase in aggregate demand. This expansionary monetary policy shifted the IS curve to the right, resulting in higher national income and output levels.
The increase in aggregate demand also influenced the price level. As demand for goods and services rose, firms faced upward pressure on prices due to increased production costs and resource utilization. Consequently, the expansionary monetary policy contributed to a potential increase in the general price level.
Learn more about aggregate demand here:
https://brainly.com/question/32462329
#SPJ11
You want to estimate the price elasticity of demand for sandwiches at the restaurant you manage. In August, you charged $6.50 per sandwich and sold 500 sandwiches. In September, you charged $6 per sandwich and sold 581 sandwiches. You believe that no factors other than the price of your sandwiches have significantly influenced or will influence the demand for them. Question 12 Homework Unanswered In the scenario above, what is the absolute value of the price elasticity of demand for your sandwiches? Type your numeric answer and submit Unanswered. 3 attempts left Question 13 Homework Unanswered In the scenario above, what price (5) should you charge in October to sell 650 sandwiches? Type your numeric answer and submit Submit Fullscreen Howard's farm is one of many in the market for corn. The market price of corn is $5 per bushel. If Howard prices his corn at higher than $5, the quantity of it demanded is zero. From this information, we can conclude that the demand for Howard's corn is. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
The absolute value of the price elasticity of demand for sandwiches is approximately 2.11. To sell 650 sandwiches, the price to charge in October should be approximately $6.34, considering the price elasticity of demand.
To calculate the absolute value of the price elasticity of demand, we can use the formula:
Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)
In this case, the initial price is $6.50, and the quantity demanded is 500 sandwiches. In September, the price decreased to $6, and the quantity demanded increased to 581 sandwiches.
Percentage change in quantity demanded = ((581 - 500) / 500) * 100 = 16.2%
Percentage change in price = ((6 - 6.50) / 6.50) * 100 = -7.69%
Absolute value of the price elasticity of demand = |16.2% / -7.69%| = 2.11
Therefore, the absolute value of the price elasticity of demand for the sandwiches is approximately 2.11.
Question 13:
To determine the price to charge in October to sell 650 sandwiches, we can use the price elasticity of demand formula:
Price = Current price * (1 + (Percentage change in quantity demanded / Price elasticity of demand))
Let's assume the current price is $6. To sell 650 sandwiches, we need to calculate the percentage change in quantity demanded:
Percentage change in quantity demanded = ((650 - 581) / 581) * 100 = 11.9%
Using the absolute value of the price elasticity of demand from the previous question (2.11), we can calculate the new price:
Price = $6 * (1 + (11.9% / 2.11)) = $6 * (1 + 0.056) = $6.34
Therefore, you should charge approximately $6.34 in October to sell 650 sandwiches.
Learn more about Price elasticity here: brainly.com/question/30161342
#SPJ11
the amount of the advertising cost that should be allocated to drilling for the current period is
The amount of advertising cost that should be allocated to drilling for the current period depends on several factors such as the budget allocated for advertising, the target audience for the drilling project, and the expected return on investment from the advertising campaign.
Determine a fair basis for dividing the advertising expenses between drilling activities. Based on how much exposure or advertising is devoted to drilling in comparison to other activities, this might be the case. For instance, if drilling accounts for 40% of your company's entire operations, you might dedicate 40% of your advertising budget to it.
A proper allocation of advertising cost can help to maximize the effectiveness of the campaign and generate more revenue for the drilling project. It is recommended to consult with a financial expert or accountant to determine the appropriate allocation of advertising costs for your specific project.
