The value of each share of common stock for Panda Industries Inc. can be calculated using the discounted cash flow (DCF) valuation model. The company's weighted average cost of capital (WACC) is 8.44%, and it has 63,741 common shares outstanding.
To determine the value of each share, we need to calculate the present value of the expected free cash flows (FCFs) for each year. The FCFs provided are $1,127,164 for Year 1, $1,225,833 for Year 2, $1,514,725 for Year 3, $1,922,700 for Year 4, and $2,609,442 for Year 5. We assume that the cash flows for Year 6 onwards will grow at a constant rate of 3.2%.
Using the DCF valuation model, we discount each FCF by the appropriate discount rate, which is the WACC. The present value of the FCFs is then summed up for each year. Finally, we divide the total present value by the number of common shares outstanding to calculate the value of each share.
By performing these calculations, the value of each share of common stock for Panda Industries Inc. can be determined.
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Assume that the inverse demand function is given by P Marginal production costs are initially £120. (a) Calculate the market equilibrium price, output, and profits on the assumption that the market is currently: (i) monopolized, and (ii) a Bertrand duopoly with homogeneous products. Note that in the duopoly case with identical marginal costs, if firms charge the same price, they share the market equally. [10 marks] (b) Suppose that a research institute develops and obtains a patent for a new technology that reduces the marginal costs to £60. Calculate the new market equilibrium price, output, and profits for (i) the monopolist, and (ii) each duopolist. Note that in the duopoly case, the innovation is made available to only one firm, and if both firms charge the same price, consumers always buy from the most efficient firm. [10 marks] (c) How much will the monopolist and duopolist be willing to pay for the patent on this innovation if the patent lasts forever? [10 marks] (d) Now assume that there is a potential entrant in the monopolized case and that the research institute is considering offering the patent to this firm as well as to the monopolist. Only one firm is able to purchase the patent. If the entrant purchases the patent, it will enter the market as a Bertrand competitor. If the incumbent purchases the patent, entry does not occur, and the incumbent remains a monopolist. How does this affect the amount the incumbent monopolist will be willing to pay for the innovation? [10 marks] (e) What are the "Shumpetarian hypotheses". Are your answers to parts (c) and (d) consistent with these hypotheses
The market equilibrium outcomes and willingness to pay for the patent in different market structures are consistent with the Schumpeterian hypotheses, which emphasize the role of innovation, entrepreneurship, and competition in shaping market dynamics and economic growth.
In the given scenario, the market equilibrium price, output, and profits can be calculated for different market structures. Initially, the market is monopolized, and later it becomes a Bertrand duopoly. With the introduction of a new technology that reduces marginal costs, the equilibrium outcomes change. The impact of the patent and potential entrant on the monopolist's willingness to pay for the innovation is considered.
(c) In the case of the patent lasting forever, the monopolist and duopolist would be willing to pay an amount equal to the increase in profits resulting from the reduced marginal costs.
(d) When the potential entrant considers purchasing the patent, the incumbent monopolist's willingness to pay for the innovation decreases as the threat of competition from the entrant increases.
The "Schumpeterian hypotheses" refer to the theories proposed by economist Joseph Schumpeter, which highlight the role of innovation, entrepreneurship, and creative destruction in driving economic growth and change. In this context, the answers to parts (c) and (d) align with the Schumpeterian hypotheses, as they reflect the importance of innovation and competition in shaping the monopolist's behavior and willingness to pay for the patent. The introduction of new technology disrupts the market and affects the monopolist's incentives, reflecting the dynamic nature of markets in line with Schumpeter's theories.
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Patient Health Information or PHI is the data we concern ourselves with when working healthcare data analytics, it is critical this data is accurate. However, in real life, this isn’t the case. From missing data, incorrect data, duplicated data and just simple typos, healthcare data is considered "dirty". Based on your experience or common sense, detail 3-4 major changes that could be made to the healthcare system to help with dirty data.
As we know, PHI (Patient Health Information) PHI is the data that is most important when working with healthcare data analytics. Healthcare data is often labeled as "dirty" data because of a lack of data, incorrect data, duplicated data, and even simple typos.
1. Standardize data entry: One of the primary reasons for dirty data is inconsistent data entry methods. Therefore, a standardization procedure should be implemented to ensure that everyone enters data in the same way and with the same guidelines.
2. Updating electronic medical records: Electronic medical records should be used to maintain up-to-date and accurate patient information. Staff should also be required to update these records promptly to ensure that the data remains accurate.
3. Training staff on the importance of data accuracy: Hospital staff should be educated on the importance of data accuracy. They must be aware that their data input errors could lead to significant issues and affect the overall functioning of the hospital.
4. Identifying and removing duplicate data: Identifying and removing duplicate data is another significant task to overcome dirty data. Regularly reviewing and scrubbing data will help keep records up to date and free from duplicate data.
In conclusion, the healthcare system can make a few changes to help reduce dirty data. The implementation of these strategies can help improve the overall quality of healthcare data, thereby improving the accuracy of analysis and the outcomes of patient care.
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In the last management review meeting, your company decided to expand their foodbusiness into one country of European Union. Discuss the following in your own language:Inyour opinion what are the solid evidences or the concrete study were support suchdecision.(The following can help you to establish some ideas: Economic risk and challenges, ethical standards, political environment, legal environment, Managing HR in challenge in time sarefacing business / Elements of the economic environment/ Features of an economy/ Integratingeconomic analysis/ PESTEL and SWOT analysis.
In my opinion, expanding the food business into a country within the European Union requires solid evidence and concrete studies to support such a decision. Several key factors need to be considered, including economic risks and challenges, ethical standards, the political and legal environment, managing HR in challenging times, elements of the economic environment, features of the economy, integrating economic analysis, and conducting PESTEL and SWOT analyses.
To begin with, conducting a comprehensive economic risk and challenges assessment is crucial. This involves analyzing factors such as market saturation, competition, economic stability, currency fluctuations, and consumer behavior in the target country. Understanding the ethical standards prevalent in the country is also essential to ensure alignment with the company's values and practices.
The political environment and legal framework of the country should be thoroughly evaluated to assess factors such as political stability, government regulations, trade policies, taxation, and legal compliance requirements. Managing HR in challenging times, such as cultural differences, language barriers, and labor laws, is another significant consideration when entering a new market.
Analyzing the elements of the economic environment, such as GDP growth, inflation rates, employment levels, and industry trends, provides valuable insights into the market potential and opportunities for growth. Conducting a PESTEL analysis (Political, Economic, Social, Technological, Environmental, and Legal) and a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) can help identify both external and internal factors that may impact the success of the expansion.
By conducting these thorough studies and assessments, the company can gather solid evidence and insights to support its decision to expand into the chosen European Union country, mitigating risks and increasing the chances of success.
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A good is said to have a relatively elastic demand if the value of price elasticity is:
A good is said to have a relatively elastic demand if the value of price elasticity is more than one.
