Answer:
C. Accept the new pattern and have confidence that Einstein knows the business accurately to the customer.
Explanation:
The business consultants are experts in the field of business and they provide suggestions about certain issue. The Universal Containers Company thinks that they know everything about business but an unexpected pattern is observed. They call a meeting with Einstein Consultant and the consultant will advise to accept the new pattern and observe the customers. The company should have confidence that the consultant knows business accurately.
Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables: Feb. 20 Received $1,000 from Andrew Warren and wrote off the remainder owed of $4,000 as uncollectible. May 10 Reinstated the account of Andrew Warren and received $4,000 cash in full payment. If an amount box does not require an entry, leave it blank. Feb. 20 May 10 May 10
Answer:
A journal was entered to determine the following transactions using the direct write-off method of accounting for uncollectible receivable shown below
Explanation:
Solution
PART A:
Particulars Debit Credit
Feb 20 Bad Debt Expense $4,000
Cash $1,000
Accounts receivable $5000
May 10 Accounts receivable $4,000
Bad Debt Expense $4,000
Cash $4,000
Accounts receivable $4,000
Consider the role of management accounting in relation to the company for which you work (or have worked). Discuss how the principles of management accounting can be utilized. What specific managerial accounting activities would be useful?
Answer:
Role of management accounting :
1. provide internal information on operations
2. help in decision making
Utilization of management accounting principles
1. make or buy decisions
2. continuing or discontinuing of operations
Useful managerial Accounting Activities
1. planning
2. deciding on the alternative causes of action
Explanation:
Role of Management Accounting is to provide managers with information related to their operations.This includes the costs and revenue incurred, the deviations from the planned costs and revenue and profit targets.
This information would help to control costs and revenues or make certain decisions of continuing or discontinuing operating of a product or segment.
Thus managerial accounting activities that are useful are planning, deciding on the alternative causes of action, implementation, monitoring and control
The role of management accounting in a company is to analyze financial information for a period to assist managers in the decision-making process for achieving organizational goals.
The management accounting principles defined by the American Institute of CPAs (AICPA) are:
InfluenceRelevanceValueConfidenceThrough the four global principles, management accounting activities such as strategic definition, control and direction will be managed more effectively.
The availability of data and information will provide greater support for the creation of value through greater vision of organizational environments, transparency and reliability to attract investments.
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In Appellia, it takes 10 units of resources to increase its output of sugar from 12 tons to 13 tons, but 11 units of resources to increase output from 13 tons to 14 tons, and 12 units of resources to increase output from 14 tons and 15 tons, and so on. The need for increasing resources is an example of:________.
a. comparative advantage.
b. diminishing returns to specialization.
c. absolute advantage.
d. mercantilism Porter's diamond model.
Answer:
b. diminishing returns to specialization.
Explanation:
Diminishing returns is also called diminishing productivity. It states that as additional unit of input is used in production it will get to a stage where more of input will be required to maintain output levels.
If the same level of input is used it will result in reduction in output over time.
This is exemplified in this secanrio where it takes 10 units of resources to increase its output of sugar from 12 tons to 13 tons, but 11 units of resources to increase output from 13 tons to 14 tons, and 12 units of resources to increase output from 14 tons and 15 tons.
It takes more input to increase output by 1 ton
George has been selling 5,000 T-shirts per month for $8.50. When he increased the price to $9.50, he sold only 4,000 T-shirts. Which of the following best approximates the price elasticity of demand? -2.2 -1.8 -2 -2.6 Suppose George's marginal cost is $5 per shirt. Before the price change, George's initial price markup over marginal cost was approximately . George's desired markup is . Since George's initial markup, or actual margin, was than his desired margin, raising the price was .
Answer: George's initial price markup over marginal cost was approximately 41.2% George's desired markup is 45% Since George's initial markup, or actual margin, was Less than his desired margin, raising the price was profitable
Explanation:
a) Price Elasticity of Demand = [(Q1-Q2)/(Q1+Q2)] / [(P1-P2)/(P1+P2)]
= 5000- 4000/4000+ 5000) / 8.50- 9.50 /8.50 ₊9.50 =
1000/8000 / -1/ 18 = 0.125/-0.055 = -2.2
George's initial price markup over marginal cost was approximately
when Marginal cost = $5
b)initial price markup = Price - marginal cost / price = 8.50 - 5.00/ 8.50 = 0.412= 41.2%
C) George's desired margin = 1/absolute value of price elasticity = 1/ 2.2= 0.45= 45%
.