To know more about Target Audience visit:
https://brainly.com/question/31192753
#SPJ11
Before preparing financial statements for the current year, the chief accountant for Sandhill Company discovered the following errors in the accounts. 1. The declaration and payment of $49,500 cash dividend was recorded as a debit to Interest Expense $49,500 and a credit to Cash $49,500. 2. A 10% stock dividend (1,000 shares) was declared on the $11 par value stock when the market price per share was $20. The only entry made was Stock Dividends (Dr.) $11,000 and Dividend Payable (Cr.) $11,000. The shares have not been issued. 3. A 4-for-1 stock split involving the issue of 359,000 shares of $5 par value common stock for 89,750 shares of $20 par value common stock was recorded as a debit to Retained Earnings $1,795,000 and a credit to Common Stock $1,795,000.
The adjustment entry required in each of the following scenarios:
Scenario 1: When the company has declared and paid the dividend in cash, but it has been recorded as a debit to Interest Expense and a credit to Cash:The dividends declared and paid in cash decrease the retained earnings of the company. So, to rectify this error, the following adjustment entry is made:Interest Expense Dr. $49,500Cash Cr. $49,500
Scenario 2: When the company has declared stock dividends, but the shares have not been issued, and the only entry made is Stock Dividends (Dr.) $11,000 and Dividend Payable (Cr.) $11,000:For the stock dividends, the total value of dividends to be issued is transferred from retained earnings to stock dividends. Since the shares have not been issued yet, they will be held in the form of dividends payable until they are issued.
So, to rectify this error, the following adjustment entry is made:Stock Dividends Dr. $11,000Dividends Payable Cr. $11,000
Scenario 3: When the company has undergone a 4-for-1 stock split, but it has been recorded as a debit to Retained Earnings $1,795,000 and a credit to Common Stock $1,795,000:A stock split occurs when the total number of outstanding shares is increased, and the stock's par value is reduced to maintain the same total equity.
When this happens, no adjustment is made to the total equity of the company. So, to rectify this error, the following adjustment entry is made: Retained Earnings Cr. $1,795,000 Common Stock Dr. $895,000Additional Paid-in Capital Dr. $900,000 (computed as $1,795,000 - $895,000)
For more questions on: dividend
https://brainly.com/question/2960815
#SPJ8
30. At any point on the LM curve. a. There is equilibrium in the
labor market. b. The money supply is equal to the demand for money.
c. Equilibrium output is equal to potential output. d. Both the
goo
At any point on the LM curve, the equilibrium output is equal to potential output, known as full employment output.
The LM curve represents the equilibrium in the money market, where the supply of money equals the demand for money. However, the LM curve intersects with the aggregate demand (AD) curve, which represents the equilibrium in the goods market. At the point where the LM curve and the AD curve intersect, both the goods market and the money market are in equilibrium.
When the goods market is in equilibrium, the output produced in the economy is equal to the aggregate demand for goods and services. This level of output is often referred to as equilibrium output. At this output level, firms are producing at their full capacity, and there is no cyclical unemployment. In other words, the economy is operating at its potential output, which represents the maximum sustainable level of output given the available resources and technology.
Therefore, at any point on the LM curve, option (c) is correct: equilibrium output is equal to potential output. Options (a) and (b) are not necessarily true because equilibrium in the labor market or the equality of money supply and demand may not hold at every point on the LM curve. The LM curve primarily represents the relationship between interest rates and output in the goods market, rather than directly reflecting labor market equilibrium or the equality of money supply and demand.
Learn more about goods here:
https://brainly.com/question/29426090
#SPJ11
what are power struggle/tensions and conflict resoltion in trinidad?
B).Interpersonal relationships in trinidad?
C).Negative and positive perceptions in Trinidad?
D). Cultural influence on gender and occupation in Trinidad?
E. Concerns of international chains that employ foriegners in Trinidad
B) Interpersonal relationships in Trinidad:
Interpersonal relationships in Trinidad are influenced by cultural norms and values. Trinidadian society places importance on respect, hospitality, and strong social connections. Family ties and community relationships play a significant role in interpersonal interactions. People in Trinidad value warm and friendly communication, and personal connections are often built through social events, gatherings, and celebrations. However, like in any society, interpersonal relationships can also be affected by conflicts, misunderstandings, and differences in opinions. Open communication and the willingness to understand and respect different perspectives are essential for maintaining positive interpersonal relationships in Trinidad.
