The term 'Time inconsistency of optimal policy' refers to the tendency of policymakers to deviate from the optimal policy they had originally set due to changing circumstances.
This inconsistency can lead to suboptimal outcomes in the long run. For example, a central bank may promise to keep inflation low, but if unemployment rises, policymakers may be tempted to deviate from this policy to stimulate the economy, which could lead to higher inflation in the future.
To avoid this, policymakers need to consider the long-term consequences of their actions and stick to their original policies as much as possible. The concept of time inconsistency of optimal policy is crucial for understanding the challenges of macroeconomic policy.
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Shares in Growth Corporation are selling for $50 per share. There are currently 9 million shares outstanding. The stock has a 3 - for - 1 stock split.
How many shares will be outstanding after the split? Please state your answer in millions and rounded to 2 decimal places.
Outstanding shares =
What will be the price per share after the split? Enter your answer rounded to two decimal places.
Price per share =
The new outstanding shares will be 27 million shares, and the new price per share will be $16.67.
After the 3-for-1 stock split, the number of outstanding shares will increase by a factor of 3. Therefore, the new number of outstanding shares will be:
Outstanding shares = 9 million x 3 = 27 million shares
To determine the price per share after the split, we can use the following formula:
Price per share = Previous price per share / Split ratio
In this case, the previous price per share was $50, and the split ratio is 3-for-1. Consequently, the new share price will be:
Price per share = $50 / 3 = $16.67
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There will be 27 million additional shares outstanding at the increased price of $16.67 per share.
The number of shares in circulation will rise by a factor of 3 following the stock split (3-for-1). Consequently, the new total of outstanding shares will be:
9,000,000 x 3
= 27,000,000 shares of outstanding stock
The following formula may be used to estimate the price per share following the split:
The split ratio in this scenario is 3-for-1, with the prior share price being $50. The new share price will thus be:
Price per share = Previous price per share / Split ratio
Price per share = $50 / 3 = $16.67
So, There will be 27 million additional shares outstanding at the increased price of $16.67 per share.
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when sports 360, a sports bar in new york, saw yet another sports bar open up across the street, it knew that it would have to lower its price again to stay in business. the city already had too many sports bars, and sports 360 intended on being one of those left after the inevitable shake out. in this situation, the best pricing strategy for sports 360 would be: group of answer choices premium pricing. a freemium program. market skimming. survival pricing.
Survival pricing is the best pricing strategy for Sports 360 to use in this highly competitive market. By lowering their prices to match or undercut the competition, they can maintain their customer base and stay in business long enough to outlast the competition. So the answer is survival pricing.
As a high school student, understanding the different pricing strategies used by businesses can be essential. One common pricing strategy that businesses use is survival pricing, which is used in highly competitive markets to stay afloat. In this situation, Sports 360, a sports bar in New York, saw another sports bar open up across the street, and it knew that it would have to lower its price again to stay in business. In this case, the best pricing strategy for Sports 360 would be survival pricing.
Survival pricing is a pricing strategy used by businesses to maintain their market position in highly competitive environments. In this strategy, a business will lower its prices to match or undercut the competition to maintain its customer base. The goal of survival pricing is to stay in business long enough to outlast the competition and emerge as the leader in the market.
In the case of Sports 360, there were already too many sports bars in the city, and they intended to be one of the remaining ones after the inevitable shakeout. To do so, they would need to lower their prices to stay competitive and maintain their customer base. Survival pricing is the most appropriate pricing strategy for Sports 360 because it allows them to stay in business long enough to outlast the competition.
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Ringo Manufacturing is considering the purchase of a new machine for $50,000. The machine is expected to save the firm $15,000 (before tax) per year in operating costs over a 5 year period, and can be depreciated on a straight-line basis to a zero salvage value over its life. Alternatively, the firm can lease the machine for $8,000 per year for 5 years, with the first payment due in 1 year. The firm's tax rate is 20%, and its before tax cost of debt is 10%. The depreciation tax shield each year is:
The depreciation tax shield each year is $2,000.
Define depreciation.A depreciable asset's depreciation is a measurement of the wear and tear, consumption, or other loss of value that results from usage, the passage of time, or obsolescence due to advancements in technology and market trends.
Cost of machine = $50,000
Useful life of machine = 5 years
Calculation of annual depreciation using Straight line method would be as follows.
annual depreciation = (Cost of machine - Salvage Value of machine )/Useful life
annual depreciation = ($50,000 - $0)/5 years
Annual depreciation = $10,000
Calculation of annual tax shield on depreciation.
Annual tax shield = Annual depreciation × Tax rate
Annual tax shield = $10,000 × 20% = $2,000
Thus, the each year depreciation tax shield = $2,000
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when then number of needed items are computed based on the number of higher-level items produced, one is operating in a(n)
When the number of needed items are computed based on the number of higher-level items produced, one is operating in a bill of materials (BOM) system.
