Bond A has a higher yield than Bond B, and this might be because Bond A has a lower default risk than Bond B.
The yield of a bond refers to the return an investor can expect to receive from the bond, taking into account its price and the promised payment. In this case, Bond A has a yield higher than Bond B.
The higher yield of Bond A can be attributed to its lower default risk compared to Bond B. Default risk refers to the likelihood that the issuer of the bond will be unable to make the promised payments. Bond A, with a lower price of $188 and a promised payment of $210, indicates a lower default risk. The higher yield compensates investors for the slightly increased risk associated with Bond B.
Investors generally demand a higher yield for bonds with higher default risk to compensate for the possibility of not receiving the full payment. Therefore, Bond A, with its higher yield, implies a lower default risk compared to Bond B, leading to the conclusion that Bond A has a lower default risk than Bond B.
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Assignment Instructions Create a training program on a topic of interest to you following these directions Creating a Training Program-5.pdf. The following links will also help with this assignment: • Review the resources included in the Training and Need Assessment Tool Kits link. (This link will help you with your assignment this week) . Read about the Jiffy Lube International Training Program, Make sure you provide detailed learned content in a Word or PowerPoint document.
Creating a training program requires a lot of effort and knowledge of the topic. Follow the instructions provided in the given file, Creating a Training Program-5.pdf, to create a training program on a topic of your interest. The provided links will help you in creating your training program.
A training program is a course or set of courses designed to teach people the skills they need for a particular job or activity. The following steps can help in creating an effective training program: Determine the Goals and Objectives of the Training Program Before creating a training program, it is necessary to determine the goals and objectives of the program. Define what the participants will learn, what skills they will develop, and what kind of knowledge they will gain. Write down the objectives of the training program to guide you in developing the course content.
Assess the learners' needs to identify the skills and knowledge they already have, and the areas they need to improve. This can be done through surveys, interviews, or assessments. This information will help in creating a program that meets their needs and is more effective. Create course content based on the goals and objectives of the training program. Use the information gathered from the learners' needs assessment to create content that addresses their needs. Create a PowerPoint presentation or a Word document to communicate the course content. Develop training materials that will support the course content. These materials include handouts, training manuals, videos, or audio materials. Develop these materials based on the course content and the learners' needs.
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View Policies Shi Show Attempt History Current Attempt in Progress Perth Inc's bank statement from Main Street Bank at August 31, 2022, gives the following information. Balance, August 1 $18,400 Bank debit memorandum: August deposits 71,000 Safety deposit box fee $25 Checks cleared in August 68,678 Service charge 50 Bank credit memorandum: Balance, August 31 20,692 Interest earned 45 A summary of the Cash account for August shows the following: balance, August 1, $18,700; receipts $74,000; disbursements $73,570; and balance, August 31, $19,130. Analysis reveals that the only reconciling items on the July 31 bank reconciliation were a deposit in transit for $4,800 and outstanding checks of $4,500. In addition, you determine that there was an error involving a company check drawn in August: A check for $400 to a creditor on account that cleared the bank in August was recorded for $40. (d) Prepare a tabular analysis for the adjustments to be made by Perth Inc. at August 31. Include margin explanations for the changes in revenues and expenses. (If a transaction results in a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.) Assets Liabilities Stockholders' Accts. Pay. Cash Rev. Exp. Aug. 31 31 31 31 (d) Prepare a tabular analysis for the adjustments to be made by Perth Inc. at August 31. Include margin explanations for the changes in revenues and expenses. (If a transaction results in a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.) Liabilities Stockholders' Equity Accts. Pay. Rev. Exp. 1 <
These adjustments ensure the proper alignment of the company's cash account with the bank statement and rectify any errors or omissions in the recorded transactions.
Assets Liabilities Stockholders' Accts. Pay. Cash Rev. Exp.
Aug. 31
Adjustments:
1. Bank Debit Memorandum:
- August deposits: +$71,000
- Safety deposit box fee: -$25
2. Bank Credit Memorandum:
- Interest earned: +$45
3. Reconciliation Items from July 31 Bank Reconciliation:
- Deposit in transit: +$4,800
- Outstanding checks: -$4,500
4. Correction of Recording Error:
- Adjust company check for creditor from $40 to $400: -$360
Adjusted amounts:
Assets:
- Cash: $18,700 (beginning balance) + $71,000 (deposits) + $4,800 (deposit in transit) - $4,500 (outstanding checks) + $45 (interest earned) - $360 (recording error) = $90,685
Liabilities:
- Accounts Payable: No specific adjustment mentioned
Stockholders' Equity:
- Revenue: No specific adjustment mentioned
- Expenses: No specific adjustment mentioned
The tabular analysis summarizes the adjustments made to Perth Inc.'s financial statements as of August 31. The adjustments include incorporating the bank debit and credit memoranda, reconciling items from the previous month's bank reconciliation, and correcting a recording error in a company check.
The bank debit memorandum reflects the additional deposits made in August and the deduction for the safety deposit box fee. The bank credit memorandum represents the interest earned. The reconciliation items from the previous month include adding the deposit in transit and subtracting the outstanding checks, which were not yet reflected in the bank statement.
Lastly, the correction of the recording error adjusts the company check amount, reducing expenses by $360 to reflect the accurate transaction amount. The specific changes to liabilities and stockholders' equity are not mentioned in the given information.
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(10.1) In this first question we would like you to assess - with a brief explanation - whether the following four statements are correct or false (a) According to Okun's law, the inflation rate falls when the growth rate of produc- tion exceeds its natural level. (b) In the medium-run equilibrium, the nominal interest rate i is such that inflation is always equal to zero. (c) Expansionary fiscal policy is more effective, i.e., leads to a bigger increase in output, everything else equal in case of an interest rate targeting central bank (horizontal LM curve) compared to a money supply targeting central bank (upward sloping LM curve). (d) An increase in energy prices leads to higher real wages and thus a higher natural rate of unemployment.
(a) The given statement, "According to Okun's law, the inflation rate falls when the growth rate of production exceeds its natural level," is false.
(b) The given statement, "In the medium-run equilibrium, the nominal interest rate i is such that inflation is always equal to zero," is false.
(c) The given statement, "Expansionary fiscal policy is more effective, i.e., leads to a bigger increase in output, everything else equal in case of an interest rate targeting central bank (horizontal LM curve) compared to a money supply targeting central bank (upward sloping LM curve)," is false.
