​(Compounding using a calculator and annuities due​) Springfield mogul Montgomery​ Burns, age 70​, wants to retire at age 100 in order to steal candy from babies full time. Once Mr. Burns​retires, he wants to withdraw ​$1.2 billion at the beginning of each year for 7 years from a special offshore account that will pay 23 percent annually. In order to fund his​ retirement, Mr. Burns will make 30 equal​ end-of-the-year deposits in this same special account that will pay 23 percent annually. How much money will Mr. Burns need at age​ 100, and how large of an annual deposit must he make to fund this retirement​ account?

Answers

Answer 1

Answer:

Therefore, Mr. Burns needs to deposit about $262.1 million every year for 30 years to fund his retirement account.

Explanation:

To calculate how much money Mr. Burns will need at age 100, we need to use the future value formula for an annuity due:

FV = PMT x ((1 + r)^n - 1) / r

Where:

PMT = the annual withdrawal amount Mr. Burns wants to make for 7 years = $1.2 billion

r = the annual interest rate = 23%

n = the number of years Mr. Burns wants to make withdrawals = 7

Plugging in the values, we get:

FV = $1.2 billion x ((1 + 0.23)^7 - 1) / 0.23

FV = $11,630,442,390.81

So Mr. Burns will need approximately $11.63 billion at age 100 to fund his retirement.

To calculate how much Mr. Burns needs to deposit each year to achieve this goal, we can use the present value formula for an annuity due:

PV = PMT x ((1 - (1 + r)^-n) / r) x (1 + r)

Where:

PV = the amount Mr. Burns needs to deposit each year

PMT = the annual deposit amount Mr. Burns wants to make for 30 years

r = the annual interest rate = 23%

n = the number of years Mr. Burns wants to make deposits = 30

Plugging in the values, we get:

PV = PMT x ((1 - (1 + r)^-n) / r) x (1 + r)

$11.63 billion = PMT x ((1 - (1 + 0.23)^-30) / 0.23) x (1 + 0.23)

$11.63 billion = PMT x 44.3851

Therefore, Mr. Burns needs to deposit:

PMT = $11.63 billion / 44.3851

PMT = $262,098,677.42

So Mr. Burns needs to make an annual deposit of approximately $262.1 million for 30 years to fund his retirement account.

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Related Questions

As the economy grows and profits increase Chinese firms begins to build more factories

Answers

Chinese businesses will probably start constructing additional factories as the economy expands and revenues rise in order to enhance productivity and keep up with the rising demand for their goods.

As more personnel are required to run the new factories, this will improve employment possibilities. It will also spur economic growth because the building of new factories will raise demand for building materials, transportation services, and other goods and services.

It is crucial for the government and businesses to adopt sustainable and responsible practices in their construction and operation of new factories because building more factories could have adverse consequences on the environment, such as increased pollution and habitat damage.

it's also important to examine how new factories will affect the environment. Overall, this statement emphasizes the connection between economic expansion, corporate spending, and potential environmental effects.

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which of the statements below about the fed is not true? the fed is controlled by the u.s. government. the fed can loan money to private banks as lender of last resort. regional federal reserve banks act as central banks for their areas. federal reserve banks control the money supply.

Answers

The Federal Reserve Act, approved by Congress in 1913, established the Federal Reserve System, also known as the "Fed," and it went into effect in 1914. The correct answer is a. the fed is controlled by the u.s. government.

It resembles all central banks exactly. The Federal Reserve is a branch of the American government. The Fed Reserve System has the following duties: - It has the authority to oversee and control banks; - They support societal objectives like economic growth, low inflation, and the smooth operation of financial markets (monetary policies).

The "lender of last resort" is the Federal Reserve. The Federal Reserve Act, enacted by Congress in 1913, established the Federal Reserve System (the "Fed"). In 1914, the Fed started operating. President Woodrow Wilson established it as part of the Federal Reserve Act, which aimed to support all banks and put an end to the bank panics of the 1800s. Controlling the issuance of money in the United States of America (it supports public goals such as economic growth, low inflation, and the smooth operation of financial markets) The Federal Reserve, like all central banks, is a government agency with the following duties.

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Carmaker produces small cars in a perfectly competitive market using labour (L) and capital (K). Carmaker's production function is given by f(L,K) = min (0.05L, K112}, { where Q is the number of cars produced. (a) [2 marks] Starting from L>0, K>0, suppose you double the amount of L and K. Is it possible for output (q) to more than double (i.e., increase from q to Aq where A > 2)? " (b) [2 marks] Find the minimum cost to produce q cars when the price of labour (w) is 400 and price of capital (r) is 10? (Hint: the answer would involve q.]

Answers

(a) No, it is not possible for the output to more than double if L and K are doubled.

(b) The minimum cost to produce q cars is 20q if q <= 200, and [tex]1120q^(2/3) if q > 200.[/tex]

(a) No, it is not possible for output to more than double when both labor and capital are doubled. This is because the production function is limited by the minimum of 0.05L and [tex]K^(1/2),[/tex], which means that the output cannot increase at the same rate as the inputs.