D)Since George's initial markup or actual margin was less than his desired margin, raising the price is profitable.
This is because When the markup is lower than the margin, business is running on a loss, so it is nessesary to increase price.
Present Value Computations
Using the present value tables, solve the following.
(Click here to access the time value of money tables to use with this problem.)
Round your answers to two decimal places.
Required:
1. What is the present value on January 1, 2016, of $30,000 due on January 1, 2020, and discounted at 10% compounded annually?
$
2. What is the present value on January 1, 2016, of $40,000 due on January 1, 2020, and discounted at 11% compounded semiannually?
$
3. What is the present value on January 1, 2016, of $50,000 due on January 1, 2020, and discounted at 16% compounded quarterly?
$
Answer:
The present value on January 1, 2016, of $30,000 due on January 1, 2020, and discounted at 10% compounded annually is $ 20,490.40
The present value on January 1, 2016, of $40,000 due on January 1, 2020, and discounted at 11% compounded semiannually is $ 26,063.95
The present value on January 1, 2016, of $50,000 due on January 1, 2020, and discounted at 16% compounded quarterly is $ 26,695.41
Explanation:
The present value formula is given as PV=FV*(1+rs/t)^-nt
where FV is the future worth of the amount
rs is the stated interest
t is the number of compounding per year
n is the number of years of investment which 4 years in this case
PV of $30,000 compounded annually:
PV=$30,000*(1+10%/1)^-(1*4)=$20,490.40
PV of $40,000 compounded semiannually:
PV=$40,000*(1+11%/2)^-(2*4)=$ 26,063.95
PV of $50,000 compounded quarterly:
PV=$50,000*(1+16%/4)^-(4*4)=$26,695.41
In 2009, because U.S. imports were $2,535 billion while exports were $2,116 billion:
A. imports exceeded exports by a sizeable $419 billion.
B. there was a huge influx of foreign capital into the U.S. economy.
C. government policy caused a lessening of foreign aid.
D. exports exceeded imports by a sizeable $419 billion.
Answer:
A. imports exceeded exports by a sizable $419 billion
Explanation:
Obviously imports had a greater value than exports. The difference in value is ...
$2535 -2116 = $419 . . . billion
This observation matches choice A.
Sarah signed an agreement to rent an apartment from a landlord who also signed the agreement. During the lease negotiations, the landlord agreed to provide Sarah with extra storage space in the basement of the apartment building but this promise was not included in the agreement. The landlord now tells Sarah that he will not provide the extra space. If the landlord admits making the promise, under the parol evidence rule (select one):
Answer:
He is legally expected to provide the space under the overconfidence trap
Explanation:
The landlord was overconfident about his judgment abilities and was quick to make the promise to provide the extra space without thinking of a wider range of possibilities. Thereby exposing himself to a greater risk than he imagined. The parole evidence is an evidence of oral speech. Since he admitted making the promise to Sarah, he is legally expected to provide the space.
Assume you can buy 52 British pounds with 100 Canadian dollars. How much profit can you earn on a triangle arbitrage given the following rates if you start out with 100 U.S. dollars?
Answer:
$374.46
Explanation:
Incomplete question. However, I inferred the rates where; CAD/USD=1.35, EUR/USD=1.8305. Thus, using this formular we calculate the profit to be made
=$100 ×(C$1.35 ÷$1) ×(£100 ÷C$52) ×($1.8305 ÷$1)] - $100 = $374.46
Every organization needs some degree of flexibility and standardization. True False Being overly committed to following rules can harm an organization and keep it from growing. True False Every organization needs either a degree of ________ to adapt to new situations or some degree of ________ to make routine tasks and decisions as efficient and effective as possible. standardization; flexibility culture; vision flexibility; standardization structure; design
Answer:
1. True: Every organization needs some degree of flexibility and standardization.
2. True: Being overly committed to following rules can harm an organization and keep it from growing.
3. flexibility; standardization.
