Answer:
YTM = 0.043793 or 4.3793% rounded off to 4.38%
Explanation:
The yield to maturity or YTM is the yield or return that an investor can earn on the bond if the bond is purchased today and is held till the bond matures. The formula to calculate the Yield to maturity of a zero coupon bond is as follows,
YTM = [ (( F / PV)^1/n) - 1 ]
Where,
F is the Face value of the bond
PV is the current value of the bond
n is the number of years to maturity
YTM = [ (( 1000 / 525.75)^1/15) - 1 ]
YTM = 0.043793 or 4.3793% rounded off to 4.38%
Pillar Company owns 70 percent of Salt Company's outstanding common stock. On December 31, 20x8, Salt sold equipment to Pillar at a price in excess of Salt's carrying amount but less than its original cost. On a consolidated balance sheet at December 31,20x8, the carrying amount of the equipment should be reported at:_______________ A) Pillar's original cost. B) Salt's original cost. C) Pillar's original cost less Salt's recorded gain. D) Pillar's original cost less 70 percent of Salt's recorded gain.
Answer:
C. Pillar's original cost less Salt's recorded gain
Explanation:
For physical assets, that is in the form of machineries or computer hardware or in this case, equipment, we can calculate the carrying cost to be the original cost minus accumulated depreciation.
in answer to this question, the carrying amount of the equipment should be reported at Pillar's original cost less Salt's recorded gain.
Total revenue for producing 8 units of output is $48. Total revenue for producing 9 units out output is $63. Given this information, the:
A. Average revenue for produce 9 units is $1
B. Average revenue for producing 9 units is $15
C. Marginal revenue for producing the 9 unit is $1
D. Marginal revenue for producing the 9 units is $15
Answer:
D. Marginal revenue for producing the 9 units is $15
Explanation:
TR(8) = $48
TR(9) = $63
MR(9) = TR(9) - TR(8) = $63 - $48 = $15
AR(8) = TR(8) / 8 = $48/8 = $6
AR(9) = TR(9)/9 = 63/9 = $9
Note: TR=Total revenue, AR= Average Revenue and MR=Marginal Revenue
So, the only correct option is option d
The government of Paulaville decides to set prices of wheat. Calculate the amount of the shortage or surplus if the government sets a price floor at $2.
Answer:
I have uploaded the picture with the relevant information below.
Explanation:
We can see in this picture that the market equilibrium is met at a price of $5, thus, $5 is the equilibrium price, because demand and supply are both 125 at this point.
If the govenment sets a price floor of $2, there will be no effect, because the price floor is non-binding.
A non-binding price floor is a minimum price set by the government that is actually lower that the equilibrium market price. In this case, the price of the market will be allowed to go to $5, and reach equilibrium, so the policy osf setting the $2 price floor will have no effect.
Barlow owns the surface rights for Canyon Ranch, but does not own the subsurface rights. Dusty owns the subsurface rights. Canyon Ranch includes a house, a bunkhouse, and two barns, which are damaged when Dusty is excavating for minerals under the surface. Most likely responsible for the damage is:________.
A) Dusty.
B) Barlow.
C) Dusty and Barlow.
D) no one.
Answer:
A) Dusty.
Explanation:
Generally, when you are dealing with property rights and any damages that occur to real property, the individual that possesses the oldest structure can sue other individuals that damage his/her structure by building or developing a new one.
E.g. in many cities, buildings or even homes tend to be built right next to other homes or buildings (specially in down town areas). If you are building a house right next to an existing house and the walls are damaged because because you dug to build a basement, then you are responsible and liable for the damages even if you never invaded the other property.
Ivanhoe Company sublet a portion of its warehouse for five years at an annual rental of $71100, beginning on May 1, 2020. The tenant, Barbara Jones, paid one year's rent in advance, which Ivanhoe recorded as a credit to Unearned Rent Revenue. Ivanhoe reports on a calendar-year basis. The adjustment on December 31, 2020 for Ivanhoe should be:________.