A bill of materials (BOM) is a comprehensive list of raw materials, assemblies, sub-assemblies, components, and parts needed to manufacture a finished product. It contains information about the quantity, unit of measure, and order of usage of each component in the manufacturing process.
When the number of needed items are computed based on the number of higher-level items produced, it means that the BOM system is used to determine the required quantity of each raw material, assembly, sub-assembly, component, and part based on the production order of the finished product.
The BOM system is commonly used in manufacturing, engineering, and supply chain management to ensure the accurate and efficient production of products.
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If the production function is Q = 30 + 42L + 45K, what’s the
most you can produce with 0 workers (L) and 6 units of capital (K)?
Enter as a value.
The most you can produce with 0 workers and 6 units of capital is 300.
A production function is an economic concept that describes the relationship between inputs and outputs in the production of goods and services. It shows how much output can be produced with a given set of inputs.
It helps to explain how an economy can grow and how factors of production can be used efficiently to increase the level of output. It is also used in business management to analyze production processes and to determine the most effective use of resources.
To find the most you can produce with 0 workers (L) and 6 units of capital (K) using the production function Q = 30 + 42L + 45K, follow these steps:
Substitute the given values of L and K into the production function:
[tex]Q = 30 + 42(0) + 45(6)Q = 30 + 0 + 270[/tex]
So, the most you can produce with 0 workers and 6 units of capital is Q = 300.
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Demo Inc. is expected to generate a free cash flow (FCF) of $13,245.00 million this year (FCF1 = $13,245.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF4). Assume the firm has no nonoperating assets. If Demo Inc.'s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Demo Inc.? (Note: Round all intermediate calculations to two decimal places.) $219,541.28 million $297,727.14 million $263,449.54 million $39,590.99 million
the current total firm value of Demo Inc. is $249,227.14 million. The closest option to this value is option (b) $297,727.14 million.
To calculate the total firm value of Demo Inc., we need to determine the present value of its future free cash flows (FCFs) discounted by the weighted average cost of capital (WACC).
1: Calculate the FCFs for years 2 and 3
FCF2 = FCF1 x (1 + g) = $13,245.00 million x (1 + 26.20%) = $16,722.69 million
FCF3 = FCF2 x (1 + g) = $16,722.69 million x (1 + 26.20%) = $21,100.90 million
2: Calculate the FCF for year 4 and beyond using the perpetuity formula
FCF4 = FCF3 x (1 + g) / (WACC - g) = $21,100.90 million x (1 + 4.26%) / (12.78% - 4.26%) = $303,321.11 million
3: Calculate the present value of the FCFs for years 1 to 4
[tex]PV(FCF1-4) = FCF1 + FCF2 / (1 + WACC)^2 + FCF3 / (1 + WACC)^3 + FCF4 / (1 + WACC)^3[/tex]
[tex]PV(FCF1-4) = $13,245.00 million + $16,722.69 million / (1 + 12.78%)^2 + $21,100.90 million / (1 + 12.78%)^3 + $303,321.11 million / (1 + 12.78%)^3[/tex]
PV(FCF1-4) = $13,245.00 million + $13,710.70 million + $15,474.14 million + $206,797.30 million
PV(FCF1-4) = $249,227.14 million
4: Calculate the total firm value
Total firm value = PV(FCF1-4)
Total firm value = $249,227.14 million.
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Aaron received a 30 year loan of $315,000 to purchase a house. The interest rate on the loan was 4.10% compounded semi-annually.
a. What is the size of the monthly loan payment?
Round to the nearest cent
b. What is the balance of the loan at the end of year 3?
Round to the nearest cent
c. By how much will the amortization period shorten if Aaron makes an extra payment of $30,000 at the end of year 3?
a. To calculate the size of the monthly loan payment, we need to use the formula for mortgage payments:
P = L[c(1 + c)^n]/[(1 + c)^n - 1]
Where:
P = monthly payment
L = loan amount
c = periodic interest rate
n = total number of payments
First, we need to convert the annual interest rate to a semi-annual rate:
r = 4.10% / 2
= 0.0205
Next, we need to calculate the total number of payments:
n = 30 years x 12 months
= 360
Now we can plug in the values and solve for P:
P = 315,000[0.0205(1 + 0.0205)^360]/[(1 + 0.0205)^360 - 1]
P = $1,527.72
Therefore, the size of the monthly loan payment is $1,527.72.
b. After 3 years, the number of semi-annual periods is 6 (since there are 2 semi-annual periods per year).
Using the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = ending balance
P = principal amount
r = annual interest rate
n = number of times interest is compounded per year
t = time in years
We can calculate the balance of the loan at the end of year 3 as follows:
A = 315,000(1 + 0.041/2)^(2*6)
= $290,615.96
Therefore, the balance of the loan at the end of year 3 is $290,615.96.
c. Making an extra payment of $30,000 at the end of year 3 will reduce the outstanding balance of the loan.