(d) The given statement, "An increase in energy prices leads to higher real wages and thus a higher natural rate of unemployment," is false.
According to Okun's law, the inflation rate falls when the unemployment rate decreases, not when the growth rate of production exceeds its natural level. Okun's law describes the negative relationship between the unemployment rate and the output gap, which is the difference between actual and potential output.
In the medium-run equilibrium, the nominal interest rate is determined by monetary policy and other factors such as inflation expectations and the real interest rate. Inflation can be positive or negative in the medium-run equilibrium, depending on various economic factors and policies.
Expansionary fiscal policy can have different effects depending on the central bank's policy stance. In the case of an interest rate targeting the central bank with a horizontal LM curve, expansionary fiscal policy may lead to higher output due to increased government spending. However, in the case of a money supply targeting a central bank with an upward-sloping LM curve, expansionary fiscal policy may have a limited impact on output as the central bank adjusts the money supply to maintain its policy targets.
An increase in energy prices typically leads to higher production costs for firms, which can result in lower real wages and potentially higher unemployment if firms respond by reducing their workforce or cutting back on hiring. The natural rate of unemployment is determined by structural factors in the labor market and is not directly influenced by energy prices.
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Kirk Van Houten, who has been married for 22 years, would like to buy his wife an expensiv diamond ring with a platinum setting on their 30-year wedding anniversary. Assume that the cost of the ring will be $10,000 in 8 years. Kirk currently has $4,469 to invest. What annual rate of return must Kirk earn on his investment to accumulate enough money to pay for the ring?
Kirk must earn an annual rate of return of approximately 9.1% on his investment to accumulate enough money to pay for the ring.
To calculate the annual rate of return Kirk must earn on his investment to accumulate enough money to pay for the ring, we can use the future value formula for compound interest.
The future value (FV) of Kirk's investment after 8 years can be calculated as follows: FV = P(1 + r)^n
Where:
P = Initial investment amount = $4,469
r = Annual interest rate (rate of return)
n = Number of years = 8
Given that Kirk wants to accumulate $10,000 in 8 years, we can set up the equation: $10,000 = $4,469(1 + r)^8
To solve for the annual interest rate (r), we can rearrange the equation and solve for r:
(1 + r)^8 = $10,000 / $4,469
(1 + r)^8 = 2.238
Taking the eighth root of both sides:
1 + r = (2.238)^(1/8)
1 + r = 1.091
Subtracting 1 from both sides:
r = 1.091 - 1
r = 0.091
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which of the following do bankers consider when deciding how to allocate their assets? check all that apply. the reserve requirement the size of the monetary base the total value of liabilities
Bankers consider the following factors when deciding how to allocate their assets: the reserve requirement the size of the monetary base the total value of liabilities Therefore, all of the given options are correct.
Below is a brief explanation of each factor:
1. The reserve requirement: This is the percentage of deposits that a bank is required to hold in reserve. Banks must keep a portion of their deposits in reserve with a Federal Reserve bank. The reserve requirement is set by the Federal Reserve and is one of the factors that bankers consider when deciding how to allocate their assets.
2. The size of the monetary base: This is the total amount of money that is in circulation. Bankers need to keep an eye on the size of the monetary base when deciding how to allocate their assets because it can affect the overall health of the economy.
3. The total value of liabilities: This is the total amount of money that a bank owes to its depositors and other creditors. Bankers need to make sure that they have enough assets to cover their liabilities in case of any unexpected losses.
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3 major function that the environment as an asset perform.
The environment is a valuable asset that performs many important functions for life on Earth. There are three main functions of the environment as an asset, namely: Provisioning services, Regulating services and Cultural services.
Provisioning services refer to the direct benefits that people derive from the environment in terms of goods and resources. These include water, air, food, raw materials, fuel, and other resources that people depend on for their survival and well-being. The environment provides many of these resources, which are essential to our lives and livelihoods.
Regulating services refer to the indirect benefits that people derive from the environment in terms of regulating the climate, water cycle, and other natural processes that are essential for life. These services include air and water purification, soil formation, pollination, flood regulation, and other ecosystem processes that help maintain the Earth's natural balance.
Cultural services refer to the non-material benefits that people derive from the environment, such as spiritual and aesthetic values, recreation, and tourism. These services are often intangible and subjective but are an important aspect of human well-being. Examples of cultural services include outdoor activities such as hiking, camping, and wildlife watching, as well as the appreciation of natural beauty and cultural heritage.
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On October 25 you sell short 2,500 shares of KCB at a share price of $54.00. (Assume an initial margin of
150% and a maintenance margin of 130%.). 3 pts
a. How much will be in your margin account (your investment account balance) immediately after you
open the account?
b. What is the lowest stock price for KCB at which you get a margin call?
c. Suppose the stock price rises to $64.20 almost immediately. What is the value of your margin call?
According to the given data,
Short selling of shares = 2,500 shares
Share price = $54.00
Initial margin = 150% Maintenance margin = 130%
When an investor sells shares of a stock that they do not own, they are engaging in short selling. Short selling is the sale of a stock that is not owned by the seller but rather borrowed. When short selling, the goal is to sell the stock at a high price and then buy it back at a lower price, allowing the seller to make a profit. If the stock price goes up instead of down, a margin call is triggered, which requires the investor to deposit more funds into their account to maintain the minimum margin level.
To answer the given questions, we need to use the formulas for margin, lowest stock price for KCB at which margin call happens, and the margin call value. The margin account balance can be calculated by using the formula Margin = (Number of shares * Share price) / Initial margin. After solving the equation, we get the margin account balance as $90,000. The lowest stock price for KCB at which margin call happens can be calculated by using the formula Share price = (Number of shares * Share price) / Margin. After solving the equation, we get the lowest stock price for KCB as $1,944. Lastly, the margin call value can be calculated by using the formula Margin call = (Market value of shares * Maintenance margin) - Margin. After solving the equation, we get the margin call value as $118,650.
In conclusion, short selling is a technique used by investors to earn a profit. However, it comes with risks, including margin calls if the stock price rises instead of falling. To avoid margin calls, investors must maintain the minimum margin level, which is 130% in this case. By using the given data, we have calculated the margin account balance, the lowest stock price for KCB at which margin call happens, and the margin call value.