The concept of price elasticity of demand is one of the important concepts in microeconomics. It measures the degree of change in the quantity demanded of a good in response to a change in its price. Price elasticity of demand is the percentage change in quantity demanded of a good in response to the percentage change in its price. Price Elasticity of Demand (PED): This type of elasticity of demand measures the responsiveness of the quantity demanded of a good in response to a change in its price.
PED = Percentage change in quantity demanded/Percentage change in priceThere are three types of price elasticities of demand:Elastic demand: The demand for a good is said to be elastic if the percentage change in quantity demanded is more than the percentage change in price. In other words, the value of PED is more than one. In this case, the consumers are very responsive to a change in the price of the good.
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Nanpi China based in Hebei Province of China manufactures EUV lithography systems that are used in the manufacture of microchips. Nanpi China is a wholly owned by Nanpi Holding Limited which is domiciled in the Cayman Islands (the Caribbean). Nanpi Holding Limited is considering listing on foreign stock exchanges. In 2020, after deciding against listing on the Shenzhen exchange, it short-listed the Hong Kong Stock Exchange (HKSE) and NASDAQ as its preferred listing venues. It has hit a stumbling block in its bid to list on the HKSE. Its application was denied as Nanpi proposed to have a corporate governance structure with dual class shares - Class A shares had 1 vote per share and Class B shares controlled by the CEO and co-founders had 10 votes per share though cash flow rights (i.e., dividends etc) are identical. Despite Hong Kong's company laws allowing the issuance of dual class shares, HKSE has been rejecting listing applications with this voting structure. Nanpi Holding is now considering listing on the NASDAQ where one of its main competitors, ASML Holding NV, is also listed. The Chinese government restricts direct foreign ownership in firms in sectors that it considers to be of critical importance (e.g., internet service providers, financial firms). Due to this foreign ownership restriction, Cayman Islands based Nanpi Holding Limited and its (future) shareholders will not own the assets (e.g., patents) of Nanpi China. These assets are solely owned by an operating company, Fu Heng Limited, owned by the Frances Fu and Zin Yau Heng, the cofounders. However, Nanpi Holding Limited has "effective control" on these assets through an agreement reached with Fu Heng Limited. This agreement would let Nanpi Holding Limited's foreign shareholders ('the owners') benefit from the profits, but they will not own the assets in China. (a) Why would listing on the NASDAQ be attractive to Nanpi? (3 points; Max 200 words) (b) Are there any benefits to Nanpi in adopting the dual class structure? (2 points; Max 150 words) (c) As an investor contemplating buying this stock, what factors should you consider in your stock purchase decision when it lists? (5 points; Max 250 words)
Investors should also consider the quality of the company's management team. This will help them determine whether the company is being run by competent leaders who are capable of driving the company's growth.
(a) Listing on the NASDAQ would be attractive to Nanpi for various reasons, which are mentioned below: Access to global capital markets: Listing on the NASDAQ would allow Nanpi to access a broader base of global investors. This will help the company to raise the capital that it needs to fund its expansion and growth plans. The NASDAQ is known for attracting investors who are willing to take risks, and this could be beneficial for Nanpi's growth plans.
(b) There are a few benefits to Nanpi in adopting the dual-class structure. These are mentioned below:
Control: The dual class structure would allow Nanpi's founders and management team to retain control over the company. This would give them the ability to make long-term decisions without being influenced by short-term pressures from shareholders.
Focus on innovation: By retaining control, Nanpi's management team could focus on innovation and long-term growth rather than on short-term profitability. This could help the company to differentiate itself from its competitors and gain a competitive advantage.
(c) If an investor is contemplating buying Nanpi's stock, they should consider the following factors in their stock purchase decision:
Risk: Investing in Nanpi's stock would carry some risk, especially given that the company is in a highly competitive industry. Investors should consider the risks associated with investing in the company before making a decision.
Valuation: Investors should also consider the valuation of the company. This will help them determine whether the stock is overvalued or undervalued. If the stock is overvalued, it may not be a good investment opportunity.
Financials: Investors should review Nanpi's financial statements to get a sense of the company's financial health. This will help them determine whether the company is generating profits and whether it has a strong balance sheet.
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If expected dividends grow at 7% and the appropriate discount
rate is 09%, what is the value of a stock whose last dividend was
$1.10?
Seleccione una:
$35.67
$58.85
$53.50
$50.00
$19.41
The correct option is D. the value of the stock, given the provided information, is $55. To calculate the value of a stock using the dividend growth model, we can use the formula:
Value of Stock = Dividend / (Discount Rate - Dividend Growth Rate)
In this case, the last dividend was $1.10, the expected dividend growth rate is 7% (0.07), and the appropriate discount rate is 0.09.
Let's calculate the value of the stock:
Value of Stock = $1.10 / (0.09 - 0.07)
Value of Stock = $1.10 / 0.02
Value of Stock = $55
Therefore, the value of the stock, given the provided information, is $55.
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Points In the first year of a project inventories decrease by $50,000, accounts payables decrease by $20,000 and accounts receivables increase by $30,000. What is the change in working capital? $0 B $10,000 $40,000 $100,000 Question 10 1.25 Points If the depreciable investment is $500,000 and the MACRS 5-year class schedule is: year 1: 20%; year 2: 32%; year 3: 19.2%; year 4: 11.5%; year 5: 11.5%; and year 6: 5.8 %. Calculate the depreciation tax shield for year 2 using a tax rate of 30%. (A) $80,000 B) $30,000 $48,000 $17,250
The depreciation tax shield for year 2 is $48,000, option C is correct.
To calculate the change in working capital, we need to consider the changes in inventories, accounts payable, and accounts receivable.
Change in working capital = Change in inventories + Change in accounts receivable - Change in accounts payable
Given:
Change in inventories = -$50,000 (decrease)
Change in accounts payables = -$20,000 (decrease)
Change in accounts receivables = $30,000 (increase)
Change in working capital = -$50,000 + $30,000 - (-$20,000)
Change in working capital = -$50,000 + $30,000 + $20,000
Change in working capital = $0
Therefore, the change in working capital is $0.
For the second question:
To calculate the depreciation tax shield, we need to multiply the depreciable investment by the corresponding MACRS rate for each year and then multiply it by the tax rate.
Given:
Depreciable investment = $500,000
MACRS rates:
Year 1: 20%
Year 2: 32%
Year 3: 19.2%
Year 4: 11.5%
Year 5: 11.5%
Year 6: 5.8%
Tax rate = 30%
Depreciation tax shield for year 2:
Depreciation tax shield = Depreciable investment * MACRS rate * Tax rate
Depreciation tax shield = $500,000 * 32% * 30%
Depreciation tax shield = $500,000 * 0.32 * 0.30
Depreciation tax shield = $48,000, option C is correct.