To calculate the new amortization period, we need to first calculate the new monthly payment based on the reduced principal:
L = 290,615.96 - 30,000
= 260,615.96
n = 30 years x 12 months
= 360
P = 260,615.96[0.0205(1 + 0.0205)^360]/[(1 + 0.0205)^360 - 1]
P = $1,248.09
The new monthly payment is $1,248.09.
We can now calculate the new amortization period using the same formula:
n = log[P/(P - rL)] / log(1 + r)
Where:
log = logarithm
P = monthly payment
L = original loan amount
r = periodic interest rate
For the original loan, n = 30 years x 12 months
= 360.
For the new loan, we have:
n = log[1248.09/(1248.09 - 0.0205*260,615.96)] / log(1 + 0.0205)
n = 322 months or 26 years and 10 months
Therefore, making an extra payment of $30,000 at the end of year 3 will shorten the amortization period by 3 years and 2 months.
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Globex Corp. currently has a capital structure consisting of 35% debt and 65% equity. However, Globex Corp.'s CFO has suggested that the firm increase its debt ratio to 50%. The current risk-free rate is 3.5%, the market risk premium is 8%, and Globex Corp.'s beta is 1.15. If the firm's tax rate is 45%, what will be the beta of an all-equity firm if its operations were exactly the same?
The beta of an all-equity firm with the same operations as Globex Corp. would be approximately 1.457.
To calculate the beta of an all-equity firm, follow these steps:
1. Determine the current cost of equity using the Capital Asset Pricing Model (CAPM):
Cost of Equity = Risk-free rate + (Beta × Market risk premium)
Cost of Equity = 3.5% + (1.15 × 8%) = 12.7%
2. Calculate the unlevered beta (βu) using the current capital structure:
βu = βL / (1 + (1 - Tax rate) × Debt ratio / Equity ratio)
βu = 1.15 / (1 + (1 - 0.45) × 0.35 / 0.65) ≈ 1.457
The beta of an all-equity firm with the same operations as Globex Corp. would be approximately 1.457, which indicates a higher level of systematic risk compared to the levered firm.
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A 4-year project with an initial cost of $119,000 and a required rate of return of 17 percent has a chance of success of 9 percent. If the project succeeds, the annual cash flow will be $1,591,000. If the project fails, the annual cash flow will be −$214,000. The project can be shut down after the first two years, but all money invested will be lost. None of the initial cost can be recouped after four years. What is the net present value of this project at Time 0?
Answer:
The net present value of the project at Time 0 is $83,062.72. This means that the project is expected to generate a positive return, and it is worth investing in.
Explanation:
To calculate the net present value (NPV) of the project at Time 0, we need to find the present value of all cash flows associated with the project using the required rate of return of 17 percent.
First, let's calculate the expected cash flows for the project:
Chance of success = 9%
Chance of failure = 91% (100% - 9%)
If the project succeeds, the annual cash flow will be $1,591,000, and it will continue for four years. Therefore, the total cash flow for the project's life will be:
Total cash flow if the project succeeds = $1,591,000 x 4 = $6,364,000
If the project fails, the annual cash flow will be -$214,000, and it will also continue for four years. Therefore, the total cash flow for the project's life will be:
Total cash flow if the project fails = -$214,000 x 4 = -$856,000
Now, we can calculate the expected value of the project's cash flows:
Expected value = (Chance of success x Total cash flow if the project succeeds) + (Chance of failure x Total cash flow if the project fails)
Expected value = (0.09 x $6,364,000) + (0.91 x -$856,000) = $415,320
This means that the expected value of the project's cash flows is $415,320.
Next, we can calculate the NPV of the project at Time 0:
NPV = -Initial cost + PV of expected cash flows
NPV = -$119,000 + (PV factor for 4 years at 17% x $415,320)
NPV = -$119,000 + (0.486 x $415,320)
NPV = -$119,000 + $202,062.72
NPV = $83,062.72
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Question 19 1 pts You observe a spot price of 409 and ATM Calls selling for 25 and ATM Puts selling for 12. What are the potential arbitrage profits if the discount rate is 10%? Next >
The potential arbitrage profits for the given scenario, with a spot price of 409, ATM Calls at 25, and ATM Puts at 12, and a discount rate of 10%, can be calculated using the Put-Call Parity formula.
Put-Call Parity Formula: S + P = C + PV(X), where S is the spot price, P is the put price, C is the call price, PV(X) is the present value of the strike price, and X is the strike price.
1. Identify the given values: S = 409, C = 25, P = 12, and r = 10%.
2. Calculate the present value of the strike price: PV(X) = X / (1 + r) = X / 1.10.
3. Plug the values into the Put-Call Parity formula: 409 + 12 = 25 + X / 1.10.
4. Solve for X: 421 = 25 + X / 1.10. Then, (421 - 25) * 1.10 = X.
5. Calculate X: X = 435.6.
Since the strike price (X) is 435.6 and no arbitrage opportunities exist when the Put-Call Parity holds, there are no potential arbitrage profits in this scenario.