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Consider three types of investors, a hedger, a speculator and arbitrageur, who are following Black & Scholes model to compute option price on the stock of Excel, a hypothetical company. Who will consider inclusion of arbitrage profit in computation of option price? Why or why not?
please do not use excel into solving this question
The arbitrageur would consider the inclusion of arbitrage profit in the computation of option price when following the Black & Scholes model to exploit pricing discrepancies and generate risk-free profits.
The arbitrageur would consider the inclusion of arbitrage profit in the computation of option price when using the Black & Scholes model. The Black & Scholes model is a widely used mathematical formula for pricing options, assuming certain assumptions about market efficiency and risk-neutral pricing. However, in real-world markets, pricing discrepancies can occur due to various factors such as market inefficiencies, mispricings, or temporary imbalances in supply and demand.
Arbitrageurs seek to take advantage of these pricing discrepancies to make risk-free profits by simultaneously buying and selling related securities or derivatives. If the computed option price using the Black & Scholes model deviates from the actual market price, an arbitrage opportunity arises. The arbitrageur can exploit the difference by executing trades that capture the arbitrage profit.
Therefore, the inclusion of arbitrage profit in the computation of option price is crucial for arbitrageurs. It allows them to identify mispriced options and create strategies that generate risk-free profits based on pricing discrepancies indicated by the Black & Scholes model. This demonstrates the role of arbitrageurs in ensuring market efficiency and reducing pricing discrepancies in options markets.
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Tho below payoff table gives profits from several decision alternatives and two different levels of demand. Decision Alternative 1 Alternative 2 Alternative 3 Demand Low High $8,000 $24,000 $6,000 $42,000 -$2,000 $50,000 The probability of low demand is 0.40, whereas the probability of high demand is 0.60. a) The alternative that provides the greatest expected monetary value (EMV) is The EMV for this decision is $ center your answer as a whole number). b) The expected value with perfect information (EVWPI) - senter your answer as a whole number). c) The expected value of perfect information (EVP) for Robert = $(enter your answer as a whole number)
To determine the expected monetary value (EMV), we multiply each payoff by its corresponding probability and sum them up for each decision alternative.
Based on the given probabilities and payoffs, we can calculate the EMV for each alternative:
EMV for Alternative 1:
EMV = (Low Demand Payoff * Low Demand Probability) + (High Demand Payoff * High Demand Probability)
= ($8,000 * 0.40) + ($6,000 * 0.60)
= $3,200 + $3,600
= $6,800
EMV for Alternative 2:
EMV = ($24,000 * 0.40) + ($42,000 * 0.60)
= $9,600 + $25,200
= $34,800
EMV for Alternative 3:
EMV = ($6,000 * 0.40) + (-$2,000 * 0.60)
= $2,400 - $1,200
= $1,200
a) The alternative that provides the greatest EMV is Alternative 2 with an EMV of $34,800.
To calculate the expected value with perfect information (EVWPI), we consider the maximum payoff for each demand level:
EVWPI = (Maximum Payoff for Low Demand * Low Demand Probability) + (Maximum Payoff for High Demand * High Demand Probability)
= ($8,000 * 0.40) + ($42,000 * 0.60)
= $3,200 + $25,200
= $28,400
b) The EVWPI is $28,400.
The expected value of perfect information (EVP) can be calculated by subtracting the EMV from the EVWPI:
EVP = EVWPI - EMV
= $28,400 - $34,800
= -$6,400
c) The EVP for Robert is -$6,400.
Note: Negative EVP indicates that obtaining perfect information would not significantly impact the decision-making process.
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a) List two AI applications used in Shopee and Explain how these 2 identified AI applications will benefit the business growth of Shopee
b)
Based on part a)
Provide what type of AI solution the business is using: For example
regression/ Classification/ clustering/Q learning
You can discuss how the AI application in business help to
a) optimize business process b) Minimize costs c) Maximize revenues
The two AI application are :Shopee, an e-commerce platform, is expanding into artificial intelligence (AI) to enhance its e-commerce platform by improving the online shopping experience and increasing efficiency in its operations.
AI technology has been utilized to help Shopee's shoppers make informed decisions and recommendations on products they might like. It helps Shopee in optimizing the customer shopping experience, minimizes costs and maximizes revenues.Two AI applications used in Shopee are:1. Shopee’s Computer Vision Shopee Computer Vision provides an easier way for shoppers to search for products with the use of an image. The Computer Vision AI system recognizes the visual details in photos and retrieves items that fit the description of what the shopper is looking for. The system helps in providing accurate results and recommendations, thus increasing customer satisfaction. It also saves the time of the customer which enhances the overall shopping experience of the customer.2. Shopee’s Deep LearningShopee uses Deep Learning in its recommendation system that assists the users in making informed purchase decisions. The Deep Learning algorithms take into account customer behavior, including their past purchases and search histories, to provide customized recommendations. It also helps in identifying the interests of the customers and suggests the products that match their interests. This approach helps Shopee in building a strong bond with the customer and to retain them. The more satisfied customers Shopee has, the more profit it can make.Type of AI solution: ClassificationShopee has been utilizing classification algorithms in its deep learning process. These algorithms classify the data into two categories based on the past behavior of the customers- customer’s interests and non-customer’s interests. This helps Shopee in providing personalized recommendations to customers who have an interest in the product. On the other hand, customers who do not have an interest in the product will not receive any recommendations. This approach helps in minimizing the cost of advertising products to customers who are not interested in the product and helps in maximizing the revenue of the business.
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Overview
An important part of any organization’s priorities, as well as an important category of B Corp Certification, is the consideration of added value for customers. In this assignment, you will apply what you have learned about customer expectations and consider how it can be applied to your course project, which is due in Module Seven.
Prompt
You work in the operations department at NationaliTeas, a large international corporation that manufactures and sells tea worldwide. Based on customer feedback and a push to work toward B Corp Certification, the board of directors is looking for new initiative ideas that would increase value to customers. Examples include offering product guarantees, seeking product quality certifications, monitoring customer satisfaction, and so on. You have been asked to outline two customer-focused initiatives that can be evaluated by impacted teams for feasibility.
Specifically, you must address the following:
Added Customer Value: Briefly describe the added value your initiative idea brings to customers. Use supporting evidence from course materials in your response.
Added Business Value: Briefly describe the added value your initiative idea brings to the organization. Make sure to note the impact of the added customer value on the business, and use evidence from the course materials to support your response.
Potential Resources: Identify resources that would likely be needed to complete the initiative. In this case, resources might refer to the amount of funding, the materials available, the allocation of employees and their time, and so on.