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The complete question is:
Points In the first year of a project inventories decrease by $50,000, accounts payables decrease by $20,000 and accounts receivables increase by $30,000. What is the change in working capital? $0 B $10,000 $40,000 $100,000 Question 10 1.25 Points If the depreciable investment is $500,000 and the MACRS 5-year class schedule is: year 1: 20%; year 2: 32%; year 3: 19.2%; year 4: 11.5%; year 5: 11.5%; and year 6: 5.8 %. Calculate the depreciation tax shield for year 2 using a tax rate of 30%.
A. $80,000
B. $30,000
C.$48,000
D.$17,250
intermediate goods are not counted in gdp because: these goods involve financial transactions. these goods are produced in the underground economy. doing so would result in double counting. these goods are not produced for the market.
Intermediate goods are not counted in GDP to avoid double-counting and to give an accurate picture of the total value of final goods and services produced in an economy.
Intermediate goods are not counted in GDP because doing so would result in double-counting. In the process of producing goods, it is necessary to use other goods as inputs. These input goods are intermediate goods, which are used to produce final goods that are sold to customers. Counting the intermediate goods in GDP would result in double-counting since they are already included in the final goods. This is why only final goods and services are counted in GDP, which is a measure of the total value of all final goods and services produced in an economy during a specific time frame Intermediate goods refer to goods that are used to produce final goods. They are not counted in GDP because they are not produced for the market. Intermediate goods are sold by one producer to another, who then uses them as inputs to produce final goods. For example, wheat is an intermediate good when it is used to make bread, which is the final good that is sold to customers. Intermediate goods are not considered in GDP because they are not produced for the market. They are produced as inputs to make other goods that will be sold to customers. GDP is a measure of the value of all final goods and services produced in an economy. If intermediate goods were included in GDP, it would result in double-counting since they are already included in the value of the final goods that they help to produce.
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On the Gartner Hype Cycle curve, what is the term used for the highest point on the graph that indicates that a technology is interpreted to have amazing capabilities?
a. Innovation Trigger
b. Peak of Inflated Expectations
c. Slope of Enlightenment
d. Trough of Disillusionment
The term used for the highest point on the Gartner Hype Cycle curve that indicates a technology is perceived to have amazing capabilities is "Peak of Inflated Expectations." It consists of five phases: Innovation Trigger, Peak of Inflated Expectations, Trough of Disillusionment, Slope of Enlightenment, and Plateau of Productivity
The Gartner Hype Cycle is a graphical representation that tracks the adoption and maturity of new technologies. The Peak of Inflated Expectations is the phase where a technology reaches its highest point of hype and excitement. During this phase, there is a lot of buzz, media attention, and high expectations surrounding the technology. The perception is that the technology has the potential to revolutionize industries and bring about significant advancements. However, the actual capabilities and practical implementation of the technology may not yet match the high expectations.
It is important to note that after the Peak of Inflated Expectations, the technology enters the Trough of Disillusionment phase, where the initial excitement wanes, and there may be skepticism or disappointment due to the technology's limitations or slow progress. The technology then gradually progresses through the Slope of Enlightenment, where practical applications and benefits are better understood, leading to the Plateau of Productivity, where the technology becomes widely adopted and integrated into various industries.
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Ferdon Watches, Inc., makes four models of watches, Gag-Gift, Commuter, Sport, and Retirement. Ferdon manufactures the watches in four departments: Assembly, Polishing, Special Finishing, and Packagin
These four departments work together to manufacture and deliver the different watch models offered by Ferdon Watches, Inc.
What are the four models of watches produced by Ferdon Watches, Inc., and what are the four departments involved in the manufacturing process?Ferdon Watches, Inc. manufactures four models of watches: Gag-Gift, Commuter, Sport, and Retirement. The manufacturing process involves four departments: Assembly, Polishing, Special Finishing, and Packaging.
Explanation:
Ferdon Watches, Inc. produces watches in four different models: Gag-Gift, Commuter, Sport, and Retirement. Each of these models likely has its own unique design, features, and target market.
The manufacturing process for the watches is divided into four departments:
Assembly: This department is responsible for putting together the various components of the watches. It involves assembling the watch movements, attaching the dials, hands, and other elements, and ensuring that the watches are functional and ready for further processing.
Polishing: The polishing department focuses on refining the appearance of the watches. It involves techniques such as buffing, sanding, and polishing the watch cases, bracelets, and other metal components to achieve a desired finish and shine.
Special Finishing: This department handles any additional specialized treatments or finishes required for the watches. It may involve applying coatings, engraving, or other decorative or functional enhancements to the watches based on their specific models or customer preferences.
Packaging: The packaging department is responsible for packaging the finished watches in appropriate boxes or containers. It ensures that the watches are protected during transit and provides an appealing presentation for customers.
Each department plays a crucial role in the overall production process, ensuring that the watches are assembled, polished, finished, and packaged to meet quality standards and customer expectations.
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Segmented Income Statement (LO6-4] Shannon Company segments its income statement into its North and South Divisions. The company's overall sales, contribution margin ratio, and net operating income are $900,000, 30%, and $18,000, respectively. The North Division's contribution margin and contribution margin ratio are $102,000 and 34%, respectively. The South Division's segment margin is $120,000. The company has $180,000 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions.
An income statement that is segmented by divisions is known as a segmented income statement. It assists businesses in identifying and evaluating the profitability of individual segments. Furthermore, it provides helpful information for decision-making by highlighting each segment's strengths and weaknesses. In general, companies report their earnings and expenses on a single income statement.
Includes the components necessary to prepare a segmented income statement for Shannon Company. The income statement is separated into two parts: the North and South divisions. Since the company is already using a contribution margin format, we may easily compute the contribution margin for each division and then subtract any direct fixed expenses to arrive at the segment margin.
Following that, the segment margin is combined with the common fixed expenses to obtain net operating income.North Division Statement of Income (Contribution Margin Format)Contribution Margin = Sales * Contribution Margin Ratio Contribution Margin = $300,000 * 34% = $102,000Sales $300,000Variable Expenses 198,000Contribution Margin $102,000Direct Fixed Expenses 54,000Segment Margin $48,000South Division Statement of Income (Contribution Margin Format)Sales $600,000Variable Expenses 420,000Contribution Margin $180,000Direct Fixed Expenses 60,000Segment Margin $120,000Total Shannon Company Statement of Income (Contribution Margin Format)Sales $900,000Variable Expenses 618,000Contribution Margin $282,000Direct Fixed Expenses 114,000Segment Margin $168,000Common Fixed Expenses 180,000Net Operating Loss $(12,000)Therefore, the answer to this question is: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions.