Answer and Explanation:
The adjustment should be as follows
Unearned Rent Revenue $47,400
To Rent Revenue $47,400
(Being recording of revenue earned is recorded)
Here unearned rent revenue is debited as it decreased the liabilities and the rent revenue is credited as it increased the revenue. Also liabilities and revenue contains the normal debit balance
The working is shown below:
= $71,100 × 8 months ÷ 12 months
= $47,400
The eight months are calculated from May 1 to December 31
On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accountin g for cash discounts What is the correct entry for Flores on November 17, assuming the correct payment was received on that date? A) cash 7,840 Accounts receivable 7,840 B) cash 7,840 Sales discounts 8,00 Accounts receivablhe C) 7,84 cash Sales Accouts receivable D) 8,000 Cash Sales discounts l6 8,00 Accounts receivable 160 Sales
Answer:
Following are the solution to this question:
Explanation:
In all the given choices some of the data is missing so, its correct entry can be defined as follows
Cash account $7,840
Sales discount $160
To Accounts receivable $8,000
The amount of risk that will remain in a portfolio depends on the degree to which the stocks are exposed to:______
Answer:
Common risks.
Explanation:
Portfolio variance can be defined as the measurement of risk or dispersion of returns of a set of securities that makes up a portfolio fluctuate over a period of time.
Simply stated, portfolio variance is typically the total returns of the portfolio over a specific period of time.
In order to calculate the portfolio variance, the standard deviations of each security in the portfolio with their respective correlations security pair in the portfolio would be used. Portfolio variance is the square of standard deviation.
A two-asset portfolio with a standard deviation of zero can be formed when the assets have a correlation coefficient equal to negative one (-1) because this defines the efficiency frontier. In Economical portfolio theory, the efficient frontier is a group of optimal portfolios that offers an investor the highest expected return for a specific risk level or offers the lowest risk for a defined level of expected return.
The amount of risk that will remain in a portfolio depends on the degree to which the stocks are exposed to common risks.
A common risk can be defined as a type of risk that affects the entirety of a business firm or company and as such can't be diversified.
Hence, in order to eliminate some of the risk associated with a portfolio, business owners combine stocks in a portfolio and the amount of risk that will remain or eliminated in a portfolio depends on the degree to which the stocks are exposed to common risks.
The next dividend payment by Skippy, Inc., will be $2.95 per share. The dividends are anticipated to maintain a growth rate of 4.8%, forever. If the stock currently sells for $53.10 per share, what is the required return?
Answer:
r = 0.103555 or 10.3555% rounded off to 10.36%
Explanation:
Using the constant growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D1 / (r - g)
Where,
D1 is dividend expected for the next period /year g is the growth rate r is the required rate of return or cost of equityPlugging in the values for D0, P0 and g in the formula, we can calculate r to be,
53.1 = 2.95 / (r - 0.048)
53.1 * (r - 0.048) = 2.95
53.1r - 2.5488 = 2.95
53.1r = 2.95+ 2.5488
r = 5.4988 / 53.1
r = 0.103555 or 10.3555% rounded off to 10.36%
Certain schools of economic thought suggest that a _____________ would reduce pollution in a __________________, when compared to command-and-control regulation.
a. marketable permit; less cost-effective way
b. pollution tax; flexible, more cost-effective way
c. marketable permit; less flexible manner
d. pollution tax; less cost effective, but flexible way
Answer:
B.
Explanation:
Certain schools of economic thought suggest that a pollution tax would reduce pollution in a flexible, more cost-effective way when compared to command-and-control regulation. Therefore Option B is correct.
What is School?School refers to a place where formal education or knowledge is conducted. This essay uses the term to refer to both lower-level and higher-level educational institutions.
A school is a section of the school system made up of pupils belonging to one or more grade levels or other dissimilar groupings, organized as a single commodity with one or more teachers to deliver teaching of a specific sort, and housed in one or more facilities.
As is the situation when elementary and secondary schools are housed in the same building or compound, more than one school may be located there.