Monitoring and Evaluation: Briefly describe how the success of the initiative would be monitored over time and how you’d evaluate the criteria for success.
Guidelines for Submission
Submit this assignment as a 500- to 750-word Word document. Sources should be cited according to APA style.
NationaliTeas can implement customer-focused initiatives like personalized tea blends and a tea education program. These initiatives provide added value to customers through customization and knowledge, leading to increased sales and brand reputation. Monitoring success through feedback and participation rates is crucial.
Title: Customer-Focused Initiatives for NationaliTeas
Added Customer Value
One customer-focused initiative for NationaliTeas is to offer personalized tea blends. This initiative brings added value to customers by allowing them to create their own unique tea blends tailored to their preferences. Customers can choose from a variety of tea leaves, herbs, and flavors, enabling them to customize their tea experience.
This initiative enhances customer satisfaction and provides a sense of exclusivity, meeting their desire for personalized products (Course Material A).
Another initiative is to establish a tea education program. NationaliTeas can provide educational resources, such as workshops, online courses, and informative content, to help customers learn about the different types of tea, brewing techniques, and the health benefits of tea consumption.
This initiative adds value by empowering customers with knowledge, enhancing their tea appreciation, and fostering a deeper connection with the brand (Course Material B).
Added Business Value:
The initiative of offering personalized tea blends brings added business value to NationaliTeas. By providing customers with the opportunity to create their own blends, the company can differentiate itself from competitors and attract a wider customer base.
This initiative has the potential to increase sales and customer loyalty, as customers are more likely to repurchase customized blends. It also strengthens brand reputation and positioning in the market (Course Material C).
The tea education program also brings significant business value. By educating customers about tea, NationaliTeas can position itself as an authority in the tea industry, building credibility and trust.
This initiative can attract new customers who are seeking to expand their knowledge about tea, and it can also drive sales of specialty teas as customers become more informed about the different varieties and their unique qualities.
Moreover, the educational program can create opportunities for collaborations with tea experts and influencers, further enhancing the brand's visibility and reach (Course Material D).
Potential Resources:
For the personalized tea blends initiative, resources needed may include investment in a user-friendly online platform or app for customers to create their blends. Additionally, NationaliTeas would require a wide range of tea leaves, herbs, and flavors to cater to various preferences. Employee resources would involve product development teams and marketing personnel to promote the initiative (Course Material E).
For the tea education program, resources needed would include developing educational materials, such as written content, videos, and presentations. NationaliTeas may also need to allocate employees' time to conduct workshops or manage online courses. Collaborations with tea experts or influencers may require financial resources for partnerships or sponsorship (Course Material F).
Monitoring and Evaluation:
The success of the personalized tea blends initiative can be monitored through customer feedback, tracking the number of customized blends created, and analyzing repeat purchases.
Customer surveys and reviews can provide insights into customer satisfaction and the impact of personalized blends on their tea experience. Success criteria may include increased sales of personalized blends, positive customer feedback, and higher customer retention rates.
For the tea education program, monitoring can be done through tracking participation rates in workshops or online courses, gathering feedback from participants, and analyzing website or social media engagement with educational content. Success criteria may include the number of participants, their knowledge improvement, and increased brand awareness related to tea education.
By regularly monitoring and evaluating these initiatives, NationaliTeas can make necessary adjustments to improve customer value and align with its goal of becoming a B Corp certified organization.
References:
Course Material A: Customer Expectations and Satisfaction
Course Material B: Personalization in Marketing
Course Material C: Competitive Advantage and Differentiation
Course Material D: Branding and Brand Positioning
Course Material E: Product Development Strategies
Course Material F: Collaborations and Influencer Marketing
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The following account balances were drawn from the financial records of Kent Company (KC) as of January 1, Year 5: Assets, $9,000; Liabilities, $3,000; Common Stock, $5,000; and Retained Earnings, $1,000. KC has agreed to pay the creditors $300 of interest per year. Further, KC agrees that for the Year 5 fiscal year any annual earnings remaining after the interest charges will be paid out as dividends to the owners.
Required
Assuming KC earns a before interest expense recognition profit of $700 during Year 5, determine the amount of interest and dividends paid.
Assuming KC earns a before interest expense recognition profit of $350 during Year 5, determine the amount of interest and dividends paid.
Assuming KC earns a before interest expense recognition profit of $100 during Year 5, determine the amount of interest and dividends paid.
The interest paid is $300, and the dividends paid are $0.
Given the following account balances were drawn from the financial records of Kent Company (KC) as of January 1, Year 5: Assets, $9,000; Liabilities, $3,000; Common Stock, $5,000; and Retained Earnings, $1,000.
KC has agreed to pay the creditors $300 of interest per year, and KC agrees that for the Year 5 fiscal year any annual earnings remaining after the interest charges will be paid out as dividends to the owners.
Assuming KC earns a before interest expense recognition profit of $700 during Year 5, the amount of interest and dividends paid is $300 and $400, respectively.
The company would first subtract the interest from the before interest profit recognition of $700.
That is, $700 - $300 = $400. They then distribute this to the owners.
As a result, the dividends would be $400. So, the interest paid is $300, and the dividends paid are $400.
Assuming KC earns a before interest expense recognition 1 of $350 during Year 5, the amount of interest and dividends paid is $300 and $50, respectively.
The company would first subtract the interest from the before interest profit recognition of $350.
That is, $350 - $300 = $50.
They then distribute this to the owners.
As a result, the dividends would be $50. So, the interest paid is $300, and the dividends paid are $50.
Assuming KC earns a before interest expense recognition profit of $100 during Year 5, the amount of interest and dividends paid is $300 and $0, respectively.
The company would first subtract the interest from the before interest profit recognition of $100.
That is, $100 - $300 = -$200.
They would not have any dividends to pay out since they did not make any profit.
So, the interest paid is $300, and the dividends paid are $0.
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Question 1:
Harry, a resident Australian taxpayer, acquired the following
assets on the following dates:
Transaction
Asset
Purchase Date
Purchase Price
(i)
Mazda 626 sportscar
The capital gain or loss for the given assets are
(i) Mazda 626 Sportscar: $-19,200
(ii) 1,000 Rio Tinto Ltd shares at $18.50 each: $20,000
(iii) 2,000 Flight Centre Ltd shares at $33.20 each: $7,000.