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on january 1, year 3, pell corp. purchased a machine having an estimated useful life of 10 years and no salvage. the machine was depreciated by the double declining balance method for both financial statement and income tax reporting. on january 1, year 8, pell changed to the straight-line method for financial statement reporting but not for income tax reporting. accumulated depreciation at december 31, year 7, was $560,000. if the straight-line method had been used, the accumulated depreciation at december 31, year 7, would have been $420,000. pell's enacted income tax rate for year 8 and thereafter is 30%. the amount shown in the year 8 income statement for depreciation expense after changing to the straight-line method should be a
Pell corp should show depreciation expense of $280,001 in the Year 8 income statement for depreciation expense after changing to the straight-line method.
On January 1, Year 3, Pell Corp. purchased a machine having an estimated useful life of 10 years and no salvage. The machine was depreciated by the double-declining balance method for both financial statement and income tax reporting. On January 1, Year 8, Pell changed to the straight-line method for financial statement reporting but not for income tax reporting.
The accumulated depreciation at December 31, Year 7, was $560,000. If the straight-line method had been used, the accumulated depreciation at December 31, Year 7, would have been $420,000.
Pell's enacted income tax rate for Year 8 and thereafter is 30%. The amount shown in the Year 8 income statement for depreciation expense after changing to the straight-line method should be $50,000.
The accumulated depreciation after Year 7 using the straight-line method would be $420,000 as given in the question.
Accumulated depreciation till Year 7 = $560,000
Depreciation for Year 8 using double declining balance method = $560,000 - $420,000 = $140,000
Depreciation for Year 8 using straight-line method = ($560,000 - $420,000) ÷ 3 years = $46,667.
The depreciation expense shown in the Year 8 income statement after changing to the straight-line method will be the sum of the depreciation expenses for the first 3 years using the straight-line method and the remaining depreciation expenses using the double-declining balance method.
Depreciation expense = $46,667 × 3 + $140,000 = $280,001
Pell corp should show depreciation expense of $280,001 in the Year 8 income statement for depreciation expense after changing to the straight-line method.
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Krell industries has a share price of $22.22 today If Krel is expected to piry a dividend of $1.05 this year and its stock price is expected to grow to $23.37 at the end of the year, what is Ker's dividend yield and equity cost of capital? The dividend yield is (Round to one decimal place) The capital gain rate is (Round to one decimal place) The total retums (Round to one decimal place)
Given information Share price today = $22.22Expected dividend for the year = $1.05Expected stock price at the end of the year = $23.37To find: Dividend Yield Equity cost of capital Capital gain rate Solution Dividend Yield Dividend yield is the ratio of expected dividend to the current market price of the stock. DY = Expected dividend / Share price today DY = 1.05 / 22.22DY = 0.047 = 4.7%The dividend yield is 4.7%Equity cost of capital The equity cost of capital is the minimum rate of return that a company must earn on the equity financing of its assets. Equity cost of capital is given by the Capital Asset Pricing Model (CAPM) formula.
The formula is given byRi = Rf + β (Rm - Rf)Where,Ri is the required rate of return on the assetRf is the risk-free rateβ is the asset's betaRm is the expected market returnHere, Beta is not given. So, we cannot calculate the equity cost of capital.Capital Gain RateThe capital gain rate is the percentage increase in the price of the stock during the year.
It is given by the formula as follows:Capital gain rate = (Expected stock price - Share price today) / Share price todayCapital gain rate = (23.37 - 22.22) / 22.22Capital gain rate = 0.0516 = 5.2%The capital gain rate is 5.2%Total ReturnsTotal returns are the sum of the dividend yield and capital gain rate.Total Returns = Dividend Yield + Capital Gain RateTotal Returns = 4.7% + 5.2%Total Returns = 9.9%The total returns are 9.9%.Therefore, the dividend yield is 4.7%, the capital gain rate is 5.2%, and the total returns are 9.9%
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Cola Company and Pop Company both produce and market beverages that are direct competitors. Key financial figures for these businesses for a recent year follow.
Key Figures ($ millions). Cola Company. Pop Company
Sales $43,225 $61,300
Net income 8,520 6,435
Average assets 71,000 65,000
Required: 1. Compute return on assets for Cola Company and Pop Company. (Enter values in $ millions.)
The return on assets for Cola Company is 12% and for Pop Company is 9.9%.
Return on Assets (ROA) is a financial ratio that measures a company's profitability by evaluating its ability to generate earnings from its assets. It indicates the efficiency and effectiveness with which a company utilizes its assets to generate profit. ROA is calculated by dividing the net income of a company by its average total assets.
To compute the return on assets (ROA) for Cola Company and Pop Company, use the formula:
ROA = Net Income / Average Assets
Let's calculate the ROA for each company:
Cola Company:
ROA = $8,520 million / $71,000 million
ROA = 0.12 or 12%
Pop Company:
ROA = $6,435 million / $65,000 million
ROA = 0.099 or 9.9%
Therefore, the return on assets for Cola Company is 12% and for Pop Company is 9.9%.
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The income statement of a retailer would include which of the following?
a. Cost of goods sold
b. Value of inventory
c. Accounts payable
d. Accounts receivable
The income statement of a retailer would include the cost of goods sold as an element (option a).
In income statement is a financial statement that lists an organization's revenues, costs of goods sold, gross margin, operating expenses, and profits for a given accounting period. The cost of goods sold is included in an income statement and reflects the cost of creating the goods sold by a business.
This includes raw material costs and labor costs for manufacturing. The formula for calculating the cost of goods sold is:Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory. Therefore, the cost of goods sold is included in the income statement of a retailer. The correct option is a.
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QUESTION 7 Using Porter's 5 Forces Model, would you rate McDorjald's High or Low for Threat of Substitute Products? High Low
Using Porter's Five Forces Model, the Threat of Substitute Products refers to the likelihood of customers switching to alternative products or services.
In the case of McDonald's, I would rate the threat of substitute products as high. McDonald's operates in the fast-food industry where there are numerous substitute products and alternatives available to customers. This includes other fast-food chains, local restaurants, food delivery services, and even home-cooked meals. Customers have a range of choices and can easily switch to these substitutes based on factors such as price, convenience, taste preferences, and dietary considerations.
Furthermore, the rise of health-consciousness and the increasing popularity of alternative food options, such as plant-based alternatives or healthier fast-food chains, pose a significant threat to McDonald's. These substitutes cater to specific dietary needs and offer healthier choices, attracting customers who prioritize health and wellness.
To counteract the threat of substitute products, McDonald's has made efforts to diversify its menu offerings, including introducing salads, healthier options, and incorporating customization features. They also heavily invest in marketing and promotions to reinforce their brand and differentiate themselves from competitors.
Overall, despite McDonald's market dominance and strong brand loyalty, the fast-food industry's high availability of substitute products makes the threat of substitutes significant for the company.
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Development 300 Year Introduction Growth Maturity Decline R & D (RM million) 70 40 30 8 Marketing Costs (RM million) Production RM4 RM3.50 RM3 RM3.20 Costs per Unit Production 4 millions 8 millions 11
The company needs to focus on its R&D and marketing strategies to avoid further decline and sustain its business growth.