Explanation:
It is really important and necessary that all organization have some degree of flexibility and standardization. Every organization is expected to be flexible, in order to be able to effectively manage potential changes or challenges that arises in business. They should also be standardized, by having proper policies, strategies and structure for the purpose of running the business smoothly and efficiently.
However, if an organization is overly committed to following rules, this can cause harm to it's business operations and thereby hindering its growth and development.
Hence, some degree of flexibility is needed in every organization in order to adapt to new situations or some degree of standardization to make routine tasks and decisions as efficient and effective as possible.
Read the following situation, and then answer the questions.
You have been working in an entry-level position in the Environmental Health and Safety division of a company for the last six months. You spend your time reviewing safety reports, entering them into the database, and compiling statistical analyses of the results for your superior, Ray Blaine. Lately, Mr. Blaine has been asking you when each report will be finished. Following this query, Mr. Blaine often compliments you on the results of your past analyses.
1) What is the most important message your superior is trying to deliver?
A. He is worried about the results of your analysis.
B. He wants to know when the report will be ready.
C. You are ready for a promotion.
2) What can you do to listen more effectively to your superior?
A. Lean forward and make eye contact.
B. Paraphrase his questions in return.
C. Ask questions in return.
Answer:
1)B
2)C
Explanation:
1) Mr. Blaine wants to know when will the results be ready. He is complimenting to let you know that he has good expectations from you.
2) Asking questions in return lets the other person know that you are interested in the conversation.
Answer:
Question 1 answer is B
Question 2 answer is C
Explanation:
1. From the data in the question, we can tell what your superior has in mind.
- The fact that Mr Blaine has been asking when each report will be finished shows that he is concerned ABOUT THE AMOUNT OF TIME it takes you to complete work on a safety report.
- He often compliments you on the results of your past analyses. This means that he is recertifying that your results come out fine and accurate BUT need to start coming out FASTER. He uses the compliments to lift your spirit so you don't feel downcast by the complaints. So you can be sure that as far as the work is concerned, YOU ARE GETTING IT RIGHT but as far as delivery window is concerned, you are delivering SLOWLY.
So the answer is B - he is most concerned about the timeframe you use to go through each report. He wants you to understand that good timing adds to the quality of a result!
2. The three options here are things you can do, to listen more effectively to your superior. The most important though is C.
You need to ask questions in return!
- Ask questions on the clarification of what exactly you are expected to do, in order to produce results that are both accurate and timely.
- Ask Mr. Blaine how he thinks you should go about it.
- Ask questions where you don't understand
- Ask when exactly you are to submit each result
After he replies, put his advice and corrections into practice.
Hardwig Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2. Refer to the data for Hardwig, Inc. Assume now that the company believes that if it adopts a restricted policy, its sales will fall by 15% and EBIT will fall by 10%, but its total assets turnover, debt ratio, interest rate, and tax rate will all remain the same. In this situation, what's the difference between the projected ROEs under the restricted and relaxed policies? a. 2.46% b. 2.98% c. 3.27% d. 2.24% e. 2.70%
Answer:
d. 2.24%
Explanation:
total annual sales = $3,600,000
fixed asset turnover = total sales / fixed assets = 4, that means that total fixed assets = $3,600,000 / 4 = $900,000
debt = 50% = $450,000
equity = 50% = $450,000
EBIT = $150,000
net income = $150,000 x (1 - 40%) = $90,000
restricted policy:
asset turnover = 2.5
sales = $3,600,000 x (1 - 15%) = $3,060,000
EBIT = $135,000
net income = $81,000
assets = $3,060,000 / 2.5 = $1,224,000
equity = $1,224,000 x 50% = $612,000
ROE = $81,000 / $612,000 = 13.24%
relaxed policy:
asset turnover = 2.2
EBIT = $150,000
net income = $90,000
assets = $3,600,000 / 2.2 = $1,636,364
equity = 50% x $1,636,364 = $818,182
ROE = $90,000 / $818,182 = 11%
difference between ROEs = 13.24% - 11% = 2.24%
Handy Home sells windows and doors in the ratio of 7:3 (windows:doors). The selling price of each window is $111 and of each door is $261. The variable cost of a window is $68.00 and of a door is $180.50. Fixed costs are $515,375.