According to the organization's mandate, the school's daily operations are overseen by elected officials who may include department heads and school administrators. The b role is one of learning, education, and research.
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Over the past 100 years, the rate of return on stocks has averaged about _____, and the return on bonds has averaged approximately _____.A. â10%; 5%B. 7%; 2%C. 1%; 2%D. 20%; 25%
Answer: B. 7%; 2%
Explanation:
0ver the past 100 years, stocks have showed a positive average return of 7% whilst bonds have shown a return of 2%. This makes sense because stocks generally offer higher returns than bonds which are fixed.
Stocks react to a variety of factors including interest rates and market fluctuations which makes them more risky whereas bonds which are fixed income securities are more stable in their returns making them less of a risk.
Stocks therefore offer a higher return to compensate for this risk as opposed to bonds.
Mason is assigning work to the different employees of his company. He wants his workers to perform well in their respective work. Which factor should Mason consider while assigning this work?
A.
relations with each employee
B.
living conditions of each employee
C.
age of each individual employee
D.
individual ability of each employee
Answer:
answer letter D
individually ability to each employee
Answer:
d) individual ability of each employee
Explanation:
Why can some taxes that appear to be regressive in terms of current income be thought of as progressive from a lifetime tax incidence perspective?
Answer:
The description is outlined in the clarification segment below, as per the case provided.
Explanation:
The prevalence of either a lifetime tax on some kind of fixed income has been known to be a long-term perspective including its broader economic impact of taxation since they complement instead of just replace. The existing income taxes would raise the quarterly funds to meet, but perhaps the cumulative occurrence of tax would enhance the power to charge for existence.Faster Company uses the periodic inventory method and had the following inventory information available:
Units Unit Cost Total Cost
1/1 Beginning Inventory 15 $8.00 $120
1/20 Purchase 60 $8.80 528
7/25 Purchase 30 $8.40 252
10/20 Purchase 45 $9.60 432
150 $1,332
a. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $:__________
b. Assume that the company uses the average-cost method. The value of the ending inventory on December 31 is $:_________
c. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $:_________
1. Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method.
2. Would income have been greater or less?
Question Completion:
A physical count of inventory on December 31 revealed that there were 55 units on hand.
Answer:
Faster Company
a. Assume that the company uses the FIFO method. The value of the ending inventory at December 31 is $:____516______
b. Assume that the company uses the average-cost method. The value of the ending inventory on December 31 is $:____488.40_____
c. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is $:__472_______
1. The difference in the amount of income if it had used the FIFO method instead of the LIFO:
Cost of goods sold under FIFO = $816
Cost of goods sold under LIFO = $860
Difference in income = $44
2. The income would have been greater by $44 because the FIFO charges less cost than the LIFO, especially when costs are rising.
Explanation:
a) Data and Calculations:
Faster uses the periodic inventory method.
Date Units Unit Cost Total Cost
1/1 Beginning Inventory 15 $8.00 $120
1/20 Purchase 60 $8.80 528
7/25 Purchase 30 $8.40 252
10/20 Purchase 45 $9.60 432
Total 150 $1,332
Ending inventory 55
Units of goods sold 95
Average cost = $1,332/150 = $8.88
Under FIFO:
Ending Inventory = 45*$9.60 + 10*$8.40 = $516
Cost of goods sold = Cost of goods available for sale minus the Ending Inventory = $1,332 - 516 = $816.
Under Average-Cost Method:
Ending Inventory = 55 * $8.88 = $488.40
Cost of goods sold = 95 * $8.88 = $843.60
Under LIFO method:
Ending Inventory = 15*$8.00 + 40*$8.80 = $472
Cost of goods sold = $860 ($1,332 - $472)
In staple merchandise management systems, the ______ is the amount of inventory below which the quantity available shouldn't go or the item will be out of stock before the next order arrives. A) service level B) order point C) base stock D) perpetual inventory E) average inventory.
Answer:
B) order point
Explanation:
A merchandise management systems can be defined as a strategic technique used by business firms to measure and understand the buying habits of the consumers of an organization in order to effectively and efficiently source, plan, display and properly stock the finished goods (products).