(b) The cost function for the Carmaker is given by C = wL + rK, where w is the wage rate and r is the rental rate of capital. Using the production function, we can express K in terms of L as K = [tex](q/0.05L)^2[/tex]. Substituting this into the cost function, we get:

[tex]C = 400L + 10(q/0.05L)^2[/tex]

To find the minimum cost to produce q cars, we need to minimize this cost function with respect to L. Taking the derivative with respect to L and setting it equal to zero, we get:

400 - [tex]400q^2/L^3 = 0[/tex]

Solving for L, we get:

L = [tex](q^2/100)^(1/3)[/tex]

Substituting this back into the cost function, we get:

C = [tex]4q(q/100)^(1/3) + 10q(100/q)^(2/3)[/tex]

Simplifying, we get:

C =[tex]14q(25/q)^(1/3)[/tex]

Therefore, the minimum cost to produce q cars is given by C = [tex]14q(25/q)^(1/3)[/tex]

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what term indicates the frequency with which workers perform specific behaviors that are representative of the job dimensions critical to successful performance?

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The term that indicates the frequency with which workers perform specific behaviours that are representative of the job dimensions critical to successful performance is called "job performance".

This refers to the actions, tasks, and responsibilities that employees carry out on a regular basis to accomplish their job goals and objectives. Job performance can be measured by evaluating the quality, quantity, and timeliness of the work performed by employees.

It is important to assess job performance because it provides insights into how well employees are meeting the expectations of their role and how effectively they are contributing to the success of the organization.

Accurate assessments of job performance can help organizations identify areas for improvement and develop strategies to enhance overall productivity and performance.

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30. A hedge fund charges 2 plus 15%. Investors want a return after fees of 20%. How much does the hedge fund have to earn, before fees, to provide investors with this return? Assume that the incentive fee is paid on the net return after management fees have been subtracted. A 27% B. 25.5% C. 21.6% D. 20%

Answers

The closest answer is B. 25.5%, the hedge fund needs to earn 25.88% before fees to provide investors with a 20% return after fees.

To calculate the amount the hedge fund needs to earn before fees to provide investors with a 20% return after fees, we need to work backward from the desired return.

Let X be the amount the hedge fund needs to earn before fees. Then, the net return after management fees would be X - 2%. The incentive fee would be 15% of the net return, or 0.15(X - 2%). Therefore, the total return after fees would be:

X - 2% - 0.15(X - 2%) = 20%

Simplifying this equation, we get:

0.85X - 2% = 20%

0.85X = 22%

X = 22%/0.85

Solving for X, we get X = 25.88%. Therefore, the hedge fund needs to earn 25.88% before fees to provide investors with a 20% return after fees.

The closest answer choice is B. 25.5%.

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f a company has $100,000 in revenue, $20,000 in equipmentdepreciation and $10,000 in deductions, what is their taxableincome?

Answers

The company's taxable income is $70,000

How to calculate the taxable income of a company?

To calculate the taxable income of a company, we need to start with its total revenue and subtract all the allowable deductions and expenses.

In this case, the company's revenue is $100,000, and it has $20,000 in equipment depreciation and $10,000 in deductions.

Therefore, the company's taxable income can be calculated as follows:

Taxable income = Revenue - Depreciation - Deductions

Taxable income = $100,000 - $20,000 - $10,000

Taxable income = $70,000

So the company's taxable income is $70,000. This means that they will be taxed on this amount according to the tax laws and regulations in their jurisdiction.

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The effectiveness of magazine advertising is reduced by itsA) inflexibility.B) inability to target specific markets.C) brief life span.D) higher total cost, relative to television advertising.

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The correct option is option "A" The effectiveness of magazine advertising is reduced by its inflexibility,

which means that once the advertisement has been printed, it cannot be altered or changed.

This is unlike other forms of advertising, such as online advertising or television advertising, where changes can be made on-the-fly. This inflexibility can be a drawback for businesses, as they may want to change their advertising message or approach as market trends or consumer preferences change.
Another factor that can reduce the effectiveness of magazine advertising is its inability to target specific markets. While magazines may have a specific readership, the audience may not be as targeted as with other forms of advertising. For example, online advertising can target users based on their browsing habits, demographics, or location, allowing businesses to target their advertising to the right people at the right time.
In addition, the brief life span of magazine advertising can also reduce its effectiveness. Magazines have a shorter shelf life compared to other forms of advertising, such as billboards or online ads, which can stay up for weeks or even months. This means that the impact of magazine advertising may be limited to the time period that the magazine is in circulation, which could be a drawback for businesses looking for a longer-term advertising strategy.
Finally, magazine advertising may also have a higher total cost relative to television advertising, which could reduce its effectiveness for businesses looking to maximize their advertising budget. While magazine advertising may be effective for certain types of businesses and target markets, it may not be the most cost-effective option for others.

So, the correct answer is option A

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The correct answer is A) inflexibility. Magazine advertising is often limited in its ability to adapt to specific target markets due to the inflexibility of the medium.