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A man lends 6,000 for four years at 6.05 simple interest. At the end of this period, he invests the full sum at 5.01% compounded annually for a period of 12 years. How much money will he have at the end of 16 years?
The man will have $13,391.84 at the end of 16 years.
To solve this problem, we first need to calculate the simple interest earned on the initial loan.
Using the formula I = PRT (interest = principal x rate x time), we get:
Simple interest for 4 years = $6000 x 6.05% x 4 = $1452
So the man earns $1,452 in simple interest over four years. Adding this to the initial loan amount, we get:
$6,000 + $1,452 = $7,452
This is the amount he invests at 5.01% compounded annually for 12 years. Using the formula A = P(1 + r/n)^(nt) (where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times compounded per year, and t is the number of years), we get:
A = $7,452(1 + 0.0501/1)^(1*12) = $13,391.84
So the man will have $13,391.84 at the end of 16 years.
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how would you explain the current inflation and issues we had
during COVID with people hoarding toilet paper? What are your
thoughts on price gauging now that you have studied microeconomic
markets fr
The current inflation can be attributed to several factors, such as supply chain disruptions, increased demand due to pent-up consumer spending, and government stimulus spending.
During COVID, people hoarded toilet paper due to panic buying and fear of shortages. Price gouging occurs when sellers raise prices excessively in response to increased demand, which is unethical and can harm consumers.
As a result, governments often implement price gouging laws to protect consumers from unfair pricing practices.
From a microeconomic perspective, price gouging can disrupt market equilibrium and lead to inefficient resource allocation. Overall, it is important to strike a balance between supply and demand and ensure fair pricing practices to maintain a healthy market economy.
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Several variables, including supply chain disruptions, higher demand brought on by stalled consumer spending, and government stimulus expenditure, are to blame for the present inflation.
People stocked up on toilet paper during COVID out of panic purchasing and concern for shortages. It is unethical and potentially harmful to customers when vendors raise prices excessively in response to rising demand. As a result, governments frequently enact anti-price-gouging legislation to safeguard consumers from deceptive business tactics.
Price gouging can, from a microeconomic standpoint, upset the equilibrium of the market and result in an ineffective distribution of resources. In order to sustain a strong market economy, it is crucial to achieve a balance between supply and demand and to guarantee fair pricing procedures.
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you purchased 100 shares of resorts, inc. stock at a price of $35.87 a share exactly one year ago. you have received dividends totaling $1.05 a share. today, you sold your shares at a price of $46.26 a share. what is your total dollar return on this investment?
The total dollar return on this investment is $1,144.00.
To calculate the total dollar return on this investment, we need to take into account both the capital gain (or loss) from the change in the stock price and the dividends received.
First, let's calculate the capital gain:
Capital gain = (Sale price - Purchase price) x Number of shares
Capital gain = ($46.26 - $35.87) x 100 = $1,039.00
Next, let's calculate the total dividends received:
Total dividends = Dividend per share x Number of shares
Total dividends = $1.05 x 100 = $105.00
Finally, we can calculate the total dollar return:
Total dollar return = Capital gain + Total dividends
Total dollar return = $1,039.00 + $105.00 = $1,144.00
Therefore, the total dollar return on this investment is $1,144.00.
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6) Baldwin Corp. just paid a dividend of $2.00. Over the next two years, this dividend is expected to grow by 20% per year. After two years, dividend growth is expected to level off at 10%. If the required rate of return on Baldwin stock is 12%, what should be the price of Baldwin stock today?
Baldwin Corp. paid a dividend of $2.00 which is expected to grow by 20% per year. After two years, dividend growth is expected to level off at 10%. Given the required rate of return on Baldwin stock is 12%. The price of Baldwin stock today should be $162.90.
To calculate the price of Baldwin stock today, we need to use the dividend discount model (DDM), which states that the current stock price is equal to the present value of all future dividends.
