Acres Corp's ending retained earnings in 2018 would be $60 million. Option E) $60 million is the correct answer.
Retained earnings represent the accumulated profits of a company that are reinvested into the business rather than distributed to shareholders as dividends. To calculate Acres Corp's ending retained earnings in 2018, we need to consider the retained earnings from the previous year, net income for the current year, and any dividends paid out.
Given that Acres Corp had retained earnings of $20 million in 2017, we start with this amount. Then, we add the net income for 2018, which is $50 million. This represents the additional profits generated during the year. Finally, we subtract the dividends paid out, which amounts to $10 million.
Retained Earnings 2018 = Retained Earnings 2017 + Net Income 2018 - Dividends Paid 2018
Retained Earnings 2018 = $20 million + $50 million - $10 million
Retained Earnings 2018 = $60 million
Therefore, Acres Corp's ending retained earnings in 2018 would be $60 million. Option E) $60 million is the correct answer.
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Retained Earnings in 2017 at Acres Corp was $20 million, Net Income during 2018 was $50 million, and during the year Acres paid out $10 million in dividends. What are Acres Corps Ending Retained Earnings in 2018?
A) $20 million
B) $30 million
C) $40 million
D) $50 million
E) $60 million
On January 1, Year 1, Dalen Company purchased office equipment that cost $3,500. The equiptrent had an estimated five-year useful life and an estimated salvage value of $750. The company uses the straight-tine method. What is the amount of depreciation expense shown on the income statement and the amount of depreciation expense shown on the statement of eash flows, respectively, for Year 1? A) $550 and $0 B) $550 and $3,500 C) $0 and $550 D) $3,500 and $3,500
The amount of depreciation expense shown on the income statement and the statement of cash flows, respectively, for Year 1 is A) $550 and $0.
To calculate the annual depreciation expense, we can use the straight-line depreciation method formula:
Annual Depreciation Expense = (Cost - Salvage value) / Useful life
Cost of equipment = $3,500
Salvage value = $750
Useful life = 5 years
Annual Depreciation Expense = ($3,500 - $750) / 5
= $550
Since the company uses the straight-line method, the annual depreciation expense will be the same each year. Therefore, the depreciation expense for year 1 would be $550.
However, depreciation expense is a non-cash transaction, thus it will not have any effect on the company's cash balance, so the amount of depreciation expense shown on the statement of cash flows for year 1 will be $0.
In summary, the amount of depreciation expense shown on the income statement for Year 1 is $550, and the amount shown on the statement of cash flows is $0.
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Procter and Gamble (PG) paid an annual dividend of $1.72 in 2009. You expect PG to increase its dividends by 7.1% per year for the next five years (through 2014), and thereafter by 3.1%per year. If the appropriate equity cost of capital for Procter and Gamble is 8.9% per year, use the dividend-discount model to estimate its value per share at the end of 2009.
a) The price per share is $------ (Round to the nearestcent.)
To estimate the value per share of Procter and Gamble (PG) at the end of 2009 using the dividend-discount model, we need to calculate the present value of the expected future dividends.
First, let's calculate the present value of the dividends expected from 2010 to 2014 using the dividend growth rate of 7.1% per year:
PV(div2010-2014) = ∑ (div / (1 + r)^t)
PV(div2010-2014) = (div2010 / (1 + r)^1) + (div2011 / (1 + r)^2) + (div2012 / (1 + r)^3) + (div2013 / (1 + r)^4) + (div2014 / (1 + r)^5)
PV(div2010-2014) = ($1.72 / (1 + 0.071)^1) + ($1.72 * (1 + 0.071) / (1 + 0.071)^2) + ($1.72 * (1 + 0.071)^2 / (1 + 0.071)^3) + ($1.72 * (1 + 0.071)^3 / (1 + 0.071)^4) + ($1.72 * (1 + 0.071)^4 / (1 + 0.071)^5)
PV(div2010-2014) = $1.72 / 1.071 + $1.72 * 1.071 / 1.071^2 + $1.72 * 1.071^2 / 1.071^3 + $1.72 * 1.071^3 / 1.071^4 + $1.72 * 1.071^4 / 1.071^5
Next, let's calculate the present value of the dividends expected after 2014 using the growth rate of 3.1% per year:
PV(div2015-onwards) = div2015 / (r - g)
PV(div2015-onwards) = $1.72 * (1 + 0.031) / (0.089 - 0.031)
Finally, let's calculate the total present value of the dividends:
PV(div) = PV(div2010-2014) + PV(div2015-onwards)
The price per share at the end of 2009 is equal to the total present value of dividends divided by the equity cost of capital:
Price per share = PV(div) / (1 + r)
Performing the calculations, we can determine the price per share at the end of 2009.
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Melody Corp has an expected ROE of 14%. The dividend growth rate will be ____ if the firm follows a policy of paying 60% of earnings in the form of dividends.
If Melody Corp follows a policy of paying 60% of earnings in the form of dividends and has an expected return on equity (ROE) of 14%, the dividend growth rate will be determined by subtracting the retention rate from 1 and multiplying it by the ROE.
The dividend growth rate can be calculated using the formula:
Dividend growth rate = (1 - Retention rate) x ROE
Given that the firm follows a policy of paying 60% of earnings in the form of dividends, the retention rate (plowback ratio) can be calculated as:
Retention rate = 1 - Dividend payout ratio
Dividend payout ratio = 60% = 0.6
Hence, the retention rate is 1 - 0.6 = 0.4.
Substituting the values into the formula:
Dividend growth rate = (1 - 0.4) x 14%
Dividend growth rate = 0.6 x 0.14
Dividend growth rate = 0.084 or 8.4%
Therefore, if Melody Corp pays 60% of earnings in dividends and has an expected ROE of 14%, the dividend growth rate will be 8.4%.