While it may have a longer life span compared to other forms of advertising, it is still not as effective as it could be if it were more flexible in targeting specific markets. Additionally, while the total cost of magazine advertising may be lower than that of television advertising, its effectiveness is often reduced due to its lack of adaptability. The effectiveness of magazine advertising is reduced by its A) inflexibility, as it cannot be easily updated or changed once printed, and B) inability to target specific markets, as the magazine's audience might not precisely match the desired target group for the advertisement.

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petrus framing's cost formula for its supplies cost is $1,790 per month plus $10 per frame. for the month of march, the company planned for activity of 619 frames, but the actual level of activity was 624 frames. the actual supplies cost for the month was $8,500. the activity variance for supplies cost in march would be closest to:

Answers

The activity variance for supplies cost in March would be $520. To calculate the activity variance for supplies cost, we need to compare the actual supplies cost with the expected supplies cost based on the planned level of activity.

Given data:

Planned level of activity: 619 framesActual level of activity: 624 framesActual supplies cost: $8,500Cost formula: $1,790 per month plus $10 per frame

First, let's calculate the expected supplies cost based on the planned level of activity:

Expected supplies cost = $1,790 per month + ($10 per frame x 619 frames)

Expected supplies cost = $1,790 + $6,190

Expected supplies cost = $7,980

Now, we can calculate the activity variance for supplies cost:

Activity variance = Actual supplies cost - Expected supplies cost

Activity variance = $8,500 - $7,980

Activity variance = $520

So, the activity variance for supplies cost in March would be $520.

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In five years, you want to go on a trip that will cost youroughly $3,000. How much will you have to save today if you willearn 4% compounded annually?Options2,748.342,465.782,356.423,649.96

Answers

You would need to save approximately $2,356.42 today to have $3,000 in five years. So the correct option from the given options is 2,356.42.

Savings refer to the portion of income or resources that are set aside or not consumed for immediate consumption. Savings are the amount of money or resources that an individual or entity sets aside for future use or investment.

Savings can take various forms such as money deposited in savings accounts, fixed deposits, investment in stocks or bonds, or other types of financial assets. The purpose of saving can vary from creating an emergency fund to achieve long-term financial goals such as buying a house, retirement, or education.

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cathfoods will release a new range of candies which contain anti-oxidants. new equipment to manufacture the candy will cost $4 million which will be depreciated by straight-line depreciation over six years. in addition, there will be $ 5 million spent on promoting the new candy line. it is expected that the range of candies will bring in revenues of $6 million per year for five years with production and support costs of $1.5 million per year. if cathfood's marginal tax rate is 35%, what are the incremental earnings in the second year of this project?

Answers

The incremental earnings in the second year of the new candy line project can be calculated by subtracting the total expenses from the total revenues earned in that year. In this case, the total revenues earned in the second year would be $6 million, which is the expected revenue for each year for a total of five years.

However, production and support costs of $1.5 million per year must be subtracted from this amount, leaving $4.5 million in revenue.

To calculate the total expenses for the second year, we must take into account the cost of the new equipment, which will be depreciated by straight-line depreciation over six years. Therefore, the yearly depreciation expense for the new equipment will be $4 million divided by six years, which equals $666,667.

This amount must be added to the production and support costs, which gives us a total expense of $2,166,667 for the second year.

Now, we can calculate the incremental earnings in the second year by subtracting the total expenses from the total revenue earned. Therefore, the incremental earnings in the second year will be $4,333,333 ($6 million - $2,166,667).

It is important to note that this calculation does not take into account the $5 million spent on promoting the new candy line, which will likely affect the earnings in the second year. However, as this information is not provided, we cannot make any assumptions about its impact on earnings.

Lastly, it is necessary to consider the marginal tax rate of 35%. This means that 35% of the incremental earnings will be paid in taxes, leaving 65% as the after-tax incremental earnings. Therefore, the after-tax incremental earnings in the second year of this project will be $2,816,667 ($4,333,333 x 0.65).

In conclusion, the incremental earnings in the second year of cathfood's new candy line project will be $4,333,333 before taxes and $2,816,667 after taxes, taking into account the marginal tax rate of 35%.

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Jonelle selects a student loan repayment plan with a 20-year term. One downside is.

a. She won't receive any grace period with this plan.

b. Her monthly payments will start out quite high and won't get lower until approximately year 10.

c. She won't be able to open additional lines of credit until that debt is completely repaid.

d. She will pay more in interest than if she had used the Standard repayment plan

Answers

One downside is she will pay more in interest than if she had used the Standard repayment plan. The answer is OPTION D.

The 20-year loan forgiveness programs offered by the federal government are a component of the income-driven repayment plans they provide. Borrowers of federal student loans are eligible for certain exclusive perks, which are not offered to those with private loans. Under IDR payment programs, the federal government gives debt forgiveness.

After 20 years, student loan forgiveness is available under the following income-driven repayment plans: if the loans were taken out to complete an undergraduate degree rather than graduate school, the revised Pay As You Earn (REPAYE) plan. Extended repayment may result in greater lifetime costs even while it does save money in the short run.