Required:
1. Determine the selling price per composite unit.
2. Determine the variable cost per composite unit.
3. Determine the break-even point in composite units.
4. Determine the number of units of each product that will be sold at the breakeven point.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Handy Home sells windows and doors in the ratio of 7:3 (windows:doors).
Window:
Selling price= $111
Unitary variable cost= $68
Door:
Selling price= $261
Unitary variable cost= $180.5
Fixed costs are $515,375.
1) Selling price per composite unit:
Selling price= 0.7*111 + 0.3*261= $156
2) Composite variable cost:
Variable cost per unit= 0.7*68 + 0.3*180.5= 101.75
3) To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 515,375/ ( 156 - 101.75)
Break-even point in units= 9,500 units
4) Units for each product:
Windows= 0.7*9,500= 6,650
Door= 0.3*9,500= 2,850
Lehi City has designated an internal service fund as the single fund to account for its self-insurance activities. Most of the insured activities such as the police department, fire department, and general government functions are accounted for in the General Fund. What is the maximum amount that can be charged to expenditure in the General Fund related to the self-insurance activities
Answer: c)The actuarially determined amount necessary to cover claims, expenditures, and catastrophic losses.
Explanation:
The Expenditure on the account related to self - insurance activities refers to the amounts that will be deducted from the fund for anything insurance related.
The insurance is meant to cover the claims and unlikely events of catastrophies. Therefore when those things do occur it will be deducted from the service fund to cover those things.
Those along with expenses incurred to maintain the fund will be considered expenses and that is the maximum amounts that can be deducted from the fund.
Which of the following statements about pricing is true? Small changes in price can have big effects on company profit but not on the number of units sold. Small changes in price can have big effects on the number of units sold but not on company profit. Small changes in price can have big effects on the number of units sold and also on company profit. Compared to the other 4P’s, pricing is important because once an item has been priced, changing its price can be quite difficult.
Answer:
Small changes in price can have big effects on the number of units sold and also on company profit
Explanation:
Small change in price will definitely have an effect on the amount of units sold due to a corresponding change in demand that will follow this change, and also will affect the amount of profit that the company generates. This changes can either be positive or negative to the company. Example is the increase in price of coca-cola might trigger customers into switching to pepsi-cola, resulting in a reduced demanded quantity which means less units are produced. The overall effect of these will leave the company with less profit.
Electra Company purchased $50,000 worth of office supplies on January 1. Electra expects to use 60 percent of the supplies in the first year and the remainder in the second year. How much should Electra show in its Supplies Expense account at the end of the first fiscal year (ending December 31st)
Answer:
$30,000
Explanation:
Data provided in the question
Purchase value of the office supplies = $50,000
Expected to use supplies in the first year = 60%
So expected to use supplies in the second year = 40%
Based on the above information, the supplies account balance at the end of the first fiscal year is
= Purchase value of the office supplies × Expected to use supplies in the first year
= $50,000 × 60%
= $30,000
We simply multiplied the purchased value with the expected supplies use in the first year so that the balance of the supplies for the first year could come
Nash's Trading Post, LLC issued a five-year interest-bearing note payable for $222000 on January 1, 2019. Each January the company is required to pay $44000 on the note. How will this note be reported on the December 31, 2020, balance sheet
Answer:
balance sheet
liabilities
note payables (current portion) 44,000
non-current liabilities
long-term note payable 178,000
Explanation:
On December 31,2020 there will be a portion of the note that will be declared as current liability while another non-current as within 12-months there is payment due (to be more precise next day after the balance close)
Thus 222,000 - 44,000 = 178,000 long-term
while the 44,000 are declared short-term
Nick’s Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $592,000, have an fifteen-year useful life, and have a total salvage value of $59,200. The company estimates that annual revenues and expenses associated with the games would be as follows: Revenues $ 300,000 Less operating expenses: Commissions to amusement houses $ 70,000 Insurance 66,000 Depreciation 35,520 Maintenance 90,000 261,520 Net operating income $ 38,480
Required:
1a. Compute the pay back period associated with the new electronic games.
1b. Assume that Nick’s Novelties, Inc., will not purchase new games unless they provide a payback period of five years or less. Would the company purchase the new games?