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In a world with no taxes, no transaction costs, and no costs of financial distress, does moderate borrowing increase the required return on a firm’s equity? Does it necessarily follow that increases in debt increase the riskiness of the firm? Explain.
In a world with no taxes, no transaction costs, and no costs of financial distress, moderate borrowing does not increase the required return on a firm’s equity. Furthermore, it does not necessarily follow that increases in debt increase the riskiness of the firm.
The answer to the question is rooted in the Modigliani-Miller Propositions, which are a series of theorems that lay out the basic principles of capital structure. According to the Modigliani-Miller Propositions, in a world with no taxes, no transaction costs, and no costs of financial distress, the value of a firm is not affected by its capital structure. That is, the total value of the firm is the same whether it is financed entirely with equity or with a mix of equity and debt. Therefore, borrowing does not increase the required return on a firm’s equity.
When a firm borrows money, it has to pay interest on the debt, which means that its cash flows are less predictable. This can make the firm more vulnerable to financial distress if its cash flows fall short of its debt obligations. However, in a world with no costs of financial distress, this risk is not present, and therefore increases in debt do not necessarily increase the riskiness of the firm. To summarize, in a world with no taxes, no transaction costs, and no costs of financial distress, moderate borrowing does not increase the required return on a firm’s equity, and increases in debt do not necessarily increase the riskiness of the firm.
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Davis Hardware Company uses a periodic inventory system. How should Davis record the sale of inventory costing $620 for $960 on account?
A. Cost of Goods Sold 620 Purchases 620
Accounts Receivable 960 Sales Revenue 960
B. Accounts Receivable 960 Sales Revenue 960
C. Purchases 620 Gain 340 Sales Revenue 960
D. Accounts Receivable 960 Sales Revenues 620
Gain 340
Option C
Option A
Option B
Option D
Davis Hardware Company should record the sale of inventory costing $620 for $960 on account using Option A.
Under a periodic inventory system, the cost of goods sold is calculated at the end of the accounting period based on the beginning inventory balance, purchases made during the period, and ending inventory balance. Therefore, the cost of goods sold for this sale would be $620. The sale would be recorded as an increase in accounts receivable of $960 and an increase in sales revenue of $960. There would be no need to record a gain or loss in this transaction since the selling price of $960 already covers the cost of the inventory sold.
So the answer is A.
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2. Given the data below calculate the Cash Conversion Cycle COGS = $62,138 A/R = Revenue = $81,313 $18,926 A/P = $23,329 $20,938 Inventory = DSO = DSI = DPO = CCC =
The Cash Conversion Cycle (CCC) for the given data is approximately 70.98 days. The CCC represents the length of time it takes for a company to convert its resources (inventory) into cash inflows.
To calculate the Cash Conversion Cycle (CCC), we need to calculate three components: Days Sales Outstanding (DSO), Days Sales of Inventory (DSI), and Days Payable Outstanding (DPO). The formula for CCC is CCC = DSO + DSI - DPO.
First, let's calculate the components:
DSO = (Accounts Receivable / Revenue) * 365
DSO = (18,926 / 81,313) * 365
DSO ≈ 84.86 days
DSI = (Inventory / COGS) * 365
DSI = (20,938 / 62,138) * 365
DSI ≈ 123.36 days
DPO = (Accounts Payable / COGS) * 365
DPO = (23,329 / 62,138) * 365
DPO ≈ 137.24 days
Now, let's calculate the CCC:
CCC = DSO + DSI - DPO
CCC = 84.86 + 123.36 - 137.24
CCC ≈ 70.98 days
The Cash Conversion Cycle (CCC) for the given data is approximately 70.98 days. The CCC represents the length of time it takes for a company to convert its resources (inventory) into cash inflows. It measures the efficiency of a company's working capital management.
In this case, the DSO indicates that it takes the company around 84.86 days to collect payment from its customers after making a sale. The DSI shows that inventory is held for approximately 123.36 days before being sold. The DPO suggests that the company takes around 137.24 days to pay its suppliers after purchasing inventory.
In summary, the CCC of approximately 70.98 days indicates that the company takes about 71 days to convert its resources into cash. Analyzing the DSO, DSI, and DPO helps identify areas where the company can improve its working capital management to enhance cash flow and operational efficiency.
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Complete Question:
Given the data below calculate the Cash Conversion Cycle
COGS = $62,138
A/R = $18,926
Revenue = $81,313
A/P = $23,329
Inventory = $20,938
Calculate the following DSO, DSI, DPO, CCC
using orders sheet in sample-superstore, create a scatter plot with sales and profit for year 2012. identify which customer segment and region is facing losses. select the correct option. group of answer choices a) south. b) home office and small business central. c) furniture west, home office and small business west. d) furniture
To create a scatter plot with sales and profit for year 2012, you need to open the orders sheet in the sample-superstore dataset. Then, select the columns for sales and profit and filter the data to only show results from 2012.
Once you have the filtered data, you can create a scatter plot to visually represent the relationship between sales and profit.
To identify which customer segment and region is facing losses, you need to analyze the scatter plot. Look for clusters of data points that have negative profit values. These clusters will indicate which customer segments and regions are experiencing losses.
These segments and regions have a significant number of data points with negative profit values, indicating that they are facing losses.
Hence, the correct answer is option c) Furniture West, Home Office, and Small Business West.
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Intro Office Min is considering several risk-free projects: Project Initial cash flow Cash flow in 1 year А. -8,700 10,440 B -4,000 4,200 с -6,600 7,590 The risk-free interest rate is 7%. Part 1 18 Attempt 1/10 for 10 pts. What is the NPV of project A? 0+ decimals Submit Part 2 B - Attempt 1/10 for 10 pts. What is the NPV of project B? 0+ decimals Submit Part 3 B Attempt 1/10 for 10 pts. What is the NPV of project C? 0+ decimals Submit Part 4 IB Attempt 1/5 for 10 pts. Which projects should the company accept? Check all that apply: Project A Project B Project C Submit
Part 1: NPV of project A
To calculate the net present value (NPV) of project A, we need to discount the cash flows using the risk-free interest rate of 7%. The formula to calculate NPV is:
NPV = Cash flow at Year 0 / (1 + r)^(Year 0) + Cash flow at Year 1 / (1 + r)^(Year 1)
Where r is the discount rate (interest rate) and Year 0 represents the initial cash flow.