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the three main areas in the value chain where significant differences in the costs of competing firms can occur include

Answers

The three main areas in the value chain where significant differences in the costs of competing firms can occur include primary activities, support activities, and profit margin.

1. Primary Activities: These activities are directly related to the production and delivery of a product or service. They include inbound logistics, operations, outbound logistics, marketing and sales, and service. Differences in costs can arise due to variations in supply chain management, production efficiency, and distribution channels.

2. Support Activities: These activities assist the primary activities in enhancing the product or service's value. They include procurement, technology development, human resource management, and firm infrastructure. Cost differences can occur due to differences in supplier relationships, technology investments, employee training and development, and organizational structure.

3. Profit Margin: This is the difference between the total value of the product or service and the combined costs of all activities in the value chain. Firms with more efficient value chain management can achieve a higher profit margin, giving them a competitive advantage in the market.

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Fariey Inc. has perpetual preferred stock outstanding that sells for $46 a share and pays a dividend of $3.25 at the end of each year. What is the required rate of return? Round your answer to two decimal places. %

Answers

The perpetual preferred stock of Fariey, Inc. has a required rate of return of 7.07%. Given the stock's current market value and projected dividends, this is the minimal return that investors would demand in order to purchase it.

The required rate of return for Fariey, Inc.'s perpetual preferred stock can be calculated using the dividend discount model formula:

Required rate of return = Dividend / Stock price

In this case, the annual dividend is $3.25 and the stock price is $46 per share.

Required rate of return = $3.25 / $46 = 0.07065 or 7.07% (rounded to two decimal places)

Therefore, the required rate of return for Fariey, Inc.'s perpetual preferred stock is 7.07%. This is the minimum return that investors would require to invest in this stock, considering its current market price and expected dividends.

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The process of locating and attracting qualified applicants for jobs open in the organization is called
hiring.
job posting.
recruiting.
interviewing.
selection.

Answers

The process of locating and attracting qualified applicants for jobs open in the organization is called: recruiting. The correct option is B.

Recruiting is the process of searching for and identifying potential candidates for a job opening in the organization. It involves a variety of strategies, such as job postings, networking, employee referrals, and social media.

Recruiting is a crucial aspect of human resource management, as it plays a critical role in identifying and attracting top talent to the organization. Effective recruiting strategies can help organizations to build a strong and diverse workforce, enhance employee engagement and retention, and ultimately drive business success.

Recruiting involves several steps, including identifying the job opening and its requirements, creating a job description, developing a recruitment plan, sourcing and screening candidates, and ultimately selecting the best candidate for the job.

The goal of recruiting is to identify the best candidates who have the necessary skills, experience, and qualifications to perform the job effectively and contribute to the organization's success.

In summary, recruiting is a critical process in the hiring process, as it involves identifying and attracting the best candidates for the job opening. It requires a variety of strategies and involves several steps to ensure that the organization hires the best candidate for the job.

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Complete question:

The process of locating and attracting qualified applicants for jobs open in the organization is called:

a. hiring.

b. job posting.

c. recruiting.

d. interviewing.

e. selection.

50 points to get this answer right :D

Step 1: The following is a situational exercise. Read and use the information that you've learned in this lesson to follow the instructions.

You are a counselor at a homeless shelter, and you are meeting with a client for the first time. You introduce yourself and begin to try to establish trust between the two of you. You explain a little bit about your experience as a counselor and the success stories of people that you know who have recovered from homelessness. In an attempt to help the client, you begin to ask questions to discover this person's needs.

Step 2: Make a list of the questions that you would ask this person.

Step 3: List other problems that you think may go along with homelessness.

Step 4: Think about any services and/or resources that may available to help your client.

Step 5: Write ideas for solutions to the problems you listed in Step 3.

Answers

The answers to the above situational exercise (or interview) is given below.

What is the explanation for the above response?


Step 2: Questions to ask the client:

Can you tell me a little bit about yourself and your background?

How long have you been homeless?

Have you been homeless before? If so, what led to that situation?

Do you have any medical or mental health conditions that require treatment?

Have you been able to find work or access education or training programs?

Are you in need of any immediate assistance, such as food, clothing, or shelter?

Step 3: Other problems that may go along with homelessness:

Lack of access to healthcare and necessary medications

Substance abuse issues

Mental health challenges

Limited access to education and job training programs

Difficulty obtaining identification documents, such as a driver's license or birth certificate

Legal issues, such as outstanding warrants or unpaid fines



Step 4: Services and resources that may be available:

Homeless shelters and temporary housing programsFood banks and meal programsHealth clinics and mental health servicesJob training and employment assistance programsLegal aid servicesHousing assistance programs.

Step 5: Solutions to the problems listed in Step 3:

Connect the client with healthcare services and help them access necessary medicationsRefer the client to substance abuse treatment programs or support groupsProvide mental health counseling and connect the client with ongoing treatmentHelp the client obtain identification documents necessary for employment or housingConnect the client with legal aid services and support them in addressing any outstanding legal issuesAssist the client in accessing housing assistance programs and job training programs to support their long-term stability.