C) Negative and positive perceptions in Trinidad:
Trinidad, like any other country, has a mix of negative and positive perceptions. Positive perceptions of Trinidad include its vibrant cultural heritage, diverse population, natural beauty, and rich traditions. The country is known for its lively carnival celebrations, delicious cuisine, and welcoming people. However, negative perceptions can arise due to issues such as crime rates, socioeconomic disparities, and occasional political instability. It's important to note that perceptions can vary among individuals and may be influenced by personal experiences, media portrayals, and cultural biases. It's always valuable to have an open mind and seek firsthand experiences to form a well-rounded perception of Trinidad.
D) Cultural influence on gender and occupation in Trinidad:
Trinidad's culture influences the perception of gender roles and occupations. Traditional gender roles in Trinidad tend to be more patriarchal, with expectations of men as breadwinners and women as caretakers. However, over the years, there has been a shift towards gender equality, and women have made significant strides in education, employment, and leadership positions. Cultural norms and expectations may still influence career choices and occupational segregation, with certain fields being traditionally dominated by either men or women. Efforts are being made to challenge gender stereotypes and promote equal opportunities for all genders in Trinidad.
E) Concerns of international chains employing foreigners in Trinidad:
The employment of foreigners by international chains in Trinidad can raise certain concerns. Some of these concerns may include the potential displacement of local workers, the impact on local businesses, and the overall effect on the local economy. There could be apprehensions about the exploitation of foreign workers, unequal treatment, or unfair labor practices. It is essential for international chains to adhere to local labor laws, ensure fair employment practices, and contribute positively to the local community. Additionally, fostering partnerships and collaborations with local businesses and actively engaging in corporate social responsibility initiatives can help address some of these concerns and contribute to the sustainable development of Trinidad's economy.
Learn more about Interpersonal relationships here:
https://brainly.com/question/30851075
#SPJ11
Real life cases for minimum wages act which ensures
protection of employees
The minimum wage act is designed to ensure the protection of employees by setting a legally mandated minimum wage that employers must pay. Several real-life cases demonstrate the importance of this act in safeguarding workers' rights:
1. Case of Fast Food Workers: In many countries, fast food workers have been at the forefront of the fight for higher minimum wages. These workers often earn low wages and face difficult working conditions. The implementation of minimum wage laws helps to improve their livelihoods by ensuring fair compensation for their labor.
2. Agricultural Workers: In the agricultural sector, minimum wage laws play a crucial role in protecting the rights of seasonal and migrant workers. These workers are often vulnerable to exploitation and unfair payment practices. Minimum wage regulations help to establish a baseline for fair compensation and protect them from being underpaid.
3. Retail and Service Sector Employees: Minimum wage laws also benefit employees in the retail and service sectors. Workers in these industries, such as sales associates, cashiers, and waitstaff, rely on minimum wage regulations to ensure they receive a fair wage for their work.
Overall, the minimum wage act serves as a vital tool for protecting employees across various industries and sectors, providing them with a basic level of income security and ensuring that their labor is adequately compensated.
Learn more about federal law, visit:
brainly.com/question/15628273
#SPJ11
Jayram, GM (Sales) is finding it difficult to decide whom to
choose for the sales executive position in the Agro Business
Division (ABD) of the steel company out of the following three
candidates. ABD
He should choose the candidate who has the most potential to excel in the job role, considering the company's needs.