In this case, we can calculate the present value of the dividends over the first two years using the following formula:
PV of Dividends (Years 1-2) = D1 / (1 + r) + D2 / (1 + r) ^ 2
where:
D1 is the expected dividend at the end of the first year
D2 is the expected dividend at the end of the second year
r is the required rate of return
We are given that D1 = $2.00 * 1.2 = $2.40 and D2 = $2.40 * 1.2 = $2.88. Plugging in these values and r = 12%, we get:
PV of Dividends (Years 1-2) = $2.40 / (1 + 0.12) + $2.88 / (1 + 0.12) ^ 2
= $2.14 + $2.26
= $4.40
Next, we can calculate the present value of all future dividends beyond the second year using the Gordon growth model, which states that the price of the stock is equal to the next dividend divided by the difference between the required rate of return and the growth rate. In this case, the growth rate is 10% after the first two years, so we have:
PV of Future Dividends = D3 / (r - g)
where:
D3 is the dividend in the third year, which is equal to D2 * (1 + g) = $2.88 * 1.1 = $3.17
g is the long-term growth rate, which is 10%
Plugging in these values and r = 12%, we get:
PV of Future Dividends = $3.17 / (0.12 - 0.1)
= $158.50
Finally, we can calculate the price of the stock today by adding the present value of the dividends over the first two years to the present value of all future dividends beyond the second year:
Price of Baldwin Stock Today = PV of Dividends (Years 1-2) + PV of Future Dividends
= $4.40 + $158.50
= $162.90
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Buffalo almost became extinct, but cattle never have been threatened with extinction becauseA.buffalo were wild and cattle were tame.B.cattle provide economically valuable products and buffalo did not.C.buffalo were common property and cattle were private property.D.buffalo are bigger than cattle and thus provide more meat and hide.
The correct answer is B. Cattle provide economically valuable products and buffalo did not.Buffalo were hunted extensively for their meat,and bones, which were used by indigenous people for a variety of purposes.
In the late 19th century, commercial hunting of buffalo became widespread, driven by the demand for buffalo hides and the desire to remove buffalo from the Great Plains to make way for cattle ranching. This led to a significant decline in the buffalo population, to the point where they were on the brink of extinction.Cattle, on the other hand, were domesticated by humans and have been raised for their meat, milk, and hides for thousands of years. Cattle have been selectively bred to produce high-quality meat and dairy products, and they are now an economically valuable commodity worldwide. Unlike buffalo, cattle are raised on ranches and farms, where they are protected and managed by humans.In summary, cattle have not been threatened with extinction because they are domesticated animals that provide valuable economic products. Buffalo, on the other hand, were hunted to near extinction due to their valuable hides and the desire to remove them from the Great Plains for cattle ranching.
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true or false drinking stimulants like coffee is a good strategy to reduce your bac.
False. Drinking stimulants like coffee is not a good strategy to reduce your BAC (Blood Alcohol Concentration).
BAC is a measure of the amount of alcohol in your bloodstream, and it is influenced by various factors such as the amount and type of alcohol consumed, body weight, gender, and metabolism. Drinking stimulants like coffee may make you feel more alert and awake, but it does not lower your BAC or speed up the metabolism of alcohol in your system. In fact, combining alcohol with stimulants can be dangerous as it may mask the effects of alcohol and lead to overconsumption, resulting in impaired judgment, poor decision-making, and a higher risk of accidents and injuries.
The only way to reduce your BAC is to wait for your body to metabolize the alcohol naturally, which takes time. The liver can metabolize about one standard drink per hour, and there is no quick fix or magic cure for alcohol intoxication.
Therefore, it is essential to drink responsibly and in moderation to avoid the negative effects of alcohol on your health and well-being. Always have a plan to get home safely and avoid driving under the influence of alcohol.
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False. Drinking stimulants like coffee does not reduce your blood alcohol concentration (BAC). Only time can decrease your BAC as your body metabolizes alcohol.
Drinking stimulants like coffee may help you feel more alert or awake, but they do not have any effect on the amount of alcohol in your bloodstream. Only time can decrease your BAC as your liver metabolizes alcohol. Drinking coffee or other stimulants may give you a false sense of sobriety, leading you to believe that you are able to drive or perform other tasks safely, when in fact your BAC is still high. It is important to wait until your body has fully metabolized the alcohol before driving or engaging in any activities that require concentration and coordination.
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a brand character statement is a brief description of the evidence that backs up the product promise.
No, a brand character statement is not a brief description of the evidence that backs up the product promise.
A brand character statement is a statement that captures the personality and values of a brand, helping to establish an emotional connection with consumers.
It often includes information about the brand's purpose, values, and mission, as well as its personality traits and tone of voice.
On the other hand, evidence that backs up the product promise typically includes data, statistics, and other information that demonstrates the quality, effectiveness, or reliability of the product or service being offered.
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4. Now we have a perpetuity that possess following cashflows. It pays you $100 at the end of the first year. It pays you $50 at the end of the second year. And it pays you $25 at the end of the third year. From the end of fourth year, it keeps paying you $25 until forever. And the annual interest rate here is 5%. What is the current price of this perpetuity? (Hint: it can be decomposed into a two-year bond and a regular perpetuity.)
The current price of this perpetuity is $2,125.
To find the current price of this perpetuity, we can decompose it into a two-year bond and a regular perpetuity. First, calculate the present value of the two-year bond:
1. $100 discounted at 5% for 1 year: $100 / (1 + 0.05) = $95.24
2. $50 discounted at 5% for 2 years: $50 / (1 + 0.05)² = $45.35
Add these two present values: $95.24 + $45.35 = $140.59
Next, calculate the present value of the regular perpetuity starting from the end of the third year:
3. Perpetuity formula: (Cash flow / Interest rate) = ($25 / 0.05) = $500
Now, discount this present value to the beginning (current time) by 3 years: $500 / (1 + 0.05)³ = $431.97
Finally, add the present values of the two-year bond and the regular perpetuity: $140.59 + $431.97 = $2,125.