No
Yes
2a. Compute the simple rate of return promised by the games. (Round your answer to 1 decimal place. i.e. 0.123 should be considered as 12.3%.)
2b. If the company requires a simple rate of return of at least 8%, will the games be purchased?
No
Yes
Answer and Explanation:
1a. The computation of the payback period is shown below:
Payback period = Initial investment ÷ Cash inflow
where,
Initial investment is $592,000
And, the cash flow is
= Depreciation expense + net operating income
= $35,520 + $38,480
= $74,000
So, the payback period is
= $592,000 ÷ $74,000
= 8 years
1b. As we can see that the payback period is of 8 years but the given payback period is 5 years so the company should not purchased the new games
2a. The computation of the simple rate of return is shown below:
Payback period = Net operating income ÷ Initial investment
= $38,480 ÷ $592,000
= 6.5%
2b. As we can see that the simple rate of return is 6.5% but the given simple rate of return is minimum 8% so the company should not purchased the new games
1a. The computation of the payback period is given below:
Payback period = Initial investment ÷ Cash inflow
Here,
Initial investment is $592,000
And, the cash flow is
= Depreciation expense + net operating income
= $35,520 + $38,480
= $74,000
Thus , the payback period is
= $592,000 ÷ $74,000
= 8 years
1b. Since the payback period is of 8 years but the given payback period is 5 years due to this the company should not purchased the new games.
2a. The calculation of the simple rate of return is given below:
Payback period = Net operating income ÷ Initial investment
= $38,480 ÷ $592,000
= 6.5%
2b. Since the simple rate of return is 6.5% but the given simple rate of return is minimum 8% due to this the company should not purchased the new games.
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Consider the following data for the United States: Year Real GDP ($ billion) 20172017 18 comma 108.118,108.1 20182018 18 comma 638.218,638.2 *Real-time data provided by Federal Reserve Economic Data (FRED), Federal Reserve Bank of Saint Louis. The percentage change in real GDP from 20172017 to 20182018equals= 2.932.93%. (Enter your response rounded to two decimal places and include a minus sign if necessary.) This percentage change in real GDP is also known as
Answer:
The percentage change in real GDP is 2.93%
Real economic growth rate
Explanation:
The percentage in real GDP between year 2017 and 2018 can be computed using the below formula:
% change in real GDP=2018 real GDP-2017 real GDP/2017 real GDP
2017 real GDP is 18,108.1
2018 real GDP is 18,638.2
% change in real GDP=(18,638.2- 18,108.1)/ 18,108.1=2.93%
This percentage change in real GDP is also known as real economic growth rate.Economic growth rate is the rate of improvement in the economy with respect to additional value-adding goods and services produced by an economy with viz-a-viz the prior year
The Holt fund has $500 million in assets, 80 million in debt and 15 million shares at the start of the year. At the end of the year, the fund has $600 million in assets, 40 million in debt and 16 million shares. During the year, investors received $0.80 in distributions per share. The total expense ratio is 0.4%, which is deducted at the end of the year. What is the rate of the return on the fund?
A. 38.54%
B. 27.32%
C. 35,14%
D. 25.81%
E. 34.79%
Answer:
B. 27.32%
Explanation:
First we need to calculate the Net asset value per share at the start and end of the year
NAV at the start of the year = ($500 million - $80 million) / 15 million shares = $28 per share
NAV at the end of the year = ($600 million - ( ($600 million x 0.004) + $40 million ) / 16 million shares = $34.85 per share
Return = (NAV at the end of the year - NAV at the start of the year + Distribution received) / NAV at the start of the year
Return = ( 34.85 - 28 + 0.8 ) / 28 = 0.2732 = 27.32%
Cute Camel Woodcraft Company just reported earnings after tax (also called net income) of $8,000,000, and a current stock price of $25.75 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 1,500,000 new shares of stock (raising its shares outstanding from 5,500,000 to 7,000,000) If Cute Camel's forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does the company's management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places).
A. $25.22 per share
B. $25.75 per share
C. $18.92 per share
D. $31.53 per share
One year later, Cute Camel's shares are trading at $49.60 per share, and the company reports the value of its total common equity as $35,308,000. Given this information, Cute Camel's market-to-book (M/B) ratio is ___________
Can a company's shares exhibit a negative P/E ratio?