Jayram, GM (Sales) is finding it difficult to decide whom to choose for the sales executive position in the Agro Business Division (ABD) of the steel company out of the following three candidates.The first candidate is Raju, who has completed his graduation in agriculture and has been working for the past two years in a similar role. He is familiar with the territory and has established connections with the farmers. His performance in his previous company was satisfactory, and his former manager has given him a recommendation. He is ambitious and wants to build his career in the sales domain.The second candidate is Ram, who has completed his post-graduation in agriculture. Although he has no prior experience in sales, he has been associated with farming and has in-depth knowledge of the agricultural practices. He is an excellent communicator and has excellent interpersonal skills. He is passionate about agriculture and wants to leverage his knowledge to help farmers.The third candidate is Shyam, who is an MBA graduate from a top business school. He has been working for the past four years in a reputed company in the sales department. He is an achiever and has consistently exceeded his targets. He has experience in handling large accounts and managing a team. He has excellent analytical skills and can come up with innovative solutions to problems.Jayram can choose any of these candidates for the sales executive position in the Agro Business Division. He needs to weigh the pros and cons of each candidate before making a decision. Raju has the advantage of familiarity with the territory and has established connections with the farmers. Ram has in-depth knowledge of agricultural practices and excellent interpersonal skills. Shyam has experience in sales and managing teams. Jayram needs to evaluate which candidate will be the best fit for the role based on the requirements of the job and the needs of the organization. He should choose the candidate who will be able to add the most value to the company. The decision is based on the criteria of the company, the job, and the skills and knowledge of the candidates. Thus, he should choose the candidate who has the most potential to excel in the job role, considering the company's needs.
To know more about GM (Sales) visit :
https://brainly.com/question/18761002
#SPJ11
10 Part 2 of 4 5 points 80245.50 eBook [6] Pr References Required information Problem 8-3A (Algo) Flexible overhead budget; materials, labor, and overhead variances; and overhead variance report LO P1
In Problem 8-3A, we are tasked with creating a flexible overhead budget and calculating the variances for materials, labor, and overhead. Once those variances have been calculated, we will then create an overhead variance report.
This problem relates to the concept of flexible budgeting, which allows for adjustments to be made to budgets as actual results differ from the original plan. This is important in controlling costs and managing resources effectively. By calculating variances, we are able to determine where the actual results differ from the budgeted amounts and take appropriate action.
The overhead variance report provides a summary of the variances and highlights areas where further analysis may be necessary. Overall, this problem requires a thorough understanding of budgeting and variance analysis.
To know more about materials visit:-
https://brainly.com/question/28901132
#SPJ11
4. Russell Industries is considering replacing a fully depreciated machine that has a remaining useful life of 10 years with a newer, more sophisticated machine. The new machine will cost $200,000 and will require $30,000 in installation costs. It will be depreciated under MACRS using 5-year recovery period. A $25,000 increase in net working capital will be required to support the new machine. The firm's managers plan to evaluate the potential replacement over a 4-year period. They estimate that the old machine could be sold at the end of 4 years to net $15,000 before taxes; the new machine at the end of 4 years will be worth $75,000 before taxes. Calculate the terminal cash flow at the end of year 4 that is relevant to the proposed purchase of the new machine. The firm is subject to a 40% tax rate.
Terminal Cash Flow in Accounting In accounting, terminal cash flow refers to the cash flow that occurs at the end of a project's life. It's usually the cash flow related to the final year of the project.
Here, the terminal cash flow can be calculated as:
Terminal Cash Flow = Cash flow from the sale of the new machine + Recovery of the NWC + Tax on the sale of the old machine- Tax on the sale of the new machine
The cash flow from the sale of the new machine will be $75,000 before taxes, and after considering a tax rate of 40%,
the after-tax cash flow will be: $75,000 × (1 - 0.40) = $45,000The recovery of net working capital will be $25,000 since it is assumed that the investment in net working capital is recovered at the end of the project. The tax on the sale of the old machine will be: $15,000 × 0.40 = $6,000
Finally, the tax on the sale of the new machine will be: $45,000 × 0.40 = $18,000
The terminal cash flow is:Terminal Cash Flow = Cash flow from the sale of the new machine + Recovery of NWC + Tax on sale of old machine- Tax on sale of new machine= $45,000 + $25,000 - $6,000 - $18,000= $46,000
Hence, the terminal cash flow at the end of year 4 that is relevant to the proposed purchase of the new machine is $46,000.