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Sardano and Sons is a large, publicly held company that is considering leasing a warehouse. One of the company’s divisions specializes in manufacturing steel, and this particular warehouse is the only facility in the area that suits the firm’s operations. The current price of steel is $784 per ton. If the price of steel falls over the next six months, the company will purchase 725 tons of steel and produce 79,750 steel rods. Each steel rod will cost $13 to manufacture and the company plans to sell the rods for $28 each. It will take only a matter of days to produce and sell the steel rods. If the price of steel rises or remains the same, it will not be profitable to undertake the project, and the company will allow the lease to expire without producing any steel rods. Treasury bills that mature in six months yield a continuously compounded interest rate of 5 percent and the standard deviation of the returns on steel is 45 percent.Use the Black-Scholes model to determine the maximum amount that the company should be willing to pay for the lease. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The maximum amount that the company should be willing to pay for the lease is approximately $1,156,956.38.
How to determine the maximum amount to be paidTo determine the maximum amount Sardano and Sons should be willing to pay for the lease using the Black-Scholes model, we first need to calculate the present value of the expected profits if the price of steel falls.
1. Calculate the profit per steel rod:
Profit per rod = Selling price - Manufacturing cost
Profit per rod = $28 - $13 = $15
2. Calculate the total profit from producing and selling 79,750 steel rods:
Total profit = Profit per rod × Number of rods
Total profit = $15 × 79,750 = $1,196,250
3. Calculate the present value of the total profit using the continuously compounded interest rate of 5%:
[tex]PV = Total \: profit \times {e}^{ - rt} [/tex]
PV = $1,196,250 × e^(-0.05 * 0.5)
PV ≈ $1,156,956.38
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the sale of a $292,500 home gave the listing broker $10,237.50. the selling broker received the same amount of commission. what was the rate of the commission charged?
The rate of commission charged is 7% when the total Commission is $20,475 and Sale Price is $292,500.
To find the Rate of the commission we have to find the values of the Commission percentage and Sale price.
Given data:
Sale Price = $292,500
Listing broker = $10,237.50
from the given data
Selling broker = listing broker = $10,237.50
Then the total commission charged = selling broker + listing broker
= $10,237.50 × 2
= $20,475
To find the rate of commission charged, we can use the formula:
Commission = (Rate of commission × Sale Price) ÷ 100
Rate of commission = Commission × 100 ÷ Sale Price
= $20,475 / $292,500
= 0.07 × 100
= 7%
Therefore, the rate of commission charged is 7%.
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On your own paper, in the working papers, or using a spreadsheet, prepare the following:
a. Prepare a multiple-step income statement for the year ended December 31, 20Y5, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 100,000 and preferred dividends were $100,000. (Round earnings per share to the nearest cent.) Save your calculations and enter the requested amounts below.
The EPS calculation would be: [tex]= ($xxx - $100,000) / 100,000= $x.xx per share[/tex]
To prepare a multiple-step income statement for the year ended December 31, 20Y5, follow these steps:
1. Determine the company's total sales revenue for the year. This should be listed at the top of the income statement.
2. Subtract the cost of goods sold (COGS) from the total sales revenue to arrive at the gross profit. This is the second line of the income statement.
3. List all operating expenses, such as salaries, rent, utilities, and depreciation, below the gross profit. Subtract the total operating expenses from the gross profit to arrive at the operating income.
4. Next, list any non-operating income, such as interest earned on investments or gains from the sale of assets. Add this income to the operating income to arrive at the total income before taxes.
5. Subtract the income tax expense from the total income before taxes to arrive at the net income. This should be listed at the bottom of the income statement.
6. To calculate earnings per share (EPS), divide the net income by the average number of common shares outstanding. In this case, the average number of common shares outstanding is 100,000 and the preferred dividends were $100,000.
Therefore, the EPS calculation would be:
Net income - preferred dividends / average number of common shares outstanding
[tex]= ($xxx - $100,000) / 100,000= $x.xx per share[/tex]
Remember to round EPS to the nearest cent.
Once you have completed these steps, you should have a complete multiple-step income statement for the year ended December 31, 20Y5, including earnings per share.
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the national political stalemate of the 1800s and early 1890s originated in part because of
The national political stalemate of the 1800s and early 1890s originated in part because of disagreements over issues such as slavery, states' rights, and economic policies.
These issues were deeply divisive and led to a breakdown in the ability of politicians to work together and compromise.
Additionally, the emergence of new political parties and the rise of third-party candidates further complicated the political landscape, making it even harder to achieve consensus and move the country forward.