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a swiss bank converted 1 million swiss francs to euros to make a euro loan to a customer when the exchange rate was 1.85 francs per euro. the borrower agreed to repay the principal plus 3.75 percent interest in one year. the borrower repaid euros at loan maturity and when the loan was repaid the exchange rate was 1.98 francs per euro. what was the bank's franc rate of return?

Answers

the bank's franc rate of return is -71.60%.

To calculate the bank's franc rate of return, we need to determine how many francs the bank initially lent out and how many francs it received back at loan maturity.

To determine the amount of francs the bank initially lent out, we need to convert 1 million Swiss francs to euros at the exchange rate of 1.85 francs per euro:

1,000,000 CHF ÷ 1.85 CHF/EUR = 540,540.54 EUR

To determine the amount of euros the bank received back at loan maturity, we need to convert the loan principal plus interest from euros to francs at the exchange rate of 1.98 francs per euro:

(540,540.54 EUR x 1.0375) ÷ 1.98 CHF/EUR = 283,972.98 CHF

To calculate the bank's franc rate of return, we need to determine the difference between the amount of francs the bank received back and the amount of francs it initially lent out and express that difference as a percentage of the amount of francs initially lent out:

(francs received back - francs lent out) ÷ francs lent out x 100%

= (283,972.98 CHF - 1,000,000 CHF) ÷ 1,000,000 CHF x 100%

= -71.60%

Therefore, the bank's franc rate of return is -71.60%. This means that the bank lost 71.60% of the amount of francs it initially lent out when the loan was repaid.

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the market for wedding planning services in a city is monopolistically competitive. the market is initially in long-run equilibrium, but then there is an increase in market demand. we expect that in the long run:

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The market for wedding planning services in a city is monopolistically competitive. the market is initially in long-run equilibrium, but then there is an increase in market demand. we expect that in the long run: dresses tend to be differentiated among the many sellers serving this market.

What holds true for a market that is monopolistic and competitive in the long run equilibrium?

When marginal cost equals marginal revenue, a business in monopolistic competition reaches long-term equilibrium, meaning that the change in total revenue caused by the sale of an additional unit of production is equal to the change in total cost caused by the sale of an additional unit of the same output.

What decisions might monopolistic rivals make that will ultimately push these companies in a certain direction?

Monopolistic competitors have the potential to generate an economic gain or loss in the short term, but entry and leave will eventually push these businesses toward a zero economic profit conclusion.

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Longbow Lumber is purchasing a new horizontal resaw at a cost of $375,000. There is an additional $10,000 delivery and installation cost. The machine has a capital cost allowance (CCA) rate of 20%. What is the incremental undepreciated capital cost (UCC) for year 2? A. $375,000 B. $346,500 C. $385,000 D. $337,500 E. $192,500

Answers

The incremental undepreciated capital cost (UCC) for year 2 is $385,000. So, the correct option is C. $385,000.

Longbow Lumber is purchasing a new horizontal resaw for $375,000 with an additional $10,000 delivery and installation cost. The total cost is $385,000.

With a CCA rate of 20%, the incremental undepreciated capital cost (UCC) for year 2 can be calculated using the following formula: UCC = (Initial Cost + Delivery and Installation Cost) - CCA

Where:

Initial Cost = Cost of the horizontal resaw = $375,000

Delivery and Installation Cost = $10,000

CCA rate = 20% of the Initial Cost = 20% * $375,000 = $75,000

Substituting these values into the formula:

UCC = ($375,000 + $10,000) - $75,000

UCC = $385,000 - $75,000

UCC = $310,000

Therefore, the incremental undepreciated capital cost (UCC) for year 2 is $385,000. So, the correct option is C. $385,000.

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The incremental undepreciated capital cost (UCC) for year 2 is  $308,000. The correct option is (c).

It is possible to calculate the incremental UCC for year 2 as follows:

Capital cost of the asset plus delivery and installation costs, or $375,000 plus $10,000, is incremental UCC for year 1 of $385,000

CCA rate for year one is equal to 20% of incremental UCC for year one, or 20% times $385,000, or $77,000.

Depreciable value for year 1 is calculated as follows: Incremental UCC for year 1 minus CCA rate for year 1 ($385,000 minus $77,000 equals $308,000).

Depreciable value for year 1 divided by incremental UCC for year 2 equals $308,000.

As a result, year 2's incremental UCC is $308,000. The options given do not include the right response.

Most companies aim to increase their size and reach. There may be a variety of possibilities, including building a new, larger facility or buying out a competitor. The cost of capital for each proposed project is calculated before the corporation chooses one of these options. This shows how long it will take for the project to make up its initial investment and how much money it will make in the long run. But when choosing between its possibilities, the corporation must use a reasonable technique.

Complete Question:

Longbow Lumber is purchasing a new horizontal resaw at a cost of $375,000. There is an additional $10,000 delivery and installation cost. The machine has a capital cost allowance (CCA) rate of 20%. What is the incremental undepreciated capital cost (UCC) for year 2?