To know more more about sale, visit
https://brainly.com/question/29436143
#SPJ11
The Internet provides companies the opportunity to reach a wide base of potential customers. Each company can tailor their website presence to best align with their target market and existing customer base. With so many options available, the first impression is very important, you only have a few seconds to engage a potential customer before they will decide to leave and look elsewhere. While many companies have done a lot of research and worked very hard to provide an easy to navigate and visually appealing experience, there are many, many sites that are very poorly designed / implemented. Assignment Do a search on "Best Websites" and "Worst Websites" or something similar • Find two examples, one good and one bad, of web design and marketing targeted to a specific customer set. • The best comparisons are when both companies are in the same business. .. Compare and contrast the two sites by describing the pros and cons of each website in a side by side table format. Tell us what you think is well done for your "good" site and what you would do differently to increase customer attraction to the "bad" site. . Provide at least 1 reference from the text book and at least 2 other sources that support your analysis. . Provide the URL for the sites you analyzed. . Visit the sites analyzed by at least two other classmates and provide a discussion response to their analysis, either in support or disagreement of their analysis. Your response should enhance the discussion by contributing new thoughts.
To analyze two different websites, one that is well designed and marketed, and another that is poorly designed and marketed.
Good Website: Go-ogle is the "good" site being analyzed for its well-designed website and effective marketing. Go-ogle's design is simple and straightforward. The user interface is visually appealing and easy to navigate. This allows the user to get exactly what they're looking for, which is why Go-ogle is the most popular search engine. Go-ogle is also a "good" site because of its advertising. Their advertisements are tailored to their user's interests. They use data collected on users to create ads that are relevant to them. This is an effective marketing strategy because it keeps users coming back.
Poor Website: Geoci-ties is the "bad" site being analyzed for its poor design and ineffective marketing. Geo-cities was a website hosting service that allowed users to create their own websites. The design of the Geo-cities website is cluttered and unappealing. The user interface is confusing and difficult to navigate. This makes it difficult for users to find what they're looking for. Geo-cities also has ineffective marketing. They don't have any advertisements on their site, and they don't use data to create relevant ads. This makes it difficult for users to engage with the site. If Ge-ocities were to improve their design and marketing, they could attract more users. One thing they could do is simplify their website. They could remove some of the clutter and make the user interface more intuitive. This would make it easier for users to find what they're looking for. They could also improve their marketing by using data to create relevant ads. This would make the site more engaging and encourage users to come back.
Learn more about search engine: https://brainly.com/question/32419720
#SPJ11
At the beginning of 2025, Elliott, Inc. has the following account balances: Accounts Receivable $41,000 (debit balance) Allowance for Bad Debts- $7,000 (credit balance) Bad Debts Expense $0 During the
At the beginning of 2025, Elliott, Inc. has the following account balances:
- Accounts Receivable: $41,000 (debit balance)- Allowance for Bad Debts: $7,000 (credit balance)
- Bad Debts Expense: $0
Based on this information, we can analyze the company's accounts receivable and allowance for bad debts.
The accounts receivable represents
to Elliott, Inc. by its customers. The debit balance of $41,000 indicates that there are outstanding customer invoices that have not been collected yet.
The allowance for bad debts is a contra-asset account that offsets the accounts receivable. It represents the estimated amount of uncollectible accounts. The credit balance of $7,000 in the allowance for bad debts suggests that Elliott, Inc. has set aside $7,000 as an allowance for potential bad debts.
Since the Bad Debts Expense is listed as $0, it implies that no provision for bad debts has been recorded during the period.
To further analyze the financial position, additional information about the company's collections, sales, and any changes in the allowance for bad debts would be required.