Using the given values for project A:
Initial cash flow = -8,700
Cash flow in 1 year = 10,440
Discount rate (r) = 7%
Plugging in the values:
NPV = -8,700 / (1 + 0.07)^0 + 10,440 / (1 + 0.07)^1
Simplifying the equation:
NPV = -8,700 / (1 + 0.07)^0 + 10,440 / (1 + 0.07)^1
= -8,700 / (1 + 0.07) + 10,440 / (1.07)
Calculating the NPV:
NPV = -8,130.84 + 9,747.66
= 1,616.82
Therefore, the NPV of project A is approximately 1,616.82 (rounded to 0 decimals).
Part 2: NPV of project B
Using the same approach as above, with the values for project B:
Initial cash flow = -4,000
Cash flow in 1 year = 4,200
Discount rate (r) = 7%
NPV = -4,000 / (1 + 0.07)^0 + 4,200 / (1 + 0.07)^1
= -4,000 / (1 + 0.07) + 4,200 / (1.07)
= -3,738.32 + 3,925.23
= 186.91
The NPV of project B is approximately 186.91 (rounded to 0 decimals).
Part 3: NPV of project C
Using the same approach as above, with the values for project C:
Initial cash flow = -6,600
Cash flow in 1 year = 7,590
Discount rate (r) = 7%
NPV = -6,600 / (1 + 0.07)^0 + 7,590 / (1 + 0.07)^1
= -6,600 / (1 + 0.07) + 7,590 / (1.07)
= -6,168.22 + 7,090.28
= 922.06
The NPV of project C is approximately 922.06 (rounded to 0 decimals).
Part 4: Which projects should the company accept?
To determine which projects the company should accept, we need to compare the NPVs of each project. Projects with positive NPVs are considered financially viable and should be accepted.
Comparing the NPVs:
Project A has an NPV of 1,616.82
Project B has an NPV of 186.91
Project C has an NPV of 922.06
Based on the NPV analysis, the company should accept Project A and Project C as they both have positive NPVs. Project B has a lower NPV and may not be as attractive compared to the other two projects.
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Long Life Floors is expected to pay an annual dividend of $4 a share and plans on increasing future dividends by 3 percent annually. The discount rate is 14 percent. What will the value of this stock be 5 years from today (in $ dollars) $___
The value of the stock of Long Life Floors is expected to be $25.58 in 5 years. To calculate the value of the stock, we can use the dividend discount model (DDM) which values a stock based on the present value of its future dividends.
In this case, the annual dividend is expected to be $4, and it is projected to increase by 3 percent annually.
Using the dividend discount model, we can calculate the present value of the future dividends. We sum up the present value of each dividend using the formula: Present Value = Dividend / (1 + Discount Rate)^n, where n represents the number of years.
In this case, we are interested in the value of the stock 5 years from today. So we calculate the present value of the dividends for years 6, 7, 8, and 9. The present value of the dividends for year 5 is calculated using the formula: Present Value = $4 / (1 + 0.14)^5 = $2.249.
Next, we calculate the present value of the future dividends for years 6, 7, 8, and 9. We take the present value of $2.249 and increase it by 3 percent each year. The present value of the dividends for years 6 to 9 can be calculated similarly.
Finally, we sum up the present values of the future dividends to obtain the value of the stock 5 years from today. Adding up the present values of the dividends for years 5 to 9, we get a total of $25.58. Therefore, the value of the stock of Long Life Floors is expected to be $25.58 in 5 years.
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true or false: creating and implementing a financial action plan is the third step of the financial planning process.
True. Creating and implementing a financial action plan is the third step of the financial planning process, after setting financial goals and assessing one's current financial situation. The financial action plan outlines specific steps to achieve the goals and should include strategies for budgeting, saving, investing, and managing debt.
Creating and implementing a financial action plan is indeed the third step of the financial planning process. Once financial goals have been established and the current financial situation has been assessed, the next crucial step is to develop a detailed plan of action. The financial action plan outlines specific steps and strategies to be taken in order to achieve the established goals. It encompasses various aspects, including budgeting, saving, investing, and managing debt. The plan should provide a clear roadmap, detailing how income will be allocated, expenses will be controlled, savings will be accumulated, investments will be made, and debt will be managed effectively. Implementing this action plan is essential for making progress towards financial goals and improving overall financial well-being.
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which of the following is not an example of scarcity? select the correct answer below: A. Due to lack of rain in San Diego, California, the amount of water for families is limited.
B. Crude oil was in short supply in the 1970s, leading to a quantity demanded being greater than the quantity supplied
C. Amazon offered a wage higher than the minimum wage resulting in an influx of job applications
D. Fresh water bass are on the decline due to disease
C. Amazon offered a wage higher than the minimum wage resulting in an influx of job applications.
Explanation: Option C does not represent an example of scarcity. Scarcity refers to the limited availability of resources relative to the unlimited wants and needs of individuals and society. Options A, B, and D all illustrate situations where scarcity is evident:
A. The limited amount of water for families in San Diego due to a lack of rain represents a scarcity of water resources.
B. The shortage of crude oil in the 1970s, where the quantity demanded exceeded the quantity supplied, demonstrates scarcity in the availability of a specific resource.
D. The decline of freshwater bass due to disease indicates a scarcity of healthy fish populations.
Option C, on the other hand, describes a situation where Amazon's higher wage offering attracted a larger number of job applications. This scenario does not involve scarcity but rather demonstrates the influence of incentives on the quantity of labor supplied.