A. No
B. Yes
Which of the following statements is true about market value ratios?
A. Companies with high research and development (R&D) expenses tend to have low P/E ratios
B. Companies with high research and development (R&D) expenses tend to have high P/E ratios.
The stock price one year from now will be A. $25.22 per share .
The market to book value after one year is 9.833.
A company's shares can exhibit a negative P/E ratio. This is true.
The true statement is that companies with high research and development (R&D) expenses tend to have high P/E ratios.
How to calculate the valueCurrent year price earning ratio = 25.75*5500000/8000000
17.7
current price earning = 17.70
next year earning = 8000000*(1+25%)
10000000
If PE ratio remains constant next year then share price next year is
10000000*17.70/7000000 = 25.22 per share
Market to book value after one year = (7000000*49.60)/35308000 = 9.833.
It should be noted that because of negative earing of the company negative PE ratio is possible. Hence PE ratio negative is possible
Lastly, company who spend high research and development expenses to have high P/E ratios
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The two independent cases are listed below: Case A Case B Year 2 Year 1 Year 2 Year 1 Sales Revenue $11,000 $9,000 $21,000 $18,000 Cost of Goods Sold 6,000 5,500 12,000 11,000 Gross Profit 5,000 3,500 9,000 7,000 Depreciation Expense 1,000 1,000 1,500 1,500 Salaries and Wages Expense 2,500 2,000 5,000 5,000 Net Income 1,500 500 2,500 500 Accounts Receivable 300 400 750 600 Inventory 750 500 730 800 Accounts Payable 800 700 800 850 Salaries and Wages Payable 1,000 1,200 200 250 Show the operating activities section of the statement of cash flows for year 2 using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
Net cash from operating activities are $2,250 for Case A and $3,820 for Case B.
Explanation:
The indirect method of presenting the cash flow statement is a method that starts with net income or loss, and then with additions to or subtractions from of revenue and expense items that are non cash to obtain cash flow from operating activities.
For this question, this can be presented as follows:
Details Case A ($) Case B ($)
Net Income 1,500 2,500
Adjustments:
Depreciation Expense 1,000 1,500
Changes in Operating assets & liab.:
(Increase) Decrease in Acct receivables 100 –150
Decrease (Increase) in Inventory –250 70
Increase (Decrease) in Accounts payable 100 –50
Increase (Decrease) in Sal. & Wag. Paybl. –200 –50
Net cash from operating activities 2,250 3,820
The Net cash-flow from the operating activities for Case A is $2,250.
The Net cash-flow from the operating activities for Case B is $3,820.
Here, we are preparing the "Year 2" operating activities section of the cash flows statement using the indirect method
Statememt of Cash flow (Operating activities)
Case A Case B
Particulars Amount Amount
Net Income $1,500 $2,500
Adjustments for Case A & B
Depreciation Expense $1,000 $1,500
Changes in operating assets
& liabilities of Case A & B
(Increase) / Decrease in Account receivables $100 -$150
Decrease / (Increase) in Inventory -$250 $70
Increase / (Decrease) in Accounts payable $100 -$50
Increase / (Decrease) in Sal. & Wage Payable $200 -$50
Net cash from operating activities $2,250 $3,820
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You are attempting to value a call option with an exercise price of $100 and one year to expiration. The underlying stock pays no dividends, its current price is $100, and you believe it has a 50% chance of increasing to $120 and a 50% chance of decreasing to $80. The risk-free rate of interest is 10%.Based upon your assumptions, calculate your estimate of the the call option's value using the two-state stock price model.
Answer:
$13.64
Explanation:
Given:
Exercise price,X = $100
Current price = $100
Value when price is up, uS = $120
Value when price is down, dS= $80
Risk free interest rate = 10%
First calculate hedge ratio, H:
[tex] H = \frac{C_u - C_d}{uS - dS} [/tex]
Where,
Cu = uS - X
= 120 - 100
= $20
[tex] H = \frac{20 - 0}{120 - 80} = \ftac{1}{2}[/tex]
A risk free portfolio involves one share and two call options.
Find cost of portfolio:
Cost of portfolio = Cost of stock - Cost of the two cells.