A. $375,000

B. $346,500

C. $308,000

D. $337,500

E. $192,500

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QUESTION 16 Bertrand's price competition (implicitly or explicitly) assumes that: O a. Firms have some degree of market power and are not "small". b. There is intense price competition, in the sense that consumers can switch from one supplier to another at no, or a very low, switching cost. OC. Collusion is not possible. Od. All of the above. QUESTION 17 0 In the price leadership model covered in class: a. The follower(s) set the price and the leader supplies the amount of output that maximises its profit at this given price level. b. The leader sets the price taking into account that the demand that will be satisfied by the follower(s) at this price. OC. The leader maximises its profit subject to the follower's or followers' reaction function(s). d. The solution contradicts the Law of Demand.

Answers

Bertrand's price competition assumes that firms have some degree of market power, intense price competition exists where consumers can easily switch between suppliers, and collusion is not possible.

For question 16, the correct answer is d. All of the above. Bertrand's price competition assumes that firms have some degree of market power, intense price competition exists where consumers can easily switch between suppliers, and collusion is not possible. These assumptions are necessary for the Bertrand model to work effectively.

Moving on to question 17, the correct answer is c. The leader maximizes its profit subject to the follower's or followers' reaction function(s). This means that the leader considers how the follower(s) will react to its pricing decisions and adjusts its output accordingly to maximize profits. The follower(s) do not set the price in the price leadership model.

This model does not contradict the Law of Demand, which states that as the price of a good or service increases, the quantity demanded decreases, and vice versa. The price leadership model still follows this law, as the leader and follower(s) must consider market demand and elasticity when setting prices and determining output levels.

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May is inviting Michael to join a 3-hours rock climbing course at the training fee of $360 per person. If Michael joins the training, he has to give up his time for studying at home for preparing his mid-term test Define opportunity cost. What are the two components of total opportunity cost? What is Michael's total opportunity cost of joining this training? Explain. If the rock-climbing course offers 10% off discount, identify and explain the type of incentive that could affect Michael's decision on joining the training, (8 marks)

Answers

Opportunity cost refers to the cost of choosing one option over another. It is the value of the best alternative foregone. In this scenario, Michael's opportunity cost of joining the rock climbing course is the value of the time he would have spent studying for his mid-term test.



The two components of total opportunity cost are explicit and implicit costs. Explicit costs are the out-of-pocket expenses that Michael will incur by joining the rock climbing course, such as the training fee of $360. Implicit costs, on the other hand, are the opportunity costs of the resources that Michael will have to give up by not studying for his mid-term test, such as the potential lower grade on the test.

Michael's total opportunity cost of joining the training would be the sum of explicit and implicit costs, which is $360 + the value of the time he would have spent studying for his mid-term test.

If the rock-climbing course offers a 10% off discount, it could be considered a price incentive. This incentive could affect Michael's decision to join the training because it would lower the explicit cost of joining the course. However, Michael would still have to consider the implicit costs of giving up his study time and the potential impact on his test grade.

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in the retail clothing industry, the customer demands vary from state to state. therefore, many retail stores allow each individual store manager to make decisions that are best for the store he or she manages. this exemplifies a(n)

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A decentralized management approach allows retail clothing stores to be more responsive to local market conditions and customer demands. This can help them to better serve their customers, build stronger relationships with their local communities, and ultimately drive more sales and profits.

In the retail clothing industry, customer demands can vary significantly from state to state, and this can present a challenge for retailers who want to offer a consistent experience across all their stores. To address this issue, many retail stores allow each individual store manager to make decisions that are best for the store they manage. This approach exemplifies a decentralized management style.

Decentralized management is a management approach where decision-making authority is spread out across different levels of an organization. In a decentralized system, lower-level managers have more autonomy to make decisions that are best for their specific area of responsibility. This is in contrast to a centralized system, where decision-making authority is concentrated at the top of the organization.

In the retail clothing industry, a decentralized management approach can be beneficial because it allows store managers to respond quickly to the unique demands of their local market. For example, a store manager in Florida might decide to stock more swimsuits and beachwear during the summer months, while a store manager in Minnesota might focus more on warm clothing for the winter season.

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Omega Corporation has 10.4 million shares outstanding, now trading at $59 per share. The firm has estimated the expected rate of return to shareholders at about 11%. It has also issued long-term bonds at an interest rate of 6% and has a debt value of $220 million. It pays tax at a marginal rate of 21%. a. What is Omega's after-tax WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) After-tax WACC % b. What would WACC be if Omega used no debt at all? (Hint: For this problem, you can assume that the firm's overall beta [BA] is not affected by its capital structure or by the taxes saved because debt interest is tax-deductible.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) WACC %

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Answer:

The after-tax WACC 15.55%. WACC with no debt is 16.14%.

Explanation:

a. To calculate the after-tax WACC, we need to first find the cost of equity and the after-tax cost of debt.

Cost of equity:

Using the Capital Asset Pricing Model (CAPM), we have:

R_e = R_f + β(R_m - R_f)

where:

R_f = risk-free rate = 0 (not given in the problem)

β = beta = not given in the problem, so we need to use the information given to estimate it.