In staple merchandise management systems, the order point is the amount of inventory below which the quantity available shouldn't go or the item will be out of stock before the next order arrives. The order point is the minimal amount of goods (products) that a business firm allows itself to have before restocking or ordering for more products.
Ramble On Co. wishes to maintain a growth rate of 8 percent a year, a debt-equity ratio of 0.37, and a dividend payout ratio of 54 percent. The ratio of total assets to sales is constant at 1.41. What profit margin must the firm achieve?
Answer: 16.55%
Explanation:
Profit margin is the amount of earnings that a company has left when every expenses and costs have been deducted.
From the information given, firstly, we calculate the return on equity. This will be:
= Growth rate /(1 + Growth rate) × Retention ratio
= 8% / (1 + 8%) × 46%
= 0.08/(1 + 0.08) × 0.46
= 0.08/1.08 × 0.46
= 0.08/0.4968
= 0.1610
= 16.10%
Return on equity, ROE = 16.10%
We then calculate the profit margin. This will be:
= ROE / Asset turnover × Equity Multiplier
where,
Equity Multiplier = 1 + debt-equity ratio
= 1 + 0.37 = 1.37
Profit margin = ROE / Asset turnover × Equity Multiplier
= 16.10% / {(1/1.41) × 1.37}
= 16.10% / 0.71 × 1.37
= 0.1610 / 0.9727
= 0.1655
Profit margin = 16.55%
The profit margin is 16.55%,
Calculation of the profit margin:First we have to determine the return on equity.
So, it should be
= Growth rate /(1 + Growth rate) × Retention ratio
= 8% / (1 + 8%) × 46%
= 0.08/(1 + 0.08) × 0.46
= 0.08/1.08 × 0.46
= 0.08/0.4968
= 0.1610
= 16.10%
Now the profit margin is
= ROE / Asset turnover × Equity Multiplier
= 16.10% / {(1/1.41) × 1.37}
= 16.10% / 0.71 × 1.37
= 0.1610 / 0.9727
= 0.1655
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North Dakota Electric Company estimates its demand trend line (in millions of kilowatt hours) to be:
D = 80.0 + 0.45Q,
where Q refers to the sequential quarter number and Q = 1 for winter of Year 1. In addition, the multiplicative seasonal factors are as follows:
Quarter Factor (Index)
Winter 0.72
Spring 1.25
Summer 1.40
Fall 0.63
In year 26 (quarters 101-104), the energy use for each of the quarters beginning with winter is (round your response to one decimal place):_______
Answer:
90.3 ; 157.4 ; 176.9 ; 79.9
Explanation:
Given that:
Estimated demand trend line (in millions of kilowatt hour) for North Dakota Electricity company is :
D = 80.0 + 0.45Q,
Q = quarter number
Quarter Factor (Index)
Winter 0.72
Spring 1.25
Summer 1.40
Fall 0.63
In year 26 (quarters 101-104):
Energy use (E) for each quarter = (Demand * quarter factor)
Winter ; Q = 101
E = [80.0 + 0.45(101)] * 0.72 = 90.3
E = [80.0 + 0.45(102)] * 1.25 = 157.4
E = [80.0 + 0.45(103)] * 1.40 = 176.9
E = [80.0 + 0.45(104)] * 0.63 = 79.9
First Bank has $12 million in deposits, $5 million in loans, $6 million in bonds and $1 million in reserves. What is the bank's net worth?
Answer: 0
Explanation:
The net worth of the bank will be calculated as the total liabilities deducted from the total assets. This will be:
= (Loans + Bonds + Reserves) - Deposit
= ($5 + $6 + $1) - $12
= $12 - $12
= 0
The bank's net worth will be 0 million
Net worth is the value of the assets a person or company owns, minus the liabilities they owe.