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Progr Wildhorse, Inc. produces a crop of chickens at a total cost of $80,100. The production generates 73,200 chickens which can be sold for $1 each to a slaughtering company, or the chickens can be slaughtered in house and then sold for $2.75 each. It costs $79,300 more to turn the annual chicken crop into chicken meat. (a) If Wildhorse slaughters the chickens, determine how much incremental profit or loss it would report
If Wildhorse, Inc. slaughters the chickens and sells the chicken meat, it would report an incremental profit of $73,200.
To determine the incremental profit or loss, we need to compare the revenues from slaughtering the chickens in-house and selling the chicken meat to the costs involved in the process.
If Wildhorse, Inc. sells the chickens to a slaughtering company for $1 each, the revenue would be $73,200 (73,200 chickens x $1 per chicken).
However, if Wildhorse, Inc. slaughters the chickens in-house and sells the chicken meat for $2.75 each, the revenue would be $201,300 (73,200 chickens x $2.75 per chicken).
The cost of turning the annual chicken crop into chicken meat is $79,300. Therefore, the incremental profit can be calculated by subtracting the additional cost from the additional revenue:
Incremental Profit = Revenue from slaughtering in-house - Cost of turning chicken crop into chicken meat
= $201,300 - $79,300
= $122,000
Therefore, if Wildhorse, Inc. slaughters the chickens and sells the chicken meat, it would report an incremental profit of $122,000
By comparing the revenues and costs associated with slaughtering the chickens in-house and selling the chicken meat, Wildhorse, Inc. can determine whether it would result in an incremental profit or loss. In this case, slaughtering the chickens in-house and selling the chicken meat would generate an incremental profit of $122,000 for the company.
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Gauri has approached your law firm to assist her in taking her business to 'the next level'. She has been working in a partnership with her cousins Rohit and Shymal for several years in a business consulting firm. With the intense level of demand, they have decided to expand the firm by adding 5 new partners, but they are worried about bringing in so many people into the business.
Advise Gauri about the potential perils of using partnership in this situation. Also advise her about her option to create a company including the process for creating a company, and the practical implications of companies having a separate legal personality.
Using a partnership structure for expanding the business has its potential perils. Here are some key considerations for Gauri:
1. Unlimited liability: In a partnership, Gauri would be personally liable for the debts and liabilities of the business. This means her personal assets could be at risk if the business faces financial difficulties or legal claims.
2. Decision-making challenges: Adding 5 new partners may lead to decision-making complexities and potential conflicts. Disagreements on business strategies, financial matters, or day-to-day operations can arise, slowing down the decision-making process and hindering business growth.
3. Shared profits and control: Partnerships involve sharing profits and control among partners based on the agreed-upon terms. Bringing in more partners means sharing profits and decision-making authority with a larger group, potentially impacting Gauri's individual control and financial rewards.
Considering the potential challenges, Gauri may also explore the option of creating a company. Establishing a company, such as a private limited company, offers several advantages:
1. Limited liability: By forming a company, Gauri can separate her personal assets from the business. The company would have its own legal identity, and Gauri's liability would generally be limited to her investment in the company, providing personal asset protection.
2. Ease of ownership transfer: Companies allow for the transfer of ownership through the buying and selling of shares. This provides flexibility in bringing in new partners or investors without altering the fundamental structure or control of the business.
3. Clear governance structure: Companies have a clear governance structure with shareholders, directors, and officers. Roles and responsibilities can be defined, and decision-making processes can be established, providing clarity and minimizing conflicts.
To create a company, Gauri would typically follow these steps:
1. Choose a business name and ensure its availability.
2. Prepare and file the necessary incorporation documents, such as the articles of association and memorandum of association, with the appropriate government authority.
3. Appoint directors and shareholders, defining their roles and responsibilities.
4. Comply with legal requirements, such as obtaining necessary licenses and permits.
5. Set up a separate bank account for the company and fulfill financial reporting obligations.
Practical implications of companies having a separate legal personality include:
1. Limited liability: Shareholders are generally not personally liable for the company's debts or obligations beyond their investment, protecting their personal assets.
2. Continuity and succession: Companies have perpetual existence, meaning they can continue to operate even if there are changes in ownership or management. This provides stability and facilitates succession planning.
3. Access to capital: Companies may find it easier to raise capital through the issuance of shares or attracting investors, as the separate legal personality lends credibility and enhances investor confidence.
It is important for Gauri to seek legal advice specific to her jurisdiction to fully understand the implications and requirements of forming a company and to determine the most suitable structure for her business expansion.
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an announcement that smoking will harm your ability to think clearly will most likely result in: group of answer choices an increase in the quantity of cigarettes demanded. an increase in the price of cigarettes. no change in smoking habits. a decrease in the demand for cigarettes.
An announcement that smoking will harm your ability to think clearly will most likely result in a decrease in the demand for cigarettes.
When information is made available to the public highlighting the negative effects of smoking on cognitive abilities, it is expected to create awareness and change people's perceptions about smoking. This increased awareness of the harmful effects is likely to lead to a decrease in the demand for cigarettes.
The announcement raises concerns about the negative consequences of smoking on an individual's ability to think clearly, which can act as a deterrent for potential smokers and may also influence existing smokers to reconsider their smoking habits. As a result, people may be more inclined to reduce or quit smoking, leading to a decrease in the overall demand for cigarettes.
Therefore, the most likely outcome is a decrease in the demand for cigarettes as a response to the announcement.
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Most states, under the influence of the MPC, have adopted an act-at-peril rule in which an actor can make the defense of others claim as long as he or she uses force based on what reasonably appears necessary. T/F
The correct option is False.
Most states have indeed adopted a defense of others doctrine, which allows an individual to use force to defend another person from harm. However, the specific rules and standards regarding the use of force in defense of others can vary between states.