Ultimately, this stalemate had significant consequences for the country, including the outbreak of the Civil War and ongoing political polarization that continues to this day.
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True or False? a pull system is likely to struggle to meet demand during demand spikes.
The Pull system will probably struggle to meet demand during peak demand. It's true.
The pull system is a spare fashion to reduce waste in product processes. Using the traction system allows you to start a new job only when it's necessary.
This minimizes above and optimizes store house costs. The pull system is a control- acquainted system that works by picking up signals that bear raised product.
The traction system contrasts with the typical thrust system common in mass product. In a pull system, the need to produce further volume appears as a" signal" from one process to the former bone .
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The Pull system will probably struggle to meet demand during peak demand. It's true. The pull system is a spare fashion to reduce waste in product processes.
Using the traction system allows you to start a new job only when it's necessary. This minimizes above and optimizes store house costs. The pull system is a control- acquainted system that works by picking up signals that bear raised product. The traction system contrasts with the typical thrust system common in mass product. In a pull system, the need to produce further volume appears as a" signal" from one process to the former bone .
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most hiring organizations are aware of the precise value of information security certifications because these programs have been in existence for a long time. question 22 options: true false
The statement "most hiring organizations are aware of the precise value of information security certifications because these programs have been in existence for a long time" is false.
While it is true that information security certifications have been around for a long time, the value of these certifications can be difficult to quantify and varies depending on the specific certification and the organization that is hiring.
Additionally, with the rapidly evolving nature of information technology and the increasing importance of cybersecurity, the value of different information security certifications can change over time.
Furthermore, not all organizations place the same value on information security certifications, and some may prioritize other qualifications or experience when making hiring decisions.
Therefore, while information security certifications can certainly be a valuable asset in the job market, it is not necessarily true that most hiring organizations are fully aware of their precise value.
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The statement "most hiring organizations are aware of the precise value of information security certifications because these programs have been in existence for a long time" is false.
While it is true that information security certifications have been around for a long time, the value of these certifications can be difficult to quantify and varies depending on the specific certification and the organization that is hiring. Additionally, with the rapidly evolving nature of information technology and the increasing importance of cybersecurity, the value of different information security certifications can change over time. Furthermore, not all organizations place the same value on information security certifications, and some may prioritize other qualifications or experience when making hiring decisions.
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I told John I want a 30% ROI or better on the estimates or else the project is a no go. "Prove it to me in a business case John. Then we’ll run with your idea." The numbers are as follows:
Projected Benefits = $30 per product sold
Products Produced = 1,750
Products Sold = 1,400
Costs (Including everything) = $29,000
What is the ROI and is the project a go? Show all work.
The ROI is 41.38%, and the project is a go as it exceeds the 30% minimum requirement.
To calculate the ROI, we first need to calculate the total revenue generated from the sale of products. This can be found by multiplying the number of products sold (1,400) by the projected benefit per product ($30). Total revenue = 1,400 x $30 = $42,000.
Next, we can calculate the net profit by subtracting the total costs from the total revenue. Net profit = $42,000 - $29,000 = $13,000.
To calculate the ROI, we divide the net profit by the total costs and multiply by 100. ROI = ($13,000 / $29,000) x 100 = 41.38%.
Since the ROI is higher than the minimum requirement of 30%, the project is a go.
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Suppose the risk free rate is 5.4% and the expected rate of return on the market is 10.5%. If the stock xyz's beta is 0.9, what is the expected rate of return to the stock? Answer to the nearest hundredth of a percent as in xx.xx% and enter without the percent sign.
The risk free rate is 5.4% and the expected rate of return on the market is 10.5%. If the stock xyz's beta is 0.9, the expected rate of return to the stock XYZ is 9.99%.
To calculate the expected rate of return for stock XYZ, we'll use the Capital Asset Pricing Model (CAPM) formula:
Expected Rate of Return = Risk-free Rate + (Beta × Market Risk Premium)
Market Risk Premium = Expected Rate of Return on Market - Risk-free Rate
Calculate the Market Risk Premium: Market Risk Premium = 10.5% - 5.4% = 5.1%
Apply the CAPM formula: Expected Rate of Return = 5.4% + (0.9 × 5.1%)
Solve for the Expected Rate of Return: Expected Rate of Return = 5.4% + (0.9 × 5.1%) = 5.4% + 4.59% = 9.99%
The expected rate of return for stock XYZ is 9.99%.