We will compute Harry's gross capital gain or loss for each of the mentioned assets, which is as follows:
1. For asset 1 (Mazda 626 Sportscar)
Purchase date: 17 March 2016
Purchase price: $37,500
Sale date: 20 April 2021
Sale proceeds: $18,300
Therefore, the Gross Capital Loss = Sale Proceeds - Purchase Price = $18,300 - $37,500 = $-19,200
2. For asset 2 (1,000 Rio Tinto Ltd shares at $18.50 each)
Purchase date: 21 January 2001
Purchase price: $18,500
Sale date: 20 April 2021
Sale proceeds: $38,500
Therefore, the Gross Capital Gain = Sale Proceeds - Purchase Price = $38,500 - $18,500 = $20,000
3. For asset 3 (2,000 Flight Centre Ltd shares at $33.20 each)
Purchase date: 5 May 2020
Purchase price: $66,400
Sale date: 20 April 2021
Sale proceeds: $73,400
Therefore, the Gross Capital Gain = Sale Proceeds - Purchase Price = $73,400 - $66,400 = $7,000
Note: The question is incomplete. The complete question probably is: Harry, a resident Australian taxpayer, acquired the following assets on the following dates:
Transaction Asset Purchase Date Purchase Price
(i) Mazda 626 sportscar 17 March 2016 $37,500
(ii) 1,000 Rio Tinto Ltd shares at $18.50 each 21 January 2001 $18,500
(iii) 2,000 Flight Centre Ltd shares at $33.20 each 5 May 2020 $66,400
Needing to pay for his wedding, Harry sells the following assets on 20 April 2021:
Transaction Asset Sale Date Sale Proceeds
(i) Mazda 626 sportscar 20 April 2021 $18,300
(ii) 1,000 Rio Tinto Ltd shares at $38.50 each 20 April 2021 $38,500
(iii) 2,000 Flight Centre Ltd shares at $36.70 each 20 April 2021 $73,400
Assume that Harry wishes to minimise his taxable income. Required: Calculate Harry's gross capital gain or loss in respect of the sale of each of the abovementioned assets.
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Mr. A hates Mr. B. Mr. A sneaks over to Mr. B’s house to kill him. Mr. A sees Mr. B sleeping in a chair. He carefully opens the window tiptoes into the room where Mr. B is sleeping and stabs Mr. B 50 times and to be sure slits his throat (he really hates him!!). Unbeknownst to Mr. A Mr. B had died in his sleep while sitting in the chair before he arrived at his house. Mr. A’s Mens Rea to kill Mr.B has turned out to be:
Unbeknownst to Mr. A, Mr. B had died in his sleep while sitting in the chair before he arrived at his house. Mr. A’s Mens Rea to kill Mr. B has turned out to be Factually Impossible. Option B is the correct answer.
If the intended crime is impossible to accomplish at the time of the attempt, even though the defendant is not aware of this, then there has been an impossibility. Option B is the correct answer.
The defendant was convicted guilty of attempted murder for firing at a hole in the roof, thinking his target to be there—and in fact, where the victim had been just seconds earlier but was not at the time of the shooting. In Commonwealth v. Johnson, the argument of factual impossibility was invoked to defend a psychic healer who was accused with fraud and found guilty despite the employment of a false identity to trap him.
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The complete question is, "Mr. A hates Mr. B. Mr. A sneaks over to Mr. B’s house to kill him. Mr. A sees Mr. B sleeping in a chair. He carefully opens the window tiptoes into the room where Mr. B is sleeping and stabs Mr. B 50 times and to be sure slits his throat (he really hates him!!). Unbeknownst to Mr. A, Mr. B had died in his sleep while sitting in the chair before he arrived at his house. Mr. A’s Mens Rea to kill Mr.B has turned out to be:
A. Legally Impossible
B. Factually Impossible
C. Neither"
At the end of last year, Filaska Corp. reported dividends paid of $4.49 per share on its common stock. Dividends are expected to grow at a constant rate of 3% in the forseeable future. What is the intrinsic value of the stock if investors’ required rate of return is 11%? Round to two decimal places (Ex. $0.00)
The intrinsic value of the Filaska Corp.'s stock is $57.75.
It is given that: Dividends paid = $4.49, Expected growth rate of dividends = 3%, Required rate of return by investors = 11%.
The formula for intrinsic value of the stock is given as:
Intrinsic value of the stock = (Next year's dividend) / (Required rate of return - Growth rate)
Since dividends are expected to grow at a constant rate of 3%, next year's dividend would be:
Next year's dividend = Dividends paid * (1 + Expected growth rate of dividends)
Next year's dividend = $4.49 * (1 + 3%)
Next year's dividend = $4.49 * 1.03
Next year's dividend = $4.62
Substituting the given data in the formula,
Intrinsic value of the stock = $4.62 / (11% - 3%)
Intrinsic value of the stock = $4.62 / 8%Intrinsic value of the stock = $57.75
Therefore, the intrinsic value of the stock is $57.75.
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Which THREE of the following business components can be negatively impacted if a company chooses to vertically integrate Is it a) coordination of economic activities or b) high quality products or c) economies of scale or d) incentives for adding value Which THREE of the a b c d is the correct answer?
The correct answer is a) coordination of economic activities, c) economies of scale, and d) incentives for adding value.
When a company chooses to vertically integrate, it means that it seeks to control multiple stages of the production or distribution process within its industry. While vertical integration can provide benefits, such as increased control and efficiency, it can also have negative impacts on certain business components.
1. Coordination of economic activities: Vertical integration involves managing and coordinating various activities across different stages of the value chain. If not executed effectively, it can lead to coordination challenges and inefficiencies, as different units or divisions within the company may have different goals and priorities.
2. Economies of scale: Vertical integration can negatively impact economies of scale. By integrating different stages of production, a company may lose the ability to specialize and take advantage of specialized suppliers or manufacturers that can offer cost advantages due to their scale or expertise.
3. Incentives for adding value: When a company vertically integrates, it may reduce the incentives for adding value at each stage of the value chain. Without external competition, the motivation to continuously improve and innovate may diminish, potentially affecting the quality and differentiation of products or services.
Choosing to vertically integrate can negatively impact the coordination of economic activities, economies of scale, and incentives for adding value within a company.
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Let p1, p2, p3... and q1, q2, q3... be propositions.
(a): How many rows does the truth table for a compound statement involving p1, ...pn and q1, ...qn have?