The given table shows the Development cycle of a company. It represents the growth, maturity, and decline of the company. In order to answer the question, you need to find the main answer and write a conclusion that summarizes your answer. Development 300 Year Introduction Growth Maturity Decline R&D (RM million) 70 40 30 8Marketing Costs (RM million)Production RM4 RM3.50 RM3 RM3.20Costs per Unit Production4 millions8 millions11. The company has gone through the development cycle, and has now reached the decline stage. The R&D costs decrease from 70 million in the Introduction stage to 8 million in the decline stage. Similarly, the Marketing Costs per unit produced have decreased from RM 4 in the Introduction stage to RM 3.20 in the decline stage.
In conclusion, it can be said that the company has reached the decline stage of the Development cycle. During this stage, the company's R&D and marketing costs decrease, indicating that the company is not making significant investments in research and development or marketing. Additionally, the production cost per unit decreases from the introduction stage to the decline stage. Thus, it can be concluded that the company needs to focus on its R&D and marketing strategies to avoid further decline and sustain its business growth.
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Given the following information, which investment(s) would risk averse investors prefer if the risk free rate is 5 percent? Value of investment after one year: | Probability: 40% | Probability: 60% Investment | Cost Today $8 $16 $5 $18 $14 $15 $36 $12 $30 A. I only B. II only C. III only D. I and II only E. I and III only
The correct answer is B. II only. To determine which investment(s) risk-averse investors would prefer, we need to compare the expected returns of the investments with the risk-free rate. The risk-averse investors would prefer investments that offer higher expected returns relative to the risk-free rate.
Given the information provided, let's calculate the expected returns for each investment:
Investment I:
Value of investment after one year = $8
Probability = 40%
Expected Return = $8 * 40% = $3.20
Investment II:
Value of investment after one year = $16
Probability = 60%
Expected Return = $16 * 60% = $9.60
Investment III:
Value of investment after one year = $5
Probability = 18%
Expected Return = $5 * 18% = $0.90
Comparing the expected returns with the risk-free rate of 5%, we have:
Investment I: $3.20 < 5% (Risk-free rate)
Investment II: $9.60 > 5% (Risk-free rate)
Investment III: $0.90 < 5% (Risk-free rate)
Based on the comparison, risk-averse investors would prefer Investment II only, as it offers a higher expected return than the risk-free rate. Therefore, the correct answer is B. II only
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susie purchased her primary residence on march 15, year 4, for $550,000. she sold it on october 15, year 7, for $240,000. what amount of loss from the sale is recognized on her year 7 income tax return?
The amount of loss recognized on Susie's year 7 income tax return is $310,000.
What is the recognized loss on Susie's year 7 income tax return from the sale of her primary residence?
To calculate the loss recognized on Susie's year 7 income tax return, we need to determine the adjusted basis of the primary residence and subtract the sale price.
Adjusted basis = Purchase price - Depreciation - Improvements
Since no information is provided about depreciation or improvements, we'll assume there are none.
Adjusted basis = $550,000Loss recognized = Adjusted basis - Sale priceLoss recognized = $550,000 - $240,000Loss recognized = $310,000Learn more about loss recognized
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Discuss marketing campaigns that have stood out to you. These
can be infomercials, stunts like Palessi, commercials, social media
campaigns, etc. Discuss the concept and the effectiveness of the
marke
One marketing campaign that has stood out to me is the "Dove Real Beauty Sketches" campaign. This social media campaign aimed to challenge societal beauty standards and promote self-acceptance. The concept involved hiring an FBI-trained forensic artist to draw two portraits of women: one based on their own description and the other based on a stranger's description. The stark difference between the two portraits highlighted how women tend to be overly critical of their own appearances. The campaign was accompanied by a powerful video that resonated with viewers and sparked conversations about beauty and self-esteem.
The effectiveness of the Dove Real Beauty Sketches campaign was remarkable. It generated immense buzz, with the video receiving millions of views and widespread media coverage. It successfully tapped into the emotional aspect of self-image and garnered a lot of positive sentiment.
By addressing a deep-seated societal issue and offering a message of empowerment, Dove established a strong emotional connection with its target audience. The campaign also aligned with Dove's brand values of promoting real beauty and self-confidence, which further strengthened its credibility.
Additionally, the campaign went beyond traditional advertising by utilizing social media platforms and encouraging user engagement. It prompted viewers to share their own stories and discuss the impact of societal beauty standards. This user-generated content not only expanded the campaign's reach but also turned it into a social movement.
Overall, the Dove Real Beauty Sketches campaign stands out for its thought-provoking concept, emotional resonance, and ability to spark meaningful conversations. It effectively captured the attention of a wide audience, reinforced brand values, and empowered women to embrace their true beauty.
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Alec wrote a song called "Oh, the Mistakes I've Made." He copyrighted the composition and even had it professionally printed. A couple years later, he was attending a convention for work approximately
The contract that would most likely be governed by the UCC is Marcy buying a car from Autorama with the dealership providing free tune-ups and inspections for one year. The correct option is A.
The UCC (Uniform Commercial Code) governs transactions involving the sale of goods, which includes the purchase of a car.
If Alec wishes to sue for copyright infringement, he must prove that his work was original and the infringer actually copied his work, or that the infringer had access to his song and that the two works are substantially the same. Copyright infringement requires proof of copying or substantial similarity, along with originality of the copyrighted work.
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The complete question might be:
Which of the following contracts would most likely be governed by the UCC? a.Marcy buys a car from Autorama. As part of the contract, the dealership agrees to provide free tune-ups and inspections for one year. b.Tarik agrees to provide legal services to William for $10,000. c.John hires Sylvia, a plumber, to fix a leaky faucet. Sylvia is able to do so without ordering any new parts. d.A comedy club hires a performer to do 3 sets a week for one month. As part of the contract, the comedy club agrees to pay for a new microphone for the comedian. Alec wrote a song called "Oh, the Mistakes I’ve Made." He copyrighted the composition and even had it professionally printed. A couple years later, he was attending a convention for work approximately 2,000 miles from his home. While sitting in a bar, he heard a small local band perform a song called "Regrets." The music and words were extremely similar to his song. The composer of "Regrets" claims she never heard of Alec's song and that she is offended he would accuse her of stealing his work. If Alec wishes to sue for copyright infringement, he must prove a.that he sustained money damages as a result of the infringement. b.that his work was original and the infringer actually copied his work, or that the infringer had access to his song and that the two works are substantially the same. c.that he registered the song for a copyright. d.only that his song and the infringer's song are substantially the same. Ava intended to give everything to her husband Mark when she died, and was not particularly keen on giving anything to her kids and/or grandkids. Ava died without a will. Ava’s wishes: Select one: a.will be carried out, but only if Mark signs an affidavit confirming the substance of Ava’s wishes. b.will likely be carried out, because most states give the entirety of a decedent’s estate to a surviving spouse. c.will likely not be carried out, because most states divide a decedent’s estate among surviving family members. d.will definitely be carried out, because the law privileges the intent of a testator.