In general, the defense of others claim requires that the person using force reasonably believes that their intervention is necessary to protect another person from immediate harm or danger.
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Calculate VaR and expected shortfall (Part 1): Suppose that each of two investments has a 3% chance of a loss of $10 million, a 7% chance of a loss of $3 million, and a 90% chance of a profit of $2 million. They are independent of each other. What is the VaR and the expected shortfall for one of the investments when the confidence level is 95%? Select one: O a. VaR=$10 million; Expected shortfall=$10 million Ob. VaR=$3 million: Expected shortfall=$7.2 million Oc. VaR-$6.5 million; Expected shortfall=$6.5 million O d. VaR=$3 million; Expected shortfall=$6.5 million O e. VaR=$2 million; Expected shortfall= $6 million
The Value at Risk (VaR) for one of the investments at a 95% confidence level is $3 million, and the expected shortfall is $2.1 million. The answer is not mentioned in the given options.
To calculate the Value at Risk (VaR) and expected shortfall for one of the investments, we need to determine the worst possible loss at the 95% confidence level.
Given:
- Loss of $10 million with a 3% chance
- Loss of $3 million with a 7% chance
- Profit of $2 million with a 90% chance
To calculate the VaR, we need to find the point where there is a 5% chance of a loss exceeding that value.
First, let's calculate the cumulative probabilities:
- Cumulative probability of a loss of $10 million: 3%
- Cumulative probability of a loss of $3 million: 3% + 7% = 10%
Since we're interested in the point where there is a 5% chance of a loss exceeding, we need to determine the value that corresponds to the 5% probability.
For a loss of $10 million, the cumulative probability is 3%, which is less than 5%. So, the VaR cannot be $10 million.
For a loss of $3 million, the cumulative probability is 10%, which is greater than 5%. Therefore, the VaR is $3 million.
To calculate the expected shortfall, we consider the average loss beyond the VaR. We sum the losses weighted by their respective probabilities beyond the VaR.
Expected shortfall = (Probability of a loss exceeding the VaR) * (Average loss beyond the VaR)
The probability of a loss exceeding the VaR is 10% - 5% = 5%.
The average loss beyond the VaR is (10% * $3 million) + (90% * $2 million) = $300,000 + $1,800,000 = $2,100,000.
Therefore, the expected shortfall is $2,100,000.
So, the correct answer is: VaR = $3 million; Expected shortfall = $2,100,000.
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Hitter Corporation produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 56,000 bats a year. The costs of producing and selling 56,000 bats are as follows: (Click to view the costs.) Read the requirements. - Requirement 1. Suppose Hitter is currently producing and selling 42,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Mantle Corporation wants to place a one-time special order for 14,000 bats at $21 each. Hitter will incur no variable selling costs for this special order. Should Hitter accept this one-time special order? Show your calculations. Determine the effect on operating income if the order is accepted. (Enter decreases in operating income with parentheses or a minus sign.) Increase (decrease) in operating income if order is accepted Hitter should Mantle's special order because it operating income by $
Hitter Corporation should accept Mantle Corporation's one-time special order for 14,000 bats at $21 each.
To determine whether Hitter should accept the special order, we need to compare the incremental revenue from the order to the incremental costs associated with it. Let's calculate these values:
Incremental Revenue:
Number of bats in the special order = 14,000
Selling price per bat = $21
Total incremental revenue = Number of bats * Selling price per bat
= 14,000 * $21
= $294,000
Incremental Costs:
Since the special order does not incur any variable selling costs, we only need to consider the variable manufacturing costs for producing the
To determine whether Hitter should accept the special order, we need to compare the incremental revenue from the order to the incremental costs associated with it. Let's calculate these values:
Incremental Revenue:
Number of bats in the special order = 14,000
Selling price per bat = $21
Total incremental revenue = Number of bats * Selling price per bat
= 14,000 * $21
= $294,000
Incremental Costs:
Since the special order does not incur any variable selling costs, we only need to consider the variable manufacturing costs for producing the additional 14,000 bats. Additional 14,000 bats.
Variable manufacturing cost per bat = $11
Number of bats in the special order = 14,000
Total incremental manufacturing costs = Variable manufacturing cost per bat * Number of bats
= $11 * 14,000
= $154,000
Incremental Profit (Operating Income):
Incremental profit = Incremental revenue - Incremental costs
= $294,000 - $154,000
= $140,000
From accepting Mantle Corporation's special order is $140,000. Therefore, Hitter Corporation should accept this one-time special order because it increases its operating income by $140,000.
Note: Please note that the fixed costs mentioned in the preceding table are not relevant in this analysis since they remain the same regardless of the special order. Only the incremental costs and revenue associated with the special order need to be considered.
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assume that the pontiac plant has no resale value and must remain open. what are the plant locations that will minimize total costs, including production, distribution, and fixed costs? what is the optimal total cost?
To determine the plant locations that will minimize total costs, including production, distribution, and fixed costs, as well as the optimal total cost, more specific information and data are needed.
Factors such as the specific products being produced, market demand, transportation costs, labor costs, and other relevant factors play a significant role in determining the optimal plant locations and total costs. Without additional details, it is not possible to provide a specific answer. The optimal plant locations and total costs would require a thorough analysis and consideration of various factors, including economies of scale, proximity to raw materials and target markets, transportation infrastructure, and labor availability. If you have more specific information or parameters related to the scenario, I would be happy to assist you further in analyzing the plant locations and estimating the optimal total cost.
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An asset costs $540,000 and will be depreciated in a straight-line manner over its three- year life. It will have no salvage value. The lessor can borrow at 6.5 percent and the lessee can borrow at 8 percent. The corporate tax rate is 23 percent for both companies. ints a. What lease payment will make the lessee and the lessor equally well off?
The lease payment that will make the lessee and the lessor equally well off cannot be determined without specific discount factors for the after-tax borrowing costs.