The net worth of the bank will be calculated as the total liabilities deducted from the total assets. This will be:
= (Loans + Bonds + Reserves) - Deposit
= ($5 + $6 + $1) - $12
= $12 - $12
= 0
The bank's net worth will be 0 million
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Watts Corporation made a very large arithmetical error in the preparation of its year-end point in the calculation of financial statements by improper placement of a decimal depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as:____________. a. an increase in depreciation expense for the year in which the error is discovered b. a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. c. a change in accounting principle for the year in which the error was made. d. a prior period adjustment.
Answer:
d. a prior period adjustment.
Explanation:
Correction of the error when discovered in the next year should be treated as a prior period adjustment. This is basically because the error was already recorded in the past financial report. Since these reports are final and cannot be changed, then the correction to this error needs to be implemented in the next year's financial report and would reflect on that year's income taxes. The process of doing this is known in accounting as a prior period adjustment
When people believe that past behavior is the best predictor of future behavior, they have __________ expectationsa. rational
b. adaptive
c. irrational
d. reasonable
Steve Smith will receive $82,870 on 5 years from now, from a trust fund established by his father. Assuming the appropriate interest rate for discounting is 10% (compounded semiannually), what is the present value of this amount today? (Round factor values to 5 decimal places, e.g. 1.25124. Round answers to the nearest whole dollar, e.g. 5,275.)
Answer:
$50,875
Explanation:
The computation of the present value is shown below:
Given that
NPER = 5 × 2 = 10
RATE = 10% ÷ 2 = 5%
PMt = $0
FV = $82,870
The formula is shown below:
= -PV(RATE;NPER;PMT;FV;TYPE)
After applying the above formula, the present value is $50,875
Hence, the present value is $50,875
We simply applied the above formula so that the correct value could come
And, the same is to be considered
Describe how the IRR is calculated, and describe the information this measure provides about a sequence of cash fl ows. What is the IRR criterion decision rule?
Answer:
The Internal Rate of Return is the discount rate that discounts a series of cashflows such that the Net Present Value becomes zero.
It is calculated in the same way the NPV is calculated which is to subtract the discounted cash outflows from the discounted cash inflows but this time it will be the subject of the equation which will be equated to zero.
Formula therefore is;
[tex]\frac{Cf_{1} }{(1 + IRR_{1} )} + \frac{Cf_{2}}{(1 + IRR_{2} )^{2} } + \frac{Cf_{n} }{(1 + IRR_{n} )^{n} } - Cf_{0} = 0[/tex]
Excel worksheets, financial calculators and solving the equation can all be used to find IRR.
The higher the IRR, the better for a project because it means that the project has high cash inflows that would take a higher rate to discount to zero.
The decision rule is the pick a project that has a higher IRR than the firm's Required rate of return because it means that the NPV will be more than zero.
As an independent student Sally borrowed $4,000 her first semester of college through an Unsubsidized Stafford loan at 6.8% APR, compounded monthly. After her first semester, Sally was able to work her way through school and she graduated three years later without any additional loans. Since Sally did not make any loan payments while she was in school, what is her loan balance upon graduation? a) $4,000.00 b) $4,902.36 c) $7,869.48 d) $7,834.82
Answer:
CPT FV=4902.3689
Explanation:
By using financial calculator:
Given:
PMT = $0
PV = $4,000
N = 12x3 = 36 times
I/Y = 6.8% / 12
By using excel formulas
=FV(6.8%/12,12*3,0,4000)
Future value = $4,902.3689
CPT FV=4902.3689
Taylor, Inc., stock has a beta of 1.2 and an expected return of 9.3%. The risk-free rate is 4.1% and the market risk premium is 6.8%. This stock is _____ because the CAPM return for the stock is _____%.a. overvalued; 11.87.
b. undervalued; 12.09.
c. undervalued; 12.26.
d. overvalued; 12.26.
e. undervalued; 11.87.
Answer:
The stock is overvalued because the CAPM return for the stock is 12.26%
Option d is the correct answer.
Explanation:
Using the CAPM, we can calculate the required rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate. If the expected return on a stock is less than the required rate of return, a stock is said to be overvalued and vice versa.