R_m = expected market return = 11% (given in the problem)

To estimate the beta, we can use the following formula:

β = (r_a - r_f) / (r_m - r_f)

where:

r_a = expected rate of return on Omega's stock = 11% (given in the problem)

r_f = risk-free rate = 0 (not given in the problem)

r_m = expected market return = 11% (given in the problem)

Therefore, β = 1.

Now, we can calculate the cost of equity using CAPM:

R_e = 0.11 + 1(0.11 - 0) = 0.22 or 22%

After-tax cost of debt:

The before-tax cost of debt is given as 6%, but we need to calculate the after-tax cost of debt. The formula for after-tax cost of debt is:

R_d = R_b(1 - T)

where:

R_b = before-tax cost of debt = 6% (given in the problem)

T = marginal tax rate = 21% (given in the problem)

Therefore, the after-tax cost of debt is:

R_d = 6%(1 - 0.21) = 4.74%

Weighted Average Cost of Capital (WACC):

The formula for WACC is:

WACC = (E/V)R_e + (D/V)R_d(1 - T)

where:

E = market value of equity = 10.4 million shares x $59 per share = $613.6 million

D = market value of debt = $220 million

V = total value of the firm = E + D = $833.6 million

Therefore, the WACC is:

WACC = (613.6/833.6)0.22 + (220/833.6)0.0474(1 - 0.21) = 0.1555 or 15.55%

b. To calculate WACC with no debt, we need to use the formula:

WACC = (E/V)R_e

where:

E = market value of equity = 10.4 million shares x $59 per share = $613.6 million

V = total value of the firm = E + D = $833.6 million

Therefore, the WACC with no debt is:

WACC = (613.6/833.6)0.22 = 0.1614 or 16.14%

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Contrast the difference between credit risk and default risk. (5
marks)

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Credit risk and default risk are two concepts that are often used interchangeably, but they actually refer to two different aspects of risk.

Credit risk is the risk that a borrower will not be able to repay their debt according to the terms of their agreement. It is the risk that the borrower will fail to make timely payments on their loan or credit line. Default risk, on the other hand, is the risk that a borrower will not be able to repay their debt at all, meaning they will not be able to pay back the principal and interest due on their loan.

In other words, credit risk is concerned with the borrower's ability to make payments on time, while default risk is concerned with the borrower's ability to repay the full amount of the loan. Credit risk can be measured by assessing the borrower's credit score, income, and other financial information, while default risk is often assessed by looking at the borrower's creditworthiness and the value of any collateral they may have pledged.

Overall, credit risk and default risk are both important considerations when lending money or extending credit, and lenders must carefully assess both types of risk in order to minimize their potential losses.

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the price of capital (r) is $50. what is the lowest possible cost of producing 3,000 units of output?

Answers

If the variable cost is zero, then the lowest possible cost would be $150,000.

How to calculate the lowest possible cost

To determine the lowest possible cost of producing 3,000 units of output, we need to use the total cost equation, which is TC = FC + (VC * Q)

where TC is total cost, FC is fixed cost, VC is variable cost, and Q is the quantity produced.

Given that the price of capital (r) is $50, we can assume that it is a fixed cost.

Therefore, we can calculate the fixed cost by multiplying the price of capital by the number of units produced, which is $50 * 3,000 = $150,000.

The variable cost depends on the specific production process and cannot be determined without additional information.

However, we can say that the lowest possible cost of producing 3,000 units of output is the sum of the fixed cost and variable cost.

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the brs corporation makes collections on sales according to the following schedule: 35% in month of sale 61% in month following sale 4% in second month following sale the following sales have been budgeted: sales april $200,000 may $130,000 june $120,000 budgeted cash collections in june would be:

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The budgeted cash collections in June would be $366,800.

To determine the budgeted cash collections for June, we need to calculate the collections for each of the three months and add them up.

For April sales of $200,000, th collections in April will be 35% of $200,000, or $70,000. The collections in May will be 61% of $200,000, or $122,000. The collections in June will be 4% of $200,000, or $8,000. So the total collections for April sales will be $70,000, for May sales will be $122,000, and for June sales will be $8,000.

For May sales of $130,000, the collections in May will be 35% of $130,000, or $45,500. The collections in June will be 61% of $130,000, or $79,300. So the total collections for May sales will be $45,500 in May and $79,300 in June.

For June sales of $120,000, the collections in June will be 35% of $120,000, or $42,000. So the total collections for June sales will be $42,000.

Adding up all the collections for each month, we get:

$70,000 + $122,000 + $8,000 + $45,500 + $79,300 + $42,000 = $366,800

Therefore, the budgeted cash collections in June would be $366,800.

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an interest rate, unless otherwise specified, is typically a(n) rate.

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An interest rate, unless otherwise specified, is typically an annual rate. This means that the interest is calculated and expressed as a percentage of the principal amount for one year.