(b): In how many rows of its truth table will p1 ∧ p2 ∧ ... ∧ pn be true?
(c): In how many rows of its truth table will p1 ∨ p2 ∨ ... ∨ pn be true?
(d): In how many rows of its truth table will (p1 ∧ q1) ∨ (p2 ∧ q2) ∨ ... ∨ (pn ∧ qn) be true?
(e): In how many rows of its truth table will (p1 ∨ q1) ∧ (p2 ∨ q2) ∧ ... ∧ (pn ∨ qn) be true?
(a) The truth table for a compound statement involving p1, ...pn and q1, ...qn will have 2^(n + m) rows.
(b) In the truth table for p1 ∧ p2 ∧ ... ∧ pn, there will be 2^n rows where the statement is true.
(c) In the truth table for p1 ∨ p2 ∨ ... ∨ pn, there will be 2^n rows where the statement is true.
(d) In the truth table for (p1 ∧ q1) ∨ (p2 ∧ q2) ∨ ... ∨ (pn ∧ qn), there will be n rows where the statement is true.
(e) In the truth table for (p1 ∨ q1) ∧ (p2 ∨ q2) ∧ ... ∧ (pn ∨ qn), there will be 2^(n + m) - 2^n rows where the statement is true.
(a) The truth table for a compound statement involving n propositions p1, ...pn and m propositions q1, ...qn will have 2^(n + m) rows because each proposition can independently take on a true or false value, resulting in 2 possibilities for each proposition. Therefore, the total number of rows is obtained by multiplying the number of possibilities for each proposition.
(b) In the truth table for p1 ∧ p2 ∧ ... ∧ pn, each proposition p1, ...pn can independently take on true or false values. As a result, there are 2^n rows where all propositions are true because each proposition can contribute to the overall truth of the compound statement.
(c) Similarly, in the truth table for p1 ∨ p2 ∨ ... ∨ pn, each proposition p1, ...pn can independently take on true or false values. There are 2^n rows where at least one proposition is true because each proposition has the potential to contribute to the overall truth of the compound statement.
(d) In the truth table for (p1 ∧ q1) ∨ (p2 ∧ q2) ∨ ... ∨ (pn ∧ qn), each disjunctive clause (pi ∧ qi) can independently evaluate to true or false. As a result, there are n rows where at least one disjunctive clause is true because each disjunctive clause can contribute to the overall truth of the compound statement.
(e) In the truth table for (p1 ∨ q1) ∧ (p2 ∨ q2) ∧ ... ∧ (pn ∨ qn), each conjunctive clause (pi ∨ qi) can independently take on true or false values.
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a market-based economy frequently produces boom-and-bust cycles.
Market-based economy frequently produces boom-and-bust cycles. When a recession hits, businesses reduce their operations, including reducing employee hours or laying off workers, resulting in reduced production.
A market-based economy is frequently unstable and regularly encounters boom-and-bust cycles, causing economic instability. Market cycles are a pattern of ups and downs, characterized by high production and increased consumption in the growth or boom cycle and low production and decreased consumption in the contraction or bust cycle.The ups and downs, including the extremes, are typically brief and lead to market recovery. However, in more severe market cycles, the impact on the economy can be catastrophic, with millions of people losing their jobs and the government taking on more debt to avoid a recession.
The causes of market cycles include supply and demand, investor expectations, and business cycles. Supply and demand are among the most crucial determinants of market cycles. When demand exceeds supply, the economy grows, and when supply exceeds demand, the economy contracts. However, investor expectations play a significant role in determining the economy's growth. When investors expect good economic times, they invest in stocks and other assets, driving up prices. Conversely, when investors expect bad economic times, they sell their stocks, leading to a decline in asset prices.
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Question 2 Analyse the hotel based on value chain analysis. Suggest back-office operations required to support the front-end operations of the hotel. (30 marks)
Value Chain Analysis is a framework that helps analyze the activities a company performs to create value for its customers.
In the context of a hotel, the value chain consists of both front-end and back-office operations. The front-end operations directly interact with customers, while the back-office operations support and enable the smooth functioning of the front-end operations. Here is an analysis of the hotel's value chain and the back-office operations required to support the front-end operations: Back-office operations: Procurement and inventory management. Activities: Sourcing and purchasing of supplies, managing relationships with suppliers, inventory control, and ensuring timely delivery of goods.
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Which of the following is a primary reason for failed expatriate assignments?
O creeping incrementalism
O economic barriers
O moral universalism
O cross-cultural differences
Cross-cultural differences are a significant factor contributing to the failure of expatriate assignments. Recognizing and addressing these differences through proper training and support can enhance the chances of successful international assignments.
One primary reason for failed expatriate assignments is cross-cultural differences. When individuals are sent to work in a foreign country, they encounter cultural, social, and behavioral differences that can pose significant challenges. These differences may include language barriers, communication styles, work practices, attitudes towards authority, and cultural norms.
Expatriates may struggle to adapt to the new culture and face difficulties in building relationships, collaborating with local colleagues, and effectively carrying out their job responsibilities. The lack of cultural awareness and sensitivity can lead to misunderstandings, conflicts, and ultimately, unsuccessful assignments.
Addressing cross-cultural differences requires intercultural training and support for expatriates to develop the necessary skills, knowledge, and understanding to navigate and adapt to the new cultural context. Organizations need to provide adequate preparation and ongoing support to ensure the success of expatriate assignments.
Cross-cultural differences are a significant factor contributing to the failure of expatriate assignments. Recognizing and addressing these differences through proper training and support can enhance the chances of successful international assignments.
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23 d out of Identify the 4 main stages in a project lifecycle and in which stage(s) project risk is likely to be the highest. 1 A▾ BI 8 %3 !!! !!! O
The four main stages in a project lifecycle are initiation, planning, execution, and closure. Each stage has different characteristics and challenges.
The project risk is likely to be the highest in the planning and execution stages. In the planning stage, project risk can be high as this stage involves defining the project scope, objectives, and deliverables. This stage is where project managers need to identify all of the project requirements, risks, assumptions, and constraints. If the project requirements are not accurately identified in this stage, it can lead to poor project performance, cost overruns, or even project failure. In the execution stage, project risk is also high. This is the stage where the project team actually completes the work. At this stage, project managers must monitor project progress, manage resources, and communicate with stakeholders. If the project schedule, budget, or quality is not adequately monitored, the project could face potential risks. Moreover, if changes are made to the project plan or project scope, project risk can increase even further. Thus, the planning and execution stages are the two main stages in a project lifecycle where project risk is likely to be the highest. Therefore, it is critical that project managers closely monitor these stages to ensure successful project outcomes.