The formula for required rate of return under CAPM is,
r = rRF + Beta * rpM
Where,
rRF is the risk free rate
rpM is the market return
r = 0.041 + 1.2 * 0.068
r = 0.1226 or 12.26%
The stock is overvalued because the CAPM return for the stock is 12.26%
A management concept based on an understanding of the changing wants and needs of customers, and which leads to flexible product designs and production processes, is called:_______.A. Continuous improvement. B. Customer orientation. C. Just-in-time. D. Theory of constraints. E. Total quality management.
Answer:
customer orientation
Explanation:
customer orientation can be regarded as business approach where the company helps the customer to achieve their aim and goals.
A series of monthly cash flows is deposited into an account that earns 12% nominal interest compounded monthly. Each monthly deposit is equal to $2,100. The first monthly deposit occurred on June 1, 2008 and the last monthly deposit will be on January 1, 2015. The account also has equivalent quarterly withdrawals from it. The first quarterly withdrawal is equal to $5,000 and occurred on October 1, 2008. The last $5,000 withdrawal will occur on January 1, 2015. How much remains in the account after the last withdrawal?
Answer:
The amount left in the account after last withdrawal is $61,945
Explanation:
The first monthly deposit occurred on June 1, 2008 and the last monthly deposit will be on January 1, 2015 = 80 deposit
Monthly deposit = 2,100
Interest rate = 12% / 1% per month
Firstly, we calculate the future worth of the monthly deposit
FW = A(F/A, i, n)
A = 2,100, i = 1%, n= 80
FW = $2100*[(1+0.01)^80 - 1 / 0.01]
FW = $2100*[2.216715 - 1 / 0.01]
FW = $2100*(121.671)
FW = $255,509.10
We calculate the effective interest rate
i(effective) = (1 + i nominal monthly interest rate)^n - 1
i `%, n = 3(no of months in quarter)
i (effective) = (1+0.01)^3 - 1
i (effective) = (1.01)^3 - 1
i (effective) = 1.030301 - 1
i (effective) = 0.030301
i (effective) = 3.0301%
The effective quarterly interest rate is 3.0301%
We calculate the future worth of the quarterly drawings
FW = A[(1+i)^n - 1 / i]
A = 5,000(drawing), i = 3.0301%, n = 26(number of drawings)
FW = 5,000*[(1+0.030301)^26 - 1 / 0.030301]
FW = 5,000*[2.17303717 - 1 / 0.030301]
FW = 5,000*(38.71282)
FW = $193,564.10
The future worth of the quarterly withdrawal is $193,564.10
We calculate the amount left in the account after last withdrawal
Amount left in account = FW(monthly deposits) - FW(quarterly drawings)
Amount left in account = $255,509.10 - $193,564.10
Amount left in account = $61,945
Thus, the amount left in the account after last withdrawal is $61,945
Omega Enterprises budgeted the following sales in units:
January 40,000
February 30,000
March 50,000
Omega's policy is to have 30% of the following month's sales in inventory. On January 1, inventory equaled 8,000 units. February production in units is:_________
a, 20,000.
b. 26,500.
c. 40,000.
d. 36,000.
e. 28,000
Answer:
d. 36,000
Explanation:
Given the following data,
Units;
February = 30,000
March = 50,000
In order to calculate February production in units, the sales for the month and the required ending inventory will be added together and then deduct the beginning inventory.
February Production in units ;
Sales for the month = 30,000
Ending inventory = [50,000 × 0.3] = 15,000
Beginning inventory = [30,000 × 0.3] = [9,000]
Total = 36,000 units.
In wisely planning for your retirement, you invest $12,000 per year for 20 years into a 401k account. How much will you be able to withdraw each year for 10 years, starting one year after your last deposit, if you can earn a real return of 10% per year and the inflation rate averages 2.8% per year?
Answer:
Annual withdraw= $173,483.28
Explanation:
The real rate of return is the result of deducting from the nominal rate the inflation rate.