An interest rate is the percentage charged or paid for the use of money, typically expressed as an annual percentage. It can either be the cost of borrowing money (for the borrower) or the reward for saving or investing money (for the lender or investor). The formula for calculating interest is:

Interest = Principal × Interest Rate × Time

Where: - Interest is the amount of money earned or paid for using the money

- Principal is the initial amount of money borrowed or invested

- Interest Rate is the percentage rate charged or paid (expressed as a decimal)

- Time is the duration for which the money is borrowed or invested (typically in years)

Remember to convert the interest rate from percentage to decimal by dividing it by 100 before using it in the formula.

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an organization that has identified an opportunity for long-term outsourcing can expect question 24 options: better communication. lowered administrative costs. improved utilization of resources. all of the above.

Answers

An organization that has identified an opportunity for long-term outsourcing can expect D) "all of the above" including better communication, lowered administrative costs, and improved utilization of resources.

Long-term outsourcing can lead to several benefits for an organization. Improved communication can be achieved by outsourcing tasks to specialized service providers, who are often more experienced and efficient in handling specific tasks.

This can lead to better coordination between the organization and the outsourcing partner, resulting in improved communication.Outsourcing can also lead to lowered administrative costs, as outsourcing service providers can handle tasks such as HR, payroll, and accounting, freeing up the organization's resources for other strategic initiatives.

Improved utilization of resources is another advantage of outsourcing, as it enables organizations to focus on their core competencies while outsourcing non-core activities to specialized service providers.

Overall, long-term outsourcing can result in significant benefits for organizations, including better communication, lowered administrative costs, and improved utilization of resources. So, correct option is d.

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1. Explain the relationship between the discount (interest) rate and the Present Value (PV) of any future cash flows.
2. Explain the relationship between the discount (interest) rate and the Future Value (FV) of any future cash flows.

Answers

A higher discount rate decreases PV and increases FV, while a lower discount rate increases PV and decreases FV.

1. The relationship between the discount (interest) rate and the Present Value (PV) of any future cash flows is inverse. As the discount rate increases, the PV decreases, and vice versa. This occurs because the higher the discount rate, the more the future cash flows are discounted, reducing their value today.

2. The relationship between the discount (interest) rate and the Future Value (FV) of any future cash flows is direct. As the interest rate increases, the FV also increases, and vice versa. This is because a higher interest rate leads to a greater accumulation of interest over time, increasing the value of the cash flows in the future.

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Calculate and interpret the Macaulay and modified durations of a a) 3-year 10% semi-annual bond (Bond C) when the required yield is 10%, and a b) 3-year zero-coupon bond (Bond D) when the required yield is 10%

Answers

a) The main answer for Bond C's Macaulay duration is 2.5 years, and its modified duration is 2.45 years.

The Macaulay duration for Bond C can be calculated using the formula:

Macaulay duration = (C1 x t1 + C2 x t2 + C3 x t3 + … + Cn x tn) / P

where C is the cash flow, t is the time until the cash flow, and P is the bond price. For Bond C, the cash flows are $5 semi-annually for three years, and the bond price is $100. The calculation gives us a Macaulay duration of 2.5 years.

The modified duration for Bond C can be calculated using the formula:

Modified duration = Macaulay duration / (1 + (YTM / m))

where YTM is the yield to maturity, and m is the number of coupon payments per year. For Bond C, YTM is 10%, and m is 2 (since it pays semi-annually). Plugging in the values, we get a modified duration of 2.45 years.

Interpretation: Bond C has a Macaulay duration of 2.5 years, meaning that it will take 2.5 years for the bondholder to recoup the bond's price through its cash flows. The modified duration of 2.45 years indicates that the bond's price will decline by approximately 2.45% for every 1% increase in yield.

b) The main answer for Bond D's Macaulay duration is 3 years, and its modified duration is also 3 years.

The Macaulay duration for Bond D is simply the time to maturity of the bond, which is 3 years.

The modified duration for Bond D can be calculated using the same formula as for Bond C, since Bond D also has a yield to maturity of 10%. Plugging in the values, we get a modified duration of 3 years.

Interpretation: Bond D has a Macaulay duration of 3 years, indicating that it will take 3 years for the bondholder to recoup the bond's price through its cash flows. The modified duration of 3 years indicates that the bond's price will decline by approximately 3% for every 1% increase in yield.

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suppose the annual inflation rate in the us is expected to be 3.5 %, while it is expected to be 8.00 % in australia. the current spot rate (on 3/1/13) for the australian dollar (aud) is $0.7552. according to purchasing power parity, expected percentage change in the value of the aud during a one-year period should be:

Answers

According to purchasing power parity the exchange rate should adjust such that the same basket of goods costs the same amount in both countries.

Therefore, the expected percentage change in the value of the AUD can be calculated based on the difference in inflation rates between the US and Australia as follows:

Expected percentage change in AUD = (1 + Australian inflation rate) / (1 + US inflation rate) - 1

Expected percentage change in AUD = (1 + 8.00%) / (1 + 3.5%) - 1

Expected percentage change in AUD = 0.0415 or 4.15%

This means that the AUD is expected to depreciate by 4.15% relative to the USD over the next year, according to PPP. However, the actual exchange rate may be influenced by other factors such as interest rates, economic growth, and geopolitical events.

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