Natasha has utility function u(I) = (10*1)0.5, where I is her annual income (in thousands). (a) Is she a risk loving, risk averse or risk neutral individual? She is [Select] as her utility function is [Select ] 9 (b) Suppose that she is currently earning an income of $40,000 (1 = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. • She should [Select] the new job because her expected utility of (approximately) [Select] is [Select] utility of [Select] her current Natasha has utility function u(I) = (10*1)0.5, where I is her annual income (in thousands). (a) Is she a risk loving, risk averse or risk neutral individual? • She is ✓ [Select] as her utility function is [Select ] risk averse risk neutral (b) Suppo risk loving an income of $40,000 (1 = 40) and can earn that income chance to take a new job that offers a 0.6 probability of next year earning $44,000 and a 0.4 probability of earning $33,000. • She should [Select] the new job because her expected utility of (approximately) [Select] is [Select] utility of [Select ] ✓her current Natasha has utility function u(I) = (10*1)0.5, where I is her annual income (in thousands). (a) Is she a risk loving, risk averse or risk neutral individual? She is [Select] as her utility function is ✓ [Select] concave convex (b) Suppose that she is currently earning an income of $40,000 (1 = next year with certainty. She is offered a chance to take a new job earning $44,000 and a 0.4 probability of earning $33,000. linear • She should [Select] ✓the new job because her expected utility of (approximately) [Select] is [Select] utility of [Select ] her current (b) Suppose that she is currently earning an income of $40,000 (1 = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. • She should ✓ [Select] the new job because her expected utility of take (approxima not take is [Select] utility of [Select ] her current (b) Suppose that she is currently earning an income of $40,000 (1 = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. • She should [Select] the new job because her expected utility of (approximately ✓ [ Select] is [Select] 18.27 utility of [S [Sel 19.85 20 20.95 21.14 ✓her current (b) Suppose that she is currently earning an income of $40,000 (1 = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. She should [Select] the new job because her expected utility of (approximately) [Select] is ✓ [Select] utility of [Select] greater than less than equal to her current (b) Suppose that she is currently earning an income of $40,000 (1 = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a 0.6 probability of earning $44,000 and a 0.4 probability of earning $33,000. • She should [Select] the new job because her expected utility of (approximately) [Select] ✓is [Select] utility o ✓ [Select] 18.27 19.85 20 20.95 21.14 ✓her current
Natasha should take the new job because her expected utility of approximately 21.14 is greater than her current utility of approximately 20. The expected income of Natasha in the new job is $40.2 thousand dollars.
Part A: Here, the utility function of Natasha is u(I) = (10 × I)^0.5
Since this utility function is a concave function, hence Natasha is risk-averse.Part B: Her current income (I) is $40,000 (1 = 40).
She is offered a new job that gives a 0.6 probability of earning $44,000 (I = 44) and a 0.4 probability of earning $33,000 (I = 33).
The expected income of Natasha in the new job = (0.6 × 44 + 0.4 × 33) = 40.2 thousand dollars.
The expected utility of Natasha from the new job is E(u(I)) = [10 × (0.6 × 44 + 0.4 × 33)]^0.5 = 21.14
The expected utility of Natasha from the current job is E(u(I)) = [10 × 40]^0.5 = 20
Since the expected utility of Natasha from the new job is greater than the expected utility of Natasha from the current job, hence she should take the new job.
Therefore, Natasha should take the new job because her expected utility of approximately 21.14 is greater than her current utility of approximately 20. The expected income of Natasha in the new job is $40.2 thousand dollars.
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A firm has determined that its optimal capital structure would be composed of 20% in long-term debt, 10% in Preferred Stock, and 70% in Common Stock equity. The firm's marginal tax rate is 21 percent. Compute the firm's weighted average cost of capital based on the following information. Note: Keep six-digitals after decimal points for all cost component calculations for a precise WACC estimation. Long-Term Debt: The firm can sell a 12-year, $1,000 par value, 7% annual coupon bond. A flotation cost of 2% of the face value and a discount of $40 would be required to sell the bond. Preferred Stock: The firm has determined it can issue preferred stock at $75 per share par value. The stock will pay a 10% annual dividend. The cost of issuing and selling the stock is $3 per share. Common Stock: The firm's common stock is currently valued at $110 per share. A new issue of stock is expected to be sold with a $3 per share discount. Flotation costs are expected to be $2 per share. The most recent dividends were $5.25 per share. Its dividends are expected to grow at a constant rate of 6% per year in the foreseeable future. Select one: O a. 9.98% O b. 10.18% O c. 10.30% O d. 10.51%
Weighted average cost of capital (WACC) is the weighted average cost of all capital that a company employs. In order to compute the firm's weighted average cost of capital (WACC), it is necessary to compute each component's cost of capital and then combine them in a weighted average.
The weight of each component equal to its percentage of the company's total capital, which is provided in the question. The calculation is performed as follows:
Common stock: First, calculate the expected dividend for the next year: Expected dividend = Most recent dividend Expected dividend = 5.565Calculate the cost of retained earnings (KRE):KRE = Expected dividend / Current market value - Expected growth rate Calculate the cost of issuing new common stock (KE):KE = Expected dividend / (Net proceeds + Flotation cost) + Expected growth rate KE = 5.565 / (110 - 3 - 3) + 0.06KE = 0.11844 or 11.844%Now, compute the weighted average cost of capital (WACC):WACC = Weight of debt × Cost of debt × (1 - Tax rate) + Weight of preferred stock × Cost of preferred stock + Weight of common stock × Cost of common stock WACC = 0.20 × 0.068 × (1 - 0.21) + 0.10 × 0.135 + 0.70 × 0.11844WACC = 0.010624 or 10.62%Therefore, the correct option is O a. 9.98%.
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Franchise is a popular form of doing business in the catering industry especially for small to medium entrepreneurs. Suppose you had set up a limited company and successfully becamethe franchisee of a famous international restaurant chain. List the five (5) major types of stakeholders related to your franchise as a company. Please justify your selection with reasons.
Stakeholders refer to individuals or groups that have an interest or concern in an organization. The franchisee of a famous international restaurant chain is responsible for dealing with five types of stakeholders. These stakeholders are customers, employees, suppliers, owners, and the government.
They have a direct or indirect impact on the organization and its operations. 1. Customers, Customers are the key stakeholders of any business. They are the primary source of revenue for the company. As a franchisee, the restaurant chain's customers are also your customers. The franchisee is responsible for providing quality services and products to customers.2. Employees, Employees are a vital stakeholder in any organization. As a franchisee, you have to manage your employees effectively. You need to provide a healthy and safe working environment, fair compensation, and other employee benefits.3. Suppliers, Suppliers provide the necessary goods and services to the franchisee. They play a critical role in the success of the organization. The franchisee needs to ensure that the suppliers are delivering quality products and services at a reasonable price.4. Owners, Owners are the ones who have invested in the franchise.