= $100 - 2C
This portfolio is risk free. The table below shows that
_______________
Portforlio 1:
Buy 1 share $80; Write 2 calls: $0; Total: ($80 + 0) $80
____________________
Portforlio 2:
Buy 1 share: $120; Write 2 calls: -$40; Total: ($120 - $40) $80
Check for oresent value of the portfolio:
Present value [tex] = \frac{80}{1 + 0.10} = 72.73 [/tex]
Value = exercise price - value of option
$72.73 = $100 - 2C
Find call option, C
[tex] C = \frac{100 - 72.73}{2} = 13.64 [/tex]
Call option's value = $13.64
Agatha's Inc. is about to introduce a new product in the market, but is not sure as to how it should price the product. The company is facing intense competition from five other companies. In such a situation, what should be Agatha’s Inc. pricing objective
Answer and Explanation:
There are two main pricing objective and strategy i.e competitive pricing and penetrative pricing which are explained below:
1. Competitive pricing :
In this Agatha's Inc, all five rivals should evaluate pricing models for a related kind of product. If your product has a little more value added than your collegaues, then you can establish a target price target that is higher than the competitors.
Now to do that, it's necessary to send the customer a message that they're purchasing value for a price.
2. Penetrative pricing :
When the target price is set on the basis of the competitive pricing model , it is important to obtain the product favourably from the consumer and to do so you can start selling a little lower than the target price and sell the goods as a discount or promotional deal.
If the initial sales are strong and buyers like the product then return the product to target pricing and do intensive marketing to sell the message that the product 's cost is a bargain for the value provided by the company.
The mixture of the above two pricing strategies would ensure a better positioning of Agatha's Inc product with better profitability.
Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 15,000 cases of sauce each year but is currently only manufacturing and selling 14,000. The following costs relate to annual operations at 14,000 cases: Total Cost Variable manufacturing cost $294,000 Fixed manufacturing cost $56,000 Variable selling and administrative cost $42,000 Fixed selling and administrative cost $38,000 Gwinnett normally sells its sauce for $45 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 1,000 cases of sauce but only if they can get the sauce for $23 per case. This special order would not affect regular sales or total fixed costs or variable costs per unit. If this special order is accepted, Gwinnett's profits for the year will:
Answer:
Gwinnett's profits for the year will decrease by $1,000
Explanation:
total costs for normal 14,000 cases:
Variable manufacturing cost $294,000 / 14,000 = $21 per caseFixed manufacturing cost $56,000 Variable selling and administrative cost $42,000 Fixed selling and administrative cost $38,000total = $430,000the incremental revenue of selling 1,000 cases to the school district = $23 x 1,000 = $23,000
the incremental costs for producing and selling 1,000 more cases:
variable manufacturing costs = $21 x 1,000 = $21,000variable S&A costs = $3 x 1,000 = $3,000total incremental costs = $24,000incremental revenue - total incremental costs = $23,000 - $24,000 = -$1,000
Answer:
Effect on income= $1,000 decrease
Explanation:
Giving the following information:
Unitary variable costs:
Variable manufacturing cost= $294,000/14,000= $21
Variable selling and administrative= $42,000/14,000= $3
Special offer= 1,000 units for $23
Because it is a special offer and there is unused capacity, we will not take into account the fixed costs:
Effect on income= 1,000*(23 - 24)= $1,000 decrease
James is dreading going to get his UF parking decal because he knows that the lines are usually three hours long. However, when he gets in line, he receives his parking decal in only thirty minutes. Which of the following is James probably experiencing?
A. Dissatisfaction
B. Satisfaction
C. Alternative
D. Evaluation
E. Bounded
F. Rationality
G. Delight
Answer:
Delight
Explanation:
James is dreading going to get his UF parking decal because he knows that the lines are usually three hours long. However, when he gets in line, he receives his parking decal in only thirty minutes. Which of the following is James probably experiencing?
Definitely, he will be experiencing a delight because he was actually expecting to meet a queue which will last for nothing less that 3 hours, but fortunately for him, he got what he went for within the space of time of 30minutes. So, he has been saved of extra 2hours 30minutes of stress due to the long queue. Hence, he will definitely be delighted.