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Question 1: Congratulations! You have been placed on dean's honor list for accounting and finance major. In order to reward you for your hard work, Dean of Suleman Dawood School of Business, has offered you the following two stocks: Stock Suleman with Rq=0.10 and 01=0.0025 Stock Dawood with R2=0.16 and oż=0.0064 . (a) Which stock would you choose if you want to maximize your expected return? Give justification for your choice. [4 Marks] (b) Which stock would you choose if you want to minimize the return? Keep in mind you cannot form a portfolio. Give justification for your choice. [4 Marks] (c) Through calculations, you have come to realize that that correlation between Suleman Stock and Dawood stock is +1. What is the optimal combination of Suleman stock and Dawood stock you would hold, if you want to minimize the risk? [4 Marks] (d) Now suppose that correlation was -1. What fraction of your net worth should be held in Suleman Stock and Dawood stock, if you want to have zero risk portfolio? [4 Marks] (e) What is the expected return on the portfolio you have formed in part (d)? How does it compare with the riskless return of ten percent being offered by State Bank of Pakistan on it's T bills. Would you rather invest in State Bank of Pakistan T bills? [4 Marks]
(a) I would choose Dawood stock because it has a higher expected return of 0.16 with a higher variance of 0.0064, which indicates higher risk but higher potential return.
(b) I would choose Suleman stock because it has a lower expected return of 0.10 with a lower variance of 0.0025, which indicates lower risk but lower potential return.
(c) Since the correlation is +1, the optimal combination of Suleman and Dawood stock to minimize risk would be to hold both stocks in equal proportions (50% each), as they move perfectly in sync with each other.
(d) If the correlation is -1, the optimal combination to have a zero-risk portfolio would be to invest 100% of the net worth in a combination of Suleman and Dawood stock in a ratio of 1:1.
(e) The expected return on the portfolio formed in part (d) would be the weighted average of the expected returns of Suleman and Dawood stock, which is (0.50.10) + (0.50.16) = 0.13 or 13%. Since the riskless return offered by the State Bank of Pakistan on its T-bills is 10%, the portfolio formed in part (d) offers a higher expected return and would be a better investment option.
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Trestian Brothers is expected to pay a $3.10 per share dividend at the end of the year (le, Du- $3.10) The dividend les expected to grow at a constant rate of 9% a war. The required rate of return on the stock, rs, 1 17%. What is the stock's current valise per share? Round your answer to the nearest cont $ Oo
Your question is: What is the stock's current value per share for Trestian Brothers, given a $3.10 per share dividend at the end of the year, a constant growth rate of 9%, and a required rate of return of 17%?
To calculate the stock's current value per share, we will use the Dividend Discount Model (DDM):
Stock Value = D1 / (rs - g)
where:
D1 = Dividend in the next year (end of the year dividend * (1 + growth rate))
rs = Required rate of return (17%)
g = Constant growth rate (9%)
Step 1: Calculate D1
D1 = $3.10 * (1 + 0.09)
D1 = $3.10 * 1.09
D1 = $3.379
Step 2: Calculate the stock value
Stock Value = D1 / (rs - g)
Stock Value = $3.379 / (0.17 - 0.09)
Stock Value = $3.379 / 0.08
Stock Value = $42.2375
Round your answer to the nearest cent:
Stock Value ≈ $42.24
The stock's current value per share for Trestian Brothers is approximately $42.24.
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what remedies are generally available to the aggrieved party for the breach of a franchise agreement if the aggrieved party is the franchisee of a distributorship-type franchise?
As a franchisee of a distributorship-type franchise, the aggrieved party may have a few remedies available for a breach of the franchise agreement.
These remedies can include:
1. Specific performance: This is a legal remedy where the court orders the breaching party to fulfill their contractual obligations. For example, if the franchisor is not providing the necessary support or marketing materials as per the agreement, the court may order them to do so.
2. Damages: The aggrieved party may be entitled to damages as a result of the breach. This could include compensation for lost profits, expenses incurred, or other financial losses.
3. Termination: The franchisee may be able to terminate the franchise agreement if the breach is significant enough. However, this will depend on the terms of the agreement and the severity of the breach.
4. Injunction: An injunction is a court order that prohibits the breaching party from continuing to violate the terms of the franchise agreement. This can be a useful remedy if the breach is ongoing or if the franchisor is engaging in illegal activity.
It is important for the franchisee to review their franchise agreement and consult with legal counsel to determine the appropriate remedy for their specific situation.
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An oil company is willing to pay the following dividends: Year 1: €4; Year 2: €5; Year 3 and following years (4, 5, 6...infinite): €2. The required rate of return for firms in this sector is 11%. Compute the price at which one share of INCARSA Corp is expected to trade in the secondary market: a. 22.42 b. 23.45 C. 20.35 d. None of the above
The correct answer is A: 22.42. The price of a share of INCARSA Corp expected to trade in the secondary market can be calculated by using the present value of dividends formula.
This formula takes into account the expected dividends that will be paid out and the required rate of return for firms in this sector.
Since the dividends paid out in Year 1 and Year 2 are higher than the subsequent dividends of €2, the present value of dividends formula takes this into account by assigning a higher value to the earlier years.
By plugging in the given dividend amounts and the required rate of return of 11%, we can calculate that the share price is expected to be 22.42.
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