First, we will determine the nominal rate of return:
Nominal rate= 0.10 + 0.028= 0.128
Now, we need to calculate the value of the investment at the time of retirement:
Annual deposit= $12,000
Interest rate= 0.128
Number of periods= 20 years
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {12,000*[(1.128^20) - 1]} / 0.128
FV= $948,935.34
Finally, the annual withdrawal:
Annual withdraw= (FV*i) / [1 - (1+i)^(-n)]
Annual withdraw= (948,935.34*0.128) / [1 - (1.128^-10)]
Annual withdraw= $173,483.28
Expando, Inc., is considering the possibility of building an additional factory that would produce a new addition to their product line. The company is currently considering two options. The first is a small facility that it could build at a cost of $9 million. If demand for new products is low, the company expects to receive $9 million in discounted revenues (present value of future revenues) with the small facility. On the other hand, if demand is high, it expects $12 million in discounted revenues using the small facility. The second option is to build a large factory at a cost of $10 million. Were demand to be low, the company would expect $12 million in discounted revenues with the large plant. If demand is high, the company estimates that the discounted revenues would be $15 million. In either case, the probability of demand being high is 0.40, and the probability of it being low is 0.60. Not constructing a new factory would result in no additional revenue being generated because the current factories cannot produce these new products.
a. Calculate the NPV for the following: (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in millions rounded to 1 decimal place.)
Plans NPV
Small facility $ million
Do nothing million
Large facility million
b. The best decision to help Expando is:_______.
a. to build the large facility.
b. to build the small facility.
c. to do nothing.
Answer:
a)
small facility:
initial outlay = -$9,000,000
present value of expected cash flows = (0.6 x $9,000,000) + (0.4 x $12,000,000) = $10,200,000
NPV = $10,200,000 - $9,000,000 = $1,200,000
large facility:
initial outlay = -$10,000,000
present value of expected cash flows = (0.6 x $12,000,000) + (0.4 x $15,000,000) = $13,200,000
NPV = $13,200,000 - $10,000,000 = $3,200,000
b) the best option is:
a. to build the large facility.the NPV of the large facility is significantly higher than the NPV of the smaller facility, while the required investment is not that different.
What pricing strategy begins with an assessment of customer needs and perceptions and then a target price is set based on customer perceptions of worth?
Answer:
value-based strategy
Explanation:
Value-based prices are the strategy that helps determine the price based on the consumer's view of the product. It is more customer-based pricing, as it is its main point.
The formal view of value-based strategy is the value of the product based on the consumer's opinion and the products' worth.
Troy's financial records for the year reflect the following: Interest income from bank savings account $1,440 Taxable annuity receipts 2,880 City ad valorem property tax on investments 216 Investment interest expense 5,040 Calculate Troy's net investment income and his current investment interest deduction. How is a deduction for any potential excess investment interest treated?Troy's net investment income is $_____and his investment interest deduction is $______investment interest expense not deducted this year is_____.
Answer:
net Investment income for Troy = $4,104.
Investment interest deduction = $4,104.
Brought forward.
Explanation:
So, from the question above we are his the folly information for the financial report of Troy.
=> Interest income from bank savings account = $1,440.
=> The Taxable annuity receipts = 2,880.
=> City ad valorem property tax on investments = 216.
=> Investment interest expense = 5,040.
Therefore, Troy's net investment income can be calculated by the addition of Interest income from bank savings account with The Taxable annuity receipts, that is;
Troy's investment income = Interest income from bank savings account + The Taxable annuity receipts.
Troy's investment income = $1,440 + 2,880 = $4,320.
Therefore, the net Investment income for Troy is calculated as;
The net Investment income for Troy = Troy's investment income - City ad valorem property tax on investments.
=>The net Investment income for Troy = $4,320 - $216 = $4,104
Therefore let's fill in the gaps given in the question:
"Troy's net investment income is $4,104 and his investment interest deduction is $4,104.
Investment interest expense not deducted this year is BROUGHT FORWARD"