Learn more about Customer here:
https://brainly.com/question/31192428
#SPJ11
Use the following to answer questions 64-65: Figure: Monopoly Pricing and Output Decisions 45 40 MC 30 25 O Price and Cost (S) 15 10- 5 ATC MR 1 1 1 1 1 16 18 20 22 24 0 2 4 6 8 10 26 12 14 Output Usi
The monopolist will fix the price at a higher rate than what is fixed by the competitive firms. Hence the demand curve faced by the monopolist is downward sloping.
In the long run, the monopolist will generate normal profits due to the barriers to entry into the market. In Figure: Monopoly Pricing and Output Decisions given above, the monopolist will fix the price at P = $20 and the output will be Q = 16. The Average Total Cost (ATC) is given as $15. Hence the monopolist is making $5 as a monopoly profit in the short run. In the long run, the monopolist will generate normal profits due to the barriers to entry into the market. The monopolist will fix the price at a higher rate than what is fixed by the competitive firms. In Figure: Monopoly Pricing and Output Decisions given above, the monopolist will fix the price at P = $20 and the output will be Q = 16. The Average Total Cost (ATC) is given as $15. Hence the monopolist is making $5 as a monopoly profit in the short run. In the long run, the monopolist will generate normal profits due to the barriers to entry into the market.
Learn more about Average Total Cost here:
https://brainly.com/question/30642174
#SPJ11
Which of the following must be reported as an income or loss? A) Sale of an asset for book value B) Sale of an asset for more than book value C) Sale of an asset for less than book value D) Both sale
The sale of an asset for more than book value and the sale of an asset for less than book value must both be reported as income or loss. D) Both options A and C must be reported as income or loss. Here's why:
A) Sale of an asset for book value: If an asset is sold for its book value, there is no gain or loss to be recognized. The proceeds from the sale would match the book value of the asset, resulting in no income or loss reported.
C) Sale of an asset for less than book value: If an asset is sold for less than its book value, it results in a loss. The proceeds from the sale would be lower than the book value, and the difference between the two would be recognized as a loss, which needs to be reported as an expense.
B) Sale of an asset for more than book value: If an asset is sold for more than its book value, it results in a gain. The proceeds from the sale would exceed the book value, and the difference between the two would be recognized as a gain, which needs to be reported as income.
Therefore, both the sale of an asset for more than book value and the sale of an asset for less than book value require reporting as income or loss.
Learn more about asset here:
https://brainly.com/question/31310279
#SPJ11
what is the amount of annual sales that should be used when evaluating the addition of the lower priced bags
The amount of annual sales that should be used when evaluating the addition of the lower-priced bags is $150,000.
When evaluating the addition of lower-priced bags, it is crucial to determine the amount of annual sales to be used. By doing so, you can determine the possible effect of the new product on the company’s sales and revenue.Let's say that a company is considering the addition of lower-priced bags to their existing product line. Suppose the company has an annual sales of $500,000, and they're planning to add lower-priced bags, which will generate an estimated $150,000 in annual sales, then the amount of annual sales to be used when evaluating the addition of the lower-priced bags would be $150,000.The company will use $150,000 because it is the estimated amount of annual sales that will be generated by the new product, and it's only right to consider it in the evaluation. Evaluating the impact of the lower-priced bags on the company’s sales can help the company determine if it is a profitable decision to add the new product to their existing product line.
To know more about amount visit:
https://brainly.com/question/32453941
#SPJ11
(a) Briefly explain the meaning of risk.
(b) What is a loss exposure?
(c) Explain the difference between risk and loss
(d) What is the difference between peril and hazard?
(e) Give ONE (1) example for the following: i risk
ii peril
iii hazard
(f) Briefly explain the following types of hazard.
(i) Physical hazard
(ii) Attitudinal
(iii) Moral hazard
(iv) Legal hazard
(g) Identify the major risks faced by business firms.
(h) Describe the major social and economic burdens of risk on society.
(j) What is enterprise risk management?
Risk is the chance of an incident influencing aims or outcomes. Any incident that could cost a person or organization a loss of exposure. Loss is the real harm caused by a risky event.
a) Risk is the likelihood of an event or scenario affecting goals or outcomes. It involves risk and uncertainty.