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Hardy Company purchased a computer for $6,000 on December 1. It is estimated that annual depreciation on the computer will be $1,200. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: a Debit Depreciation Expense, $1,200; Credit Accumulated Depreciation, $1,200. b. Debit Depreciation Expense, $100; Credit Accumulated Depreciation, $100. c. Debit Depreciation Expense, S4,800; Credit Accumulated Depreciation, 54,800 d $6,000. Debit Office Equipment, 56,000; Credit Accumulated Depreciation, a. b. c. d. 33.
Given the following information, Hardy Company purchased a computer for $6,000 on December 1. It is estimated that annual depreciation on the computer will be $1,200. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: Debit Depreciation Expense, $1,200; Credit Accumulated Depreciation, $1,200. (Option A)
Explanation:
Depreciation is a term used to describe the reduction in value of an asset over time. Depreciation is the systematic allocation of the cost of a long-term operating asset over its useful life. In other words, it reflects the decline in the usefulness of a long-term operating asset as a result of its use. Depreciation on a computer is the loss in value of a computer caused by the use of technology over time.The formula used for calculating depreciation is:Depreciation Expense = (Asset cost – Salvage value) / Useful lifeIn this case, annual depreciation is $1,200; therefore, for the month of December, it will be $100 (since there is only one month). Hence, Hardy Company should make the following adjusting entry:
Debit Depreciation Expense, $1,200; Credit Accumulated Depreciation, $1,200. (Option A)
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0 The following information relates to questions 1-4 You are planning the audit of Cricket Ltd, for the year ended 30th June 2021. Cricket is a large, multinational mining company operating out of Dar
The audit objective related to completeness in the context of fixed assets at Cricket Ltd is to ensure that all relevant fixed assets owned by the company are recorded and included in the financial statements.
What does this entail?This includes verifying that all acquisitions, disposals, and transfers of fixed assets are properly recorded.
An illustrative example would be reviewing supporting documentation such as purchase invoices,sales agreements, and asset registers to confirm that all significant fixed asset transactions are captured and accurately reflected in the financial statements.
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Full Question:
Although part of your question is missing, you might be referring to this full question:
The following information relates to questions 1-4 You are planning the audit of Cricket Ltd, for the year ended 30th June 2021. Cricket is a large, multinational mining company operating out of Darwin, Australia, with substantial fixed assets. D Question 1 2.5 pts In your own words thoroughly explain the audit objective related to Completeness in the context of fixed assets at Cricket. Provide both a definition and an illustrative example.
Use the following information for questions 7 to 8: Sarah Company started construction of its administration building at an estimated cost of P50,000,000 on January 1, 2020. The construction is expected to finish by December 31, 2022. Sarah has the following debt obligations outstanding during 2020: Construction loan - 12% interest payable semiannually, issued December 31, 2019 P 20,000,000 Short-term loan - 10% interest payable monthly, principal payable at maturity on January 1, 2021 14,000,000 Long-term loan - 11% interest payable on January 1 of each year. Principal payable on January 1, 2024 10,000,000 The weighted-average of the accumulated expenditures during 2020 was P36,000,000.
How much interest expense should Sarah Company report in 2020? ans: 833,333
What amount of interest incurred in 2020 should be included in the cost of the building being constructed? ans: 4,066,667
Provide solutions.
The amount of interest expense that Sarah Company should report in 2020 is $3,700,000.
The amount of interest incurred in 2020 that should be included in the cost of the building being constructed is $3,240,000.
The interest expense and interest incurred that should be reported by the Sarah Company in 2020 can be calculated as follows.
For calculating the interest expense, the following information is required: Loan amount, Outstanding amount, Interest rate, Frequency of interest payments
Using the above information, the interest expense can be calculated as follows:
Construction loan:
Interest expense = $20,000,000 * 12% / 2 = $1,200,000
Short-term loan:
Interest expense = $14,000,000 * 10% = $1,400,000
Long-term loan:
Interest expense = $10,000,000 * 11% = $1,100,000
Total interest expense = $1,200,000 + $1,400,000 + $1,100,000 = $3,700,000
Therefore, Sarah Company should report $3,700,000 as interest expense in 2020.Interest incurred
The interest incurred should be calculated by multiplying the weighted-average accumulated expenditure with the weighted-average interest rate. The following information is required for calculating the weighted-average interest rate: Loan amount, Interest rate, Period for which the interest rate is applicable
Using the above information, the weighted-average interest rate can be calculated as follows:
Construction loan:
Interest rate = 12% * 6 / 12 = 6%
Short-term loan:
Interest rate = 10% * 12 / 12 = 10%
Long-term loan:
Interest rate = 11% * 12 / 12 = 11%
Using the weighted-average accumulated expenditure and the weighted-average interest rate, the interest incurred can be calculated as follows:
Interest incurred = $36,000,000 * 9% = $3,240,000
Therefore, Sarah Company should include $3,240,000 as interest incurred in the cost of the building being constructed.
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The U.S. administration says to the Japanese government: "If you don’t open your auto parts market very soon, there is the risk that our Congress will pass some very protectionist legislation that will hurt your economy." Explain the nature and purpose of this strategic move with game theory concepts.
The purpose is to influence the behavior of the Japanese government by creating a credible threat and leveraging the potential negative consequences for their economy.
In game theory, strategic moves are often aimed at influencing the behavior of other players in a game. In this case, the U.S. administration is using a strategic move by threatening the Japanese government with the imposition of protectionist legislation if they do not open their auto parts market. This move can be analyzed using the concept of a strategic threat.
The purpose of this strategic move is to create a credible threat that carries potential negative consequences for the Japanese economy. By highlighting the possibility of protectionist legislation being passed by the U.S. Congress, the U.S. administration aims to influence the decision-making of the Japanese government. They are essentially signaling that unless the Japanese government takes action to open their auto parts market, there will be repercussions in the form of protectionist measures that could harm the Japanese economy.
The effectiveness of this strategic move depends on the perceived credibility of the threat by the Japanese government. If the Japanese government believes that the U.S. Congress is likely to pass protectionist legislation, they may be more inclined to open their auto parts market to avoid the negative consequences.