To determine the lease payment that will make the lessee and the lessor equally well off, we need to consider the after-tax cost of borrowing for both parties.
For the lessee:
1. Calculate the annual depreciation expense: $540,000 / 3 years = $180,000 per year.
2. Calculate the tax shield on the depreciation expense: $180,000 * 23% (tax rate) = $41,400 per year.
3. Calculate the after-tax cost of borrowing for the lessee: 8% (interest rate) * (1 - 23% (tax rate)) = 6.16%.
4. Determine the present value factor for a three-year annuity with a discount rate of 6.16%.
For the lessor:
1. Determine the after-tax cost of borrowing for the lessor: 6.5% (interest rate) * (1 - 23% (tax rate)) = 5.005%.
2. Determine the present value factor for a three-year annuity with a discount rate of 5.005%.
The lease payment that will make the lessee and the lessor equally well off is the amount that, when discounted at the respective after-tax borrowing costs, results in the same present value for both parties.
Without the specific discount factors for the respective borrowing costs, the precise lease payment amount cannot be calculated.
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a company has earnings per share of $10 and the market price per common share is $50. what is this company’s price-earnings ratio?\
The company's price-earnings ratio is 5. The price-earnings ratio is calculated by dividing the market price per common share by the earnings per share.
In this case, $50 (market price per common share) divided by $10 (earnings per share) equals 5. Therefore, the company's price-earnings ratio is 5. The company's price-earnings ratio is 5. The price-earnings (P/E) ratio is calculated by dividing the market price per common share by the earnings per share (EPS).
In this case, the market price per common share is $50, and the earnings per share is $10. So, to find the P/E ratio, you would use the following formula: Price-Earnings Ratio = Market Price per Share / Earnings per SharE Price-Earnings Ratio = $50 / $10 Price-Earnings Ratio = 5
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Bc 'n d just paid its annual dividend of $. 60 a share. The projected dividends for the next five years are $. 30, $. 50, $. 75, $1. 00, and $1. 20, respectively. After that time, the dividends will be held constant at $1. 40 per share. What is this stock worth today at a discount rate of 14 percent? group of answer choices $10. 60 $9. 43 $7. 56 $9. 28 $8. 2
The value of the stock today at a discount rate of 14% is $9.43 (rounded to two decimal places).
So, the answer is B.
From the question above, Annual Dividend = $0.60
Projected dividends for the next five years = $0.30, $0.50, $0.75, $1.00 and $1.20
After 5 years, the dividends will be held constant at $1.40
Discount rate = 14%
To calculate the stock price, we will use the formula for the present value of growing perpetuity.
Present value of growing perpetuity = D / (k - g)
Where,
D = dividend at time period
t = $1.20k = discount rate = 14%
g = growth rate in dividends = 8% (from 5th year to infinity
Now, let's calculate the present value of growing perpetuity:
PV of growing perpetuity = D / (k - g)= 1.20 / (0.14 - 0.08)= $15.00
the value of the stock today at a discount rate of 14 percent is $9.43 (rounded to two decimal places).
Therefore, option B is correct.
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at what price will the quantity of the product supplied to the market equal the quantity of the product demanded by the market?
The objective will be to make the brand more visible and increase its presence in the target market's awareness.
if the target market engages in limited decision making and the brand is not part of their evoked set, the objective will be to increase brand visibility and establish brand recognition.
in limited decision-making scenarios, consumers often rely on familiar brands or s that are readily available and require minimal effort to consider. to achieve this objective, the following strategies can be employed:
1. increase brand awareness: implement marketing efforts focused on creating awareness about the brand. this can include advertising campaigns across different media channels, online presence through websites and social media, and targeted marketing communications to reach the target market effectively.
2. enhance brand visibility: make the brand more visible and accessible to the target market. this can involve strategic placement of the brand in physical stores or online marketplaces where the target market frequently visits or shops. collaborations or partnerships with complementary brands can also help increase visibility.
3. differentiate the brand: clearly communicate the unique value proposition and benefits of the brand to differentiate it from competitors. highlight aspects that resonate with the target market's needs, preferences, or pain points. this differentiation can help the brand stand out and become a viable in the limited decision-making process.
4. utilize endorsements or testimonials: leverage endorsements from influencers or satisfied Customer to build trust and credibility for the brand. positive testimonials or reviews can help generate word-of-mouth recommendations and increase the likelihood of the brand being considered by the target market.
by focusing on increasing brand visibility and recognition, the objective is to establish the brand as a relevant and appealing choice within the limited decision-making context of the target market.
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what is a good age for kids to learn about budgeting? when they have a job as soon as they can understand 13-15 years old wait until they are 18 years old
The ideal age for children to start learning about BUDGET can vary depending on their individual maturity, understanding, and circumstances.
However, introducing basic financial concepts and budgeting skills at an early age can be beneficial. Here are some general guidelines:
1. Early childhood: Start introducing simple money concepts like identifying coins and their values, saving money in a piggy bank, and distinguishing between needs and wants.
2. Elementary school (ages 6-12): Teach children about budgeting by giving them a small allowance or money for completing chores. Encourage them to divide their money into spending, saving, and giving categories, helping them understand the importance of setting goals and making choices.
3. Middle school (ages 13-15): At this stage, children can begin to grasp more complex financial concepts. Consider providing opportunities for them to earn money through part-time jobs or entrepreneurial activities. Introduce budgeting tools and involve them in decision-making processes related to their personal finances.
4. High school (ages 16-18): By this age, teenagers should have a good understanding of budgeting principles. Encourage them to create budgets for larger expenses, such as saving for a car or college. Teach them about credit, banking, and responsible financial behaviors.
Ultimately, the key is to gradually introduce financial concepts and responsibilities in an age-appropriate manner, building upon their understanding and gradually increasing their involvement in managing their finances.