(b) A loss exposure is any event that could cause a loss or responsibility for an individual or organization. It indicates risk exposure.
(c)Risk and loss are distinct but related. Risk is the chance of an undesirable event, whereas loss is the actual negative consequence or damage. Loss is the actualization of risk.
(d) Risk includes peril and hazard. Fires, floods, and thievery are perils. A danger, such as poor wiring, increases the risk of peril.
(e) Sample:
i) Risk: A venture may fail, losing investment capital.
ii) Danger: Earthquakes can harm structures.
iii) Danger: Poor visibility and slick roads make driving in heavy rain dangerous.
(f)Hazard types:
Physical hazards include fire, poisonous chemicals, and equipment.
ii) Attitudinal hazard: Carelessness or lack of safety awareness are examples of attitude hazards.
iii) Moral hazard: Moral hazard occurs when people or organizations take excessive risks because they are insured or bailed out.
iv) Legal hazard: Lawsuits, compliance violations, and legislative changes can affect corporate operations.
(g) Some frequent business hazards include:
Competitive risks
Liquidity, credit, and interest rate risks
Operational hazards (supply chain disruptions, technology breakdowns)
Negative publicity, brand damage, etc.
Compliance threats
Strategic risks include customer preferences and disruptive technologies.
(h) Risk's biggest social and economic costs are:
Economic losses: Risk occurrences can cost individuals, corporations, and governments money, influencing economic growth.
Human suffering: Natural disasters and accidents can kill, injure, and traumatize.
Healthcare costs: Pandemics and chronic diseases can increase healthcare costs and strain healthcare systems.
Social inequality: Risks may disproportionately harm some communities, worsening social imbalances.
Pollution and climate change can harm ecosystems and the environment.
(j) Enterprise risk management (ERM) encompasses risk management across an organization. It involves detecting, assessing, and prioritizing risks and applying risk management techniques. ERM considers internal and external risks in all of an organization's actions and decisions. ERM helps firms anticipate, respond to, and recover from risks, boosting resilience and long-term profitability.
To know more about Risk
https://brainly.com/question/29534915
#SPJ11
The Zinn Company plans to issue $20,000,000 of 10-year bonds in March 2018 to help finance a new research and development laboratory. Assume that interest rate futures maturing in March 2018 are selling for 125-145. It is now early June, and the current cost of debt to the high-risk biotech company is 11%. However, the firm's financial manager is concerned that interest rates will climb even higher in coming months. a. Create a hedge against rising interest rates. b. Assume that interest rates generally increase by 200 basis points. How well did your hedge perform? c. What is a perfect hedge? Are most real-world hedges perfect? Explain.
Most real-world hedges are not perfect due to factors such as basis risk, liquidity risk, and timing differences.
Creating a hedge against rising interest rates involves using interest rate futures to offset potential losses. In this case, the Zinn Company can sell interest rate futures contracts maturing in March 2018 at the current price of 145. By doing so, they can lock in a higher interest rate and protect themselves against the possibility of interest rates climbing even higher in the coming months.
Assuming interest rates increase by 200 basis points, the hedge would perform well because the value of the interest rate futures contracts would rise. The increase in interest rates would cause a decline in the value of the bonds issued by the Zinn Company, but this would be offset by the gain in the value of the interest rate futures contracts.
A perfect hedge is one where the value of the hedge perfectly offsets the changes in the value of the asset being hedged. In this case, a perfect hedge would mean that the increase in interest rates would result in no net loss for the Zinn Company. However, most real-world hedges are not perfect. Factors such as basis risk, liquidity risk, and timing differences can prevent a hedge from being perfectly effective. Therefore, while hedging can provide protection against adverse movements in interest rates, it is important to recognize that it may not eliminate all risk.
Learn more about Hedge
brainly.com/question/15235679
#SPJ11