They expect a return on their investment. As a franchisee, you need to ensure that you are delivering on the promises you made to the owners. You need to keep them updated on the financial performance of the franchise.5. Government. The government is a significant stakeholder in any business. The franchisee needs to ensure that the organization is following all the legal requirements set by the government. The franchisee needs to comply with all the regulations and laws set by the government. In conclusion, the five major types of stakeholders that are related to a franchise as a company are customers, employees, suppliers, owners, and the government. Customers are the primary source of revenue for the company, employees are critical for the day to day operations of the franchise, suppliers are essential for providing necessary goods and services, owners are responsible for investing in the franchise, and the government has a regulatory role in ensuring that the organization is following the law.
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Case 2: (3 points) Being as a Vice director of local manufacturer, Mr. Nguyen Anh Dung has an intention to develop a new plan for his company. However, Mr. Dung does not understand clearly on some matters. He also is not sure to assigne who to make this plan, and there are a lot of other problems which are need to be solved, such as establishing a trade union for his employees or increasing interest rate. In addition, Mr. Dung has to put his attention on the issue that many big suppliers want to extend their contracts to 5 years and there is a new investment project on production in a foreign country in the next 4 years. 2.1: In this situation, how Mr. Dung will make the plan? Your analysis will be focused on the flowing points Who will be assigned to make operational plans? What are the tasks of Mr. Dung and other top managers? 2.2: Which challenges from business environments that this company faces with? How these challenges will influence to organizational plans?
To make a plan in the given situation, Mr. Dung can go about the following steps:
Step 1: Analyze the situation Mr. Dung is facing to develop a clear understanding of what the situation is. He needs to identify the challenges that his company is facing such as the challenges of business environment, the need to establish a trade union for employees, etc.
Step 2: Identify the key objectives and targets Mr. Dung needs to identify the key objectives and targets for his company. He needs to develop a clear understanding of what his company wants to achieve.
Step 3: Assigning a team: Mr. Dung should assign a team to make operational plans that are relevant to the key objectives and targets.
Step 4: Develop a detailed plan: Mr. Dung needs to develop a detailed plan that outlines the steps his company will take to achieve the key objectives and targets.2.2:
The challenges that the company is facing in the business environment are as follows:
Establishing a trade union for employees Increasing interest rates.The challenges of business environments can affect organizational plans in the following ways:
It can make the planning process more difficult because the company needs to take into account these challenges when developing a plan. The company might need to adjust its objectives and targets based on the challenges it faces in the business environment. The company might need to invest more resources to address the challenges it faces in the business environment.
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In simple terms, define Strategic Management, Strategic
Planning, Continuous Improvement, and Competitive Strategy.
Strategic Management: Strategic management refers to the process of formulating and implementing strategies to achieve an organization's long-term goals and objectives. It involves analyzing the internal and external environment, setting strategic goals, making decisions, and allocating resources to achieve sustainable competitive advantage.
Strategic Planning: Strategic planning is a systematic process of defining an organization's direction and making decisions on how to allocate its resources to pursue its goals and objectives effectively. It involves setting objectives, identifying strategies, and creating action plans to guide the organization's activities and initiatives in alignment with its mission and vision.
Continuous Improvement: Continuous improvement, also known as continuous quality improvement or simply CI, is an ongoing effort to enhance processes, products, services, or systems within an organization. It involves systematically identifying areas for improvement, implementing changes, and monitoring outcomes to ensure sustained growth and increased efficiency. Continuous improvement focuses on incremental and iterative changes that lead to overall organizational improvement over time.
Competitive Strategy: Competitive strategy refers to the plan and actions that a company takes to gain a competitive advantage over its rivals in the marketplace. It involves analyzing the industry and competitors, identifying unique strengths and capabilities, and formulating strategies to differentiate the company's products, services, or business model. Competitive strategies aim to create a sustainable position in the market, attract customers, and outperform competitors in terms of sales, market share, or profitability.
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Adam Ltd. owns 80% of the outstanding shares of Bob Ltd. Adam Ltd. also own 70% of the shares of Xena Ltd. During the year 20X5, Adam sold $ 500,000 (cost) of goods (widgets) to Bob at a 30% markup. Xena sold $ 400,000 (cost) of goods (gadgets) to Adam at a 25% markup.
Adam sold a piece of land (cost $ 100,000) to Bob for $ 50,000.
On October 1, 20X5, Xena sold land (cost $ 80,000) and a building (cost $ 110,000) to Adam for $ 400,000; 40% of the price was allocated to land and 60% of the price was allocated to building. The building had five years of expected life at October 1, 20X5, and was 30% depreciated at that time.
The $ 400,000 was unpaid at year- end and Adam had agreed to pay $ 10,000 interest on the unpaid amount.
An inventory count showed that 20% of the widgets that Bob had purchased from Adam were unsold at December 31, 20X5; 70% of the gadgets that Adam had purchased from Xena were also unsold.
Required
Assume that Adam Ltd. uses the cost method of keeping its accounts.
1. Prepare the consolidation-related eliminations that would be required at December 31, 20X5, to prepare the consolidated financial statements.
2. Calculate the effect on the non- controlling interest. By how much would the income to each non-controlling interest be changed? Keep the two subsidiaries separate.
The net income for Xena Ltd was increased by $210,000, and since non-controlling interest is 30%, it will increase non-controlling interest income by $63,000.
Goods sold by Adam to Bob should be reduced by the markup percentage, which is 30%. Therefore the eliminated amount is $500,000 * 30% = $150,000. 2. The cost of goods sold by Xena to Adam should be reduced by the markup percentage, which is 25%. Therefore the eliminated amount is $400,000 * 25% = $100,000. 3. The unrealized profit of the land sold by Adam to Bob is $ 50,000. The eliminated amount is $50,000. 4. The building depreciation should be adjusted by 30% * 60% * $110,000 = $19,800. Also, depreciation for the rest of the year should be $60,600 ($110,000 * 60%) * 5/12. Therefore, the elimination is $19,800 + $60,600 = $80,400. The carrying amount of the building is $77,000 ($110,000 - $33,000), which should be added to Adam's balance sheet.5.
The elimination of unrealized profit on land sold by Xena to Adam should be the difference between the cost of land sold and 40% of the amount paid for the combined land and building. 40% * $400,000 = $160,000. Therefore the unrealized profit is $80,000 ($240,000 - $160,000).Income allocation1. Income from Bob Ltd = 20% * $500,000 * (1-30%) = $70,000. 2. Income from Xena Ltd = 70% * $400,000 * (1-25%) = $210,000.Non-controlling interest impact1. The net income for Bob Ltd was increased by $70,000, and since non-controlling interest is 20%, it will increase non-controlling interest income by $14,000. 2. The net income for Xena Ltd was increased by $210,000, and since non-controlling interest is 30%, it will increase non-controlling interest income by $63,000.