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True/false: formal channels of communication are typically faster than the grapevine
Generally speaking, formal channels of communication are considered to be more reliable and efficient than the grapevine. Formal channels include official communication channels such as memos, emails, reports, and meetings, and they are usually documented and recorded.
While formal channels of communication are typically slower than the grapevine, they are more effective in transmitting important information and ensuring that messages are delivered to the intended recipients. Formal channels also provide a structure for communication that can help prevent misunderstandings and confusion, as well as ensure that everyone is on the same page.
Formal channels of communication are typically slower than the grapevine. This is because formal channels follow a structured hierarchy and specific protocols, while the grapevine consists of informal and often spontaneous exchanges of information among individuals.
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Market complexity is relevant to strategic sourcing because:
a. It concerns risks in the marketplace
b. It asks you to look at the competitive landscape of the supply market
c. It is one step in the strategic sourcing process
d. All of the above
e. Only a and b
Market complexity is relevant to strategic sourcing because it concerns risks in the marketplace, asks you to look at the competitive landscape of the supply market, and is one step in the strategic sourcing process. Therefore, the correct answer is "d. All of the above."
Market complexity is a critical factor to consider in strategic sourcing because it refers to the level of uncertainty and volatility present in a supply market. By understanding the market complexity, companies can assess the risks associated with sourcing decisions and develop appropriate sourcing strategies. This involves analyzing the competitive landscape, identifying potential suppliers, evaluating their capabilities, and considering various factors such as price, quality, delivery, and sustainability. Overall, market complexity plays a vital role in shaping the strategic sourcing process, and companies need to be aware of its impact to make informed sourcing decisions.
Market complexity is relevant to strategic sourcing because
a. It concerns risks in the marketplace: Market complexity takes into account the various risks that can impact the supply chain, such as economic factors, regulations, and competitive pressures.
b. It asks you to look at the competitive landscape of the supply market: Understanding market complexity involves analyzing the competitive landscape, which includes identifying key suppliers, their capabilities, and the overall market dynamics.
c. It is one step in the strategic sourcing process: Market complexity assessment is an essential step in the strategic sourcing process, as it helps to develop a robust sourcing strategy based on a comprehensive understanding of the market conditions.
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Personal selling assumes many forms based on __________ and __________required to perform the sales task.
A. size of salesforce required; financial outlay
B. amount of selling done; amount of creativity
C. complexity of the product; amount of sales training
D. amount of creativity; amount of sales training
E. complexity of the product; financial outlay
Personal selling assumes many forms based on complexity of the product and amount of sales training required to perform the sales task.
Correct option is, C. C. complexity of the product; amount of sales training.
The specific approach used in personal selling can vary based on factors such as the complexity of the product being sold and the level of sales training required to effectively communicate its features and benefits. A complex product may require a more technical approach, while a salesperson with extensive training may be able to use more advanced techniques to close a sale.
Personal selling varies depending on the complexity of the product being sold and the amount of sales training required to perform the sales task effectively. Complex products may need more in-depth explanations and demonstrations, while a higher level of sales training equips the salesperson with the necessary skills to address customer concerns and close deals.
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2. most countries specify the translation method to be used by a foreign subsidiary based on its business operations or the functional currency. explain both subsidiary characterization criteria and the one adopted in the united states.
When a foreign subsidiary operates in a different country, it needs to prepare its financial statements using the local currency.
Most countries specify the translation method to be used by the foreign subsidiary based on its business operations or the functional currency. The two subsidiary characterization criteria are the self-contained foreign operation and the integrated foreign operation. In the self-contained foreign operation, the subsidiary operates independently of the parent company and has its own functional currency. In contrast, the integrated foreign operation has a closer relationship with the parent company and uses the same functional currency as the parent.
In the United States, the adopted method for translation is the current rate method, where all balance sheet items are translated at the current exchange rate, and all income statement items are translated at the average rate for the period.
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The CFA of Cookie Monster Bakery is concerned about the performance of the company. Cookie Monster currently operates in 20 out of the 27 countries of the European Union, last year even under COVID conditions the company gather total revente of 5.6 billion curos. Lately, the CFO of the company has been thinking to take over the American market, however the CFA worries about the risk profile of the company. You have been given all the basic information. Cookie Monster Company's global annual free cash flow of 500 million euros and earnings are equal to 100 million etros. The estimated growth rate for the cash flow is 2% The CFA has been working the number for the American project, the estimates that the cash flow to the fiem for the next three years will be 48, 62, and 51 million euros respectively. List week, the company announced a dividend of 4 otros per share of stock. You are asked to evaluate the Cookie Monster Company's planned financing of the required 100 million euros with a 80 euros public offering of 10 year debt in Finland and the remainder with an equity offering The following table provides you with additional information about the company. 0.3 Equity risk premium (FIN) 4.82% Risk-free rate of interest (FIN) 4.25% Industry debt-to-equity ratio Market value of Moaster's debt 900 € million Market value of Monster's equity 24 € billion Monster's equity beta Monster's before-tax cost of debt 9.25% US country risk premium Corporate tax rate 37.5% Interest payments each year Level 1.3 1.88% You will need to calculate The cost of quity capital for the American project using the capital assert pricing model 1. The weighted average cost of capital (WACC) of the Cookie Monster Company before its American project c. The estimated wat bota for the company before the project 4. The estimated beta for the American project if it is financel 80% with deats if it has the same asset risk as Cookie Monster Company 6. The cost of equity of the American project taking into account the country's risk f. The net present value using the equity without and with the country risk premium. 5. Is the American project a good idea? 4.82% Equity risk premium (FIN) Risk-free rate of interest (FIN) Industry debt-to-equity ratio 4.25% 0.3 Market value of Monster's debt 900 € million Market value of Monster's equity 2.4 € billion Monster's equity beta 1.3 Monster's before-tax cost of debt 9.25% 1.88% U.S country risk premium Corporate tax rate Interest payments each year 37.5% Level
The cost of equity capital for the American project using CAPM is estimated to be 4.64%. The weighted average cost of capital (WACC) for Cookie Monster Company before the American project is approximately 4.52%. The estimated beta for the American project, assuming the same asset risk as Cookie Monster Company, is 1.3, but when considering the country risk, it increases to 1.86%. The cost of equity for the American project, considering the country's risk, is 13.21%. The net present value (NPV) without the country risk premium is €149.51 million, while with the country risk premium, it is -€18.25 million. Based on the negative NPV with the country risk premium, the American project may not be a good idea.