Frances loves shopping for clothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $700 in her local bank, which pays her 9% annual interest. Frances decides that she will continue to do this for the next 5 years. Frances’s savings are an example of an annuity. How much will she save by the end of 5 years, rounded to the nearest whole dollar?
Answer:
Future Value= $4,189.30
Explanation:
Giving the following information:
Investment= $700 annual
Interest rate= 9%
Frances decides that she will continue to do this for the next 5 years.
To calculate the final value, we need to use the following formula:
FV= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {700*[(1.09^5)-1]} / 0.09
FV= $4,189.30
A jewelry firm buys semiprecious stones to make bracelets and rings. The supplier quotes a price of $8.20 per stone for quantities of 600 stones or more, $8.60 per stone for orders of 400 to 599 stones, and $9.10 per stone for lesser quantities. The jewelry firm operates 101 days per year. Usage rate is 19 stones per day, and ordering costs are $39. a. If carrying costs are $2 per year for each stone, find the order quantity that will minimize total annual cost. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Order quantity stones b. If annual carrying costs are 21 percent of unit cost, what is the optimal order size
Answer:
a. 274
b. 295
Explanation:
a. Optimum Order
Optimum Order = √( (2×Total Annual Demand×Ordering cost per order) / Holding Cost per unit)
= √ ((2×101×19×$39) / $2)
= 273.57
= 274
b. Optimum Order
Optimum Order = √( (2×Total Annual Demand×Ordering cost per order) / Holding Cost per unit)
= √ ((2×101×19×$39) / $8.20 ×0.21)
= 294.83
= 295
Your boss stops by to see how the research is progressing. She's concerned about your research plan. "I don't think we are ready to run causal research on the effects of advertising. I think we should re-evaluate the descriptive research options." Which option should you choose now?Select an option from the choices below and click Submit.1- Research the attitudes that men under 35 have towards eSports.2- Research the attitudes that U.S. women and consumers over 35 have towards the eSports industry.
Answer: Research the attitudes that U.S. women and consumers over 35 have towards the eSports industry.
Explanation:
From the question, the boss is concerned about the research plan and says that he does not believe that we are ready to run causal research on the effects of advertising and further said we should re-evaluate the descriptive research options.
Based on the scenario above, I'll choose to research the attitudes that U.S. women and consumers over 35 have towards the eSports industry. By choosing this option, I'll have a large sample size to carry out the descriptive research.
It should also be noted that the descriptive method consist of qualitative natural survey and also the cross sectional research. By researching the attitude of women and consumers, this will give us the opportunity to utilize the cross sectional research. Therefore, the second option is the correct answer.
A mail-order house uses 18,000 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. The following price schedule applies. Determine: a. The optimal order quantity. b. The number of orders per year.
Answer:
Hie, the price schedule is missing from your question however the important principles are explained below.
a. The optimal order quantity
Optimum order quantity is the order level that results in minimum ordering costs and holding costs.
Optimum order quantity = √ (2 × Annual Demand × Cost per order) / holding cost per unit
b. The number of orders per year.
orders per year = Annual Demand / optimal order quantity
This calculates the number of orders to be placed during the year at the optimum order quantity.
Like a good economist, you calculated the opportunity cost of getting your college degree. Suppose that at your university, you will pay $10,000 each year for tuition, $2,500 each year for textbooks, and $10,000 per year for room and board. Before you left for college, your boss at your high-school job offered you a job paying $20,000 per year. Assume that if you decided not to go to college, your parents would not let you live at home. What is your opportunity cost for four years of college?
Answer:
The opportunity cost is $130,000 for the four year duration.
Explanation:
Here, it is clear that I will not go to the job, so going to university is the only option left. Now, the loss of the job income is also an opportunity cost with an amount $20,000 which will aggregated with the University specific costs.
University Specific cost for 4 Years = 4 * (Tuition Cost + Textbooks + Job Opportunity loss)
The room and board cost is common between college and the university so it must not be considered for the decision making.
By putting values, we have:
University Specific cost for 4 Years = 4 * ($10,000 + $2,500 + $20,000)
University Specific cost for 4 Years = $130,000 for the four years
The opportunity cost is $130,000 for the four year duration.
For better understanding of relevant costing (Opportunity cost analysis), consider the following question:
https://brainly.com/question/14423321