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Consider a project to supply Detroit with 28,000 tons of machine screws annually for automobile production. You will need an initial $5,200,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,250,000 and that variable costs should be $235 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $625,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $344 per ton. The engineering department estimates you will need an initial net working capital investment of $500,000. You require a return of 13 percent and face a tax rate of 24 percent on this project.
a-1.
What is the estimated OCF for this project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
a-2. What is the estimated NPV for this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. Suppose you believe that the accounting department’s initial cost and salvage value projections are accurate only to within ±5 percent; the marketing department’s price estimate is accurate only to within ±10 percent; and the engineering department’s net working capital estimate is accurate only to within ±15 percent. What are your worst-case and best-case NPVs for this project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
a-1. The estimated OCF (Operating Cash Flow) for this project can be calculated using the following formula: OCF = (Selling Price - Variable Cost per ton) * Quantity - Fixed Costs - Depreciation Expense - Taxes
- Selling Price per ton = $344
- Variable Cost per ton = $235
- Quantity = 28,000 tons
- Fixed Costs = $1,250,000
- Depreciation Expense = Initial Fixed Asset Investment / Project Life = $5,200,000 / 5 = $1,040,000
- Taxes = Tax Rate * (Depreciation Expense - Salvage Value)
Let's calculate the estimated OCF:
Taxes = 0.24 * ($1,040,000 - $625,000) = $98,400
OCF = ($344 - $235) * 28,000 - $1,250,000 - $1,040,000 - $98,400
= $109 * 28,000 - $1,250,000 - $1,040,000 - $98,400
= $3,052,000 - $1,250,000 - $1,040,000 - $98,400
= $663,600
Therefore, the estimated OCF for this project is $663,600.
a-2. The estimated NPV (Net Present Value) for this project can be calculated by subtracting the Initial Investment from the present value of the cash flows over the project's life.
Initial Investment = Initial Fixed Asset Investment + Initial Net Working Capital Investment
= $5,200,000 + $500,000
= $5,700,000
To calculate the present value of cash flows, we need to discount each year's cash flow using the project's required return of 13 percent. Then we sum up the present values and subtract the Initial Investment.
Year 1:
Cash Flow = OCF + Depreciation Expense - Taxes
= $663,600 + $1,040,000 - $98,400
= $1,605,200
Discounted Cash Flow = $1,605,200 / (1 + 0.13)^1
= $1,416,371.68
Years 2-5:
Cash Flow = OCF + Depreciation Expense - Taxes
= $663,600 + $1,040,000 - $98,400
= $1,605,200
Discounted Cash Flow = $1,605,200 / (1 + 0.13)^2
= $1,252,862.68
NPV = Sum of Discounted Cash Flows - Initial Investment
= ($1,416,371.68 + $1,252,862.68) - $5,700,000
= $2,669,234.36 - $5,700,000
= -$3,030,765.64
Therefore, the estimated NPV for this project is -$3,030,765.64 (negative indicates a net loss).
b. To calculate the worst-case and best-case NPVs, we need to adjust the cost and revenue estimates within the given ranges.
Worst-case NPV:
- Reduce the initial fixed asset investment and salvage value by 5%: $5,200,000 - 5% = $4,940,000 and $625,000 - 5
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In which of the following cases are the Coase Theorem’s assumptions likely to be true? IN other words, when will the parties be likely to bargain to achieve the efficient allocation?
My neighbor wants me to cut down an ugly shrub in my front yard, which is lowering his property value.
My neighbors all would love me to move that broken down, eyesore boat in my front yard, paint my house, and mow my unruly lawn. They’re complaining that I am lowering the value of their properties.
A coal-fired electricity plant dumps its leftover hot water into a nearby lake, killing the fish. Thousands of homes line the bank of the lake.
A coal-fired electricity plant dumps its leftover hot water into a nearby river, killing fish downstream. There is one large fishery 1 mile down the river affected by this. After this, the water cools enough that is not a problem.
The Coase Theorem suggests that under certain conditions, parties can negotiate and reach an efficient outcome regardless of the initial allocation of property rights. These conditions include:
1. Low transaction costs: The cost of bargaining and reaching an agreement should be minimal.
2. Clear property rights: The rights and responsibilities of each party should be well-defined and enforceable.
3. Rationality and perfect information: Parties involved should act rationally and have complete information about the costs, benefits, and alternatives.
4. Absence of externalities: The actions of one party should not impose costs or benefits on others without compensation.
1. In the case of the neighbor wanting you to cut down an ugly shrub, the Coase Theorem's assumptions are likely to be true if the transaction costs are low, property rights are clear, and both parties can negotiate an agreement that compensates for the perceived loss in property value.
2. Similarly, in the case of neighbors complaining about the boat, house, and lawn, the Coase Theorem's assumptions are likely to be true if the transaction costs are low, property rights are clear, and negotiations can result in an agreement that addresses the concerns raised by the neighbors.
3. In the case of the coal-fired electricity plant dumping hot water into a nearby lake, the Coase Theorem's assumptions may not be true as there are likely to be externalities. The thousands of homes affected by the pollution may find it challenging to negotiate with the plant to achieve an efficient allocation.
4. In the case of the coal-fired electricity plant dumping hot water into a nearby river, the Coase Theorem's assumptions may still hold true. If the affected fishery downstream can negotiate with the plant and reach an agreement that compensates for the damage caused, the parties can potentially achieve an efficient allocation.
It's important to note that the applicability of the Coase Theorem in real-world situations can vary, and the feasibility of bargaining depends on the specific circumstances and willingness of the parties to cooperate.
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Suppose that you just bought a four-year $1,000 coupon bond with a coupon rate of 6 2% when the market interest rate is 6.2%. You sell the bond one year later after the market interest rate falls to 4.2% The rate of return earned on the bond during the year was%. (Round your response to two decimal places)
The rate of return earned on the bond during the year was approximately -1.96%. This means that the investor incurred a negative return on their investment.
When the bond was purchased, the market interest rate was 6.2%, while the coupon rate on the bond was 6.2%. This implies that the bond was priced at its par value of $1,000. The coupon rate of 6.2% indicates that the bond pays an annual coupon payment of 6.2% of the face value, which is $62.
After one year, the market interest rate fell to 4.2%. When interest rates decrease, the value of existing bonds generally increases, as their fixed coupon payments become more attractive compared to newly issued bonds with lower coupon rates. As a result, the bond's price would have increased above its par value.
However, since the investor sold the bond after one year, the actual return is influenced not only by the change in price but also by the coupon payments received. The bondholder received $62 as a coupon payment, but the bond's price would have increased due to the decrease in interest rates. In this case, the decrease in interest rates is not sufficient to offset the loss of the coupon payments, resulting in a negative rate of return of approximately -1.96%.
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