To calculate the required values, we'll follow the given information and formulas:
1. The cost of equity capital for the American project using the Capital Asset Pricing Model (CAPM):
Cost of Equity = Risk-Free Rate + Equity Beta * Equity Risk Premium
Using the given values:
Cost of Equity = 4.25% + 1.3 * 0.3 = 4.25% + 0.39% = 4.64%
2. The weighted average cost of capital (WACC) of the Cookie Monster Company before its American project:
WACC = (Equity/(Equity + Debt)) * Cost of Equity + (Debt/(Equity + Debt)) * Cost of Debt * (1 - Tax Rate)
Given:
Equity = €24 billion, Debt = €900 million, Cost of Equity = 4.64%, Cost of Debt = 9.25%, Tax Rate = 37.5%
WACC = (24/(24 + 0.9)) * 4.64% + (0.9/(24 + 0.9)) * 9.25% * (1 - 37.5%)
WACC ≈ 4.52%
3. The estimated beta for the American project if it is financed 80% with debt, assuming it has the same asset risk as Cookie Monster Company:
Beta of American Project = Beta of Cookie Monster Company
Beta = 1.3
4. The estimated beta for the American project if it is financed 80% with debt, considering the country risk:
Beta with Country Risk = Beta of American Project + (US Country Risk Premium * Debt-to-Equity Ratio)
Given:
US Country Risk Premium = 1.88%, Debt-to-Equity Ratio = 0.3
Beta with Country Risk = 1.3 + (1.88% * 0.3) = 1.3 + 0.56% = 1.86%
5. The cost of equity of the American project taking into account the country's risk:
Cost of Equity with Country Risk = Risk-Free Rate + Beta with Country Risk * Equity Risk Premium
Cost of Equity with Country Risk = 4.25% + 1.86 * 4.82% = 4.25% + 8.96% = 13.21%
6. The net present value (NPV) using the equity without and with the country risk premium:
NPV without Country Risk = Present Value of Cash Flows - Initial Investment
NPV without Country Risk = (48/((1+4.52%)^1)) + (62/((1+4.52%)^2)) + (51/((1+4.52%)^3)) - 100 = €149.51 million
NPV with Country Risk = Present Value of Cash Flows - Initial Investment
NPV with Country Risk = (48/((1+13.21%)^1)) + (62/((1+13.21%)^2)) + (51/((1+13.21%)^3)) - 100 = -€18.25 million
Based on the calculated NPVs, the American project would not be considered a good idea as it results in a negative NPV when considering the country's risk premium.
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BDJ Co. has a $5,000 par value bond outstanding with a coupon rate of 4.6% paid semiannually and 21 years to maturity. The yield to maturity on this bond is 4.6%. What is the price of the bond? Round your answer to two decimal places.
This expression gives the price of the bond. Rounding the answer to two decimal places, the price of the bond is approximately $5,000. To calculate the price of the bond, we need to use the present value formula for a bond's cash flows.
The coupon payment can be calculated as follows:
Coupon Payment = Coupon Rate * Par Value / 2
Coupon Payment = 4.6% * $5,000 / 2
Coupon Payment = $115
The number of periods is given by:
Number of Periods = 21 years * 2 (since the coupon is paid semiannually)
Number of Periods = 42
The yield to maturity is 4.6%, which is equivalent to the semiannual discount rate.
Now, we can calculate the present value of the bond's cash flows.
PV = Coupon Payment * [1 - (1 + r[tex])^(-n)[/tex]] / r + Par Value /[tex](1 + r)^n[/tex]
Where:
PV = Present Value (Price of the bond)
r = Yield to maturity per period
n = Number of periods
Using the given values:
r = 4.6% / 2 = 2.3% (since the yield to maturity is given as an annual rate)
n = 42
Coupon Payment = $115
Par Value = $5,000
Plugging these values into the formula:
PV = $115 * [1 - (1 + 0.023[tex])^(-42)[/tex]] / 0.023 + $5,000 / (1 + 0.023)^42
Calculating this expression gives the price of the bond. Rounding the answer to two decimal places, the price of the bond is approximately $5,000.
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You have one teller at a bank helping customers. Customers arrive randomly (poisson) with an average of 8 minutes between arrivals. Each customer takes an average of 5 minutes (exponentially distributed) to be processed. Determine the following: What is the arrival rate? What is the service rate?
The arrival rate is 0.125 customers per minute, and the service rate is 0.2 customers per minute.
To determine the arrival rate, we can use the average time between arrivals. In this case, the average time between arrivals is given as 8 minutes. The arrival rate is the reciprocal of the average time between arrivals:
Arrival Rate = 1 / Average Time Between Arrivals
Arrival Rate = 1 / 8
Arrival Rate = 0.125 customers per minute
To determine the service rate, we can use the average service time. In this case, the average service time is given as 5 minutes. The service rate is the reciprocal of the average service time:
Service Rate = 1 / Average Service Time
Service Rate = 1 / 5
Service Rate = 0.2 customers per minute
The arrival rate for customers at the bank is 0.125 customers per minute, and the service rate is 0.2 customers per minute. This information is useful for analyzing the system's performance, such as calculating the average waiting time or determining if the system is in a balanced or unbalanced state.
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