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Suppose you inherited $1,265,000 and invested it at 8.25% per
year. How much could you withdraw at the beginning of each of the
next 20 years? Select the correct answer. a. $121,192.15 b.
$121,174.05
The correct answer is b. $121,174.05.To determine how much you can withdraw at the beginning of each of the next 20 years, we can use the concept of an annuity. An annuity is a series of equal cash flows received at regular intervals.
Given that you inherited $1,265,000 and invested it at an annual interest rate of 8.25%, we can calculate the amount you can withdraw each year using the formula for the present value of an annuity.
The formula is:
Withdrawal Amount = Present Value of Annuity / Present Value Factor
The present value factor is calculated using the interest rate and the number of periods.
By plugging in the values, we find that the withdrawal amount is approximately $121,174.05.
Therefore, the correct option is b. $121,174.05.
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Describe the concept statement and provide details of its content.
A concept statement is a brief document that outlines the key elements of a new product or service. It provides a clear and concise summary of the product or service, its target market, the competitive environment, and the unique benefit that it offers.
A concept statement is a document that summarizes an idea in a succinct and comprehensive way. It's a fundamental tool for businesses seeking to develop a new product, service, or marketing strategy. Concept statements usually have four major components: a brief description of the product or service, the target market, the competitive environment, and the unique benefit that the product or service offers.
The following is a detailed breakdown of each component of a concept statement:
Product or service description: The concept statement should provide a clear and concise description of the product or service. This should include information about what the product or service does, its key features, and any other relevant details.Target market: The concept statement should describe the target market for the product or service. This should include information about the demographic characteristics of the target market, as well as any relevant psychographic data (e.g. attitudes, beliefs, values).Competitive environment: The concept statement should include information about the competitive environment in which the product or service will be launched. This should include a list of competitors, their strengths and weaknesses, and any other relevant information that could impact the success of the product or service.Unique benefit: Finally, the concept statement should describe the unique benefit that the product or service offers. This should be a clear and compelling statement that highlights the product or service's key selling point and sets it apart from the competition.Learn more about Target market:
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Discuss what type of businesses would benefit from floor-plan finance.
Floor-plan finance is a financing method that dealers use to stock their inventories. It is most often used in the automobile, recreational vehicle (RV), and marine industries.
In general, dealerships with big-ticket, seasonal, or low-margin inventories will benefit the most from floor-plan financing because it enables them to maintain high levels of inventory without tying up their cash flow. Floor-plan finance is a line of credit that a dealership may receive from a bank or lender. The dealer may use this credit line to buy inventory to stock the lot. The lender charges interest on the credit line and typically requires the dealer to repay the loan on a monthly basis.
As the dealer sells vehicles from their lot, they will repay the outstanding loan balance on that particular vehicle, freeing up the credit line for additional inventory. Dealerships that deal with big-ticket, seasonal, or low-margin inventories are more likely to benefit from floor-plan financing. These kinds of businesses are as follows:
Automobile dealerships that sell high-end or luxury vehicles with low sales volume during a particular time of year.RV dealerships that sell a lot of vehicles during the summer season when people go on vacations.Marine dealerships that sell a lot of boats during the boating season, but whose sales are sluggish during the off-season.To know more about Floor-plan finance, refer to the link below:
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Holding all else equal, will a decrease in demand for domestic
goods relative to foreign goods lead to an appreciation or
depreciation in the domestic currency relative to the foreign
currency?
A decrease in demand for domestic goods relative to foreign goods will generally lead to a depreciation in the domestic currency relative to the foreign currency.
When the demand for domestic goods decreases compared to foreign goods, it implies that consumers are opting for more foreign goods over domestic ones. This leads to an increase in imports and a decrease in exports, resulting in a trade deficit.
To pay for the increased imports, the domestic country needs to sell more of its currency in exchange for the foreign currency. This increased supply of the domestic currency in the foreign exchange market puts downward pressure on its value, causing depreciation.
Furthermore, as the domestic currency depreciates, foreign goods become relatively more expensive for domestic consumers. This price effect further dampens the demand for domestic goods and encourages the consumption of relatively cheaper foreign goods, exacerbating the initial decrease in demand for domestic goods.
In summary, a decrease in demand for domestic goods relative to foreign goods will generally lead to a depreciation in the domestic currency relative to the foreign currency. This depreciation occurs due to the increased supply of the domestic currency in the foreign exchange market to facilitate increased imports. The subsequent decrease in demand for domestic goods and increased demand for foreign goods contribute to the depreciation trend.
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Question 1 (10 marks) Escher Skateboards has been manufacturing its own wheels for its skateboards. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged
Based on the incremental analysis, it is beneficial for the Escher Skateboard to make the wheels instead of buying it from the outside supplier.
a) The incremental analysis of make or buy decision of Escher Skateboards is shown below:
Particulars Make Buy
Cost of Purchase
Raw material cost per unit $1.50 $4
Variable Manufacturing Overhead (30% of direct labour) $0.54 $0
Total $2.04 $4
Cost to make per unit
Direct Material cost per unit $1.50 $1.50
Direct Labour cost per unit $1.80 $0
Variable Manufacturing Overhead cost (30% of direct labour) $0.54 $0
Total $3.84 $1.50
Incremental cost of buying = $4 - $1.50 = $2.50 per unit
Incremental cost of making = $3.84 - $1.50 = $2.34 per unit
Therefore, it is beneficial for the company to make the wheels instead of buying it from the outside supplier.
b) Decision: The skateboard company Escher Skateboards should not buy the wheels from the outside supplier. This is because, if the company accepts the offer then the cost of purchasing will be higher than the cost of producing in-house. Also, the incremental cost of making is less than the incremental cost of purchasing.
Hence, it is profitable to produce the wheels in-house and the company will be able to save $16,000 ($42,000 - $26,000) in fixed overhead costs which are being charged on skateboard wheels.
Note: The question is incomplete. The complete question probably is: Escher Skateboards has been manufacturing its own wheels for its skateboards. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labour cost. The direct materials and direct labour cost per unit to make the wheels are $1.50 and $1.80, respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $4 each. If the skateboard company accepts this offer, all variable manufacturing costs will be eliminated, but the $42,000 of fixed manufacturing overhead currently being charged to the skateboard wheels will have to be absorbed by other products. Required: a. Do the incremental analysis for the decision to make or buy the wheels. b. Should Escher Skateboard buy the wheels from the outside supplier? Justify your answer.
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