To achieve the social optimum, the government could set a tax equal to $6 per unit sold.
Explanation:
The social optimum seems to be the distribution chosen by a good social planner who is limited by resources allocation only. In particular, the social optimum can not be achieved if there are limitations on the social planner's policy tools.
Proponents of significant increases or cuts in the United States marginal tax rates have long provided statistical evidence of the existence of their proposals.
The elasticity of earned income figures was actually a relatively new description of behavioral reactions to marginal taxes that have historically been studied.
Zira Co. reports the following production budget for the next four months. April May June July Production (units) 455 570 560 540 Each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginning raw materials inventory for April was 663 pounds. Assume direct materials cost $4 per pound. Prepare a direct materials budget for April, May, and June.
To prepare a direct materials budget, you calculate the production needs, ending inventory, and required purchases for each month, then compute the cost of the purchases.
Explanation:To prepare a direct materials budget, we first need to determine the production needs for each month. Here is how it's done:
April:Production needs: 455 units x 5 pounds/unit = 2,275 poundsEnding inventory requirement: 570 (next month's units) x 5 pounds/unit x 30% = 855 poundsRequirement from purchases (production needs + ending inventory - beginning inventory): 2,275 + 855 - 663 = 2,467 poundsCost of purchases: 2,467 pounds x $4/pound = $9,868May:Production needs: 570 units x 5 pounds/unit = 2,850 poundsEnding inventory requirement: 560 (next month's units) x 5 pounds/unit x 30% = 840 poundsRequirement from purchases (production needs + ending inventory - beginning inventory for May which is April's ending inventory): 2,850 + 840 - 855 = 2,835 poundsCost of purchases: 2,835 pounds x $4/pound = $11,340June:Production needs: 560 units x 5 pounds/unit = 2,800 poundsEnding inventory requirement: 540 (next month's units) x 5 pounds/unit x 30% = 810 poundsRequirement from purchases (production needs + ending inventory - beginning inventory for June which is May's ending inventory): 2,800 + 810 - 840 = 2,770 poundsCost of purchases: 2,770 pounds x $4/pound = $11,080Learn more about Direct Materials Budget here:https://brainly.com/question/33948733
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The direct materials budget for Zira Co. for April, May, and June requires determining the raw materials needed, desired ending inventory, subtracting beginning inventory, and then calculating the total cost of raw materials.
To prepare the direct materials budget for Zira Co. for April, May, and June, follow these steps:
Step-by-Step Calculation=
1. Calculate the raw materials required for each month:
April: 455 units * 5 pounds = 2275 poundsMay: 570 units * 5 pounds = 2850 poundsJune: 560 units * 5 pounds = 2800 pounds2. Determine the desired ending inventory for each month:
April: 30% of May's raw materials requirement = 30% of 2850 pounds = 855 poundsMay: 30% of June's raw materials requirement = 30% of 2800 pounds = 840 poundsJune: 30% of July's raw materials requirement = 30% of (540 units * 5 pounds) = 30% of 2700 pounds = 810 pounds3. Determine the total raw materials needed for each month:
April: Required raw materials + Desired ending inventory = 2275 pounds + 855 pounds = 3130 poundsMay: Required raw materials + Desired ending inventory = 2850 pounds + 840 pounds = 3690 poundsJune: Required raw materials + Desired ending inventory = 2800 pounds + 810 pounds = 3610 pounds4. Subtract the beginning inventory to find the raw materials to be purchased:
April: Total needed - Beginning inventory = 3130 pounds - 663 pounds = 2467 poundsMay: Total needed - April's ending inventory = 3690 pounds - 855 pounds = 2835 poundsJune: Total needed - May's ending inventory = 3610 pounds - 840 pounds = 2770 pounds5. Calculate the cost of raw materials to be purchased:
April: 2467 pounds * $4 = $9868May: 2835 pounds * $4 = $11340June: 2770 pounds * $4 = $11080A ten year loan of 10,000 at 8% annual effective can be repaid using any of the 4 following methods:
(I) Amortization method, with annual payments at the end of each year.
(II) Repay the principal at the end of ten years while paying the 8% annual effective interest on the loan at the end of each year. In addition, make equal annual deposits at the end of each year into a sinking fund earning 6% annual effective so that the sinking fund accumulates to 10,000 at the end of the 10th year.
(III) Same as (II), except the sinking fund earns 8% annual effective.
(IV) Same as (II), except the sinking fund earns 12% annual effective.
Rank the annual payment amounts of each method.
Answer:
(I) $ 1,490.30
(II) $ 1,558.68
(III) $ 1,490.30
(IV) $ 1,369.84
Explanation:
(I) French system:
[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]
PV 10,000
time 10
rate 0.08
[tex]10000 \div \frac{1-(1+0.08)^{-10} }{0.08} = C\\[/tex]
C $ 1,490.295
American system with payment of interest on the principal
and then, to a fund to generatethe principal at maturity
(II) 800 dollar of interest plus cuota to get 10,000 in the future
[tex]FV \div \frac{(1+r)^{time} -1}{rate} = C\\[/tex]
FV 10,000
time 10
rate 0.06
[tex]10000 \div \frac{(1+0.06)^{10} -1}{0.06} = C\\[/tex]
C $ 758.680
Total: $1,558.68
[tex]FV \div \frac{(1+r)^{time} -1}{rate} = C\\[/tex]
FV 10,000
time 10
rate 0.08
[tex]10000 \div \frac{(1+0.08)^{10} -1}{0.08} = C\\[/tex]
C $ 690.295
Total $ 1,490.30
[tex]FV \div \frac{(1+r)^{time} -1}{rate} = C\\[/tex]
FV 10,000
time 10
rate 0.12
[tex]10000 \div \frac{(1+0.12)^{10} -1}{0.12} = C\\[/tex]
C $ 569.842
Total $1,369.84
On September 1, 2012, Daylight Donuts signed a $200,000, 8%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2013. Daylight Donuts records the appropriate adjusting entry for the note on December 31, 2012. In recording the payment of the note plus accrued interest at maturity on March 1, 2013, Daylight Donuts would
a. Debit interest expense, $5,333.
b. Debit interest payable, $2,667.
c. Debit interest expense, $2,667.
d. Debit interest expense, $8,000.
Answer:
c. Debit interest expense, $2,667.
Explanation:
The adjusted journal entry is shown below:
Interest expense A/c Dr $2,667
To Interest payable A/c $2,667
(Being accrued interest adjusted)
The interest expense is computed below:
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $200,000 × 8% × (2 months ÷ 12 months)
= $2,667
The 2 months is calculated from December 31, 2012 to March 1, 2013
Which Texas regulatory board, established in 1891, is considered one of the most powerful state regulatory bodies in the United States because of its powers over the petroleum industry?
Answer:
The Texas Railway Commission
Explanation:
The Texas Railway Commission is an agency of the state of Texas. Headquartered in Austin, William B. Travis State Office Building. In Texas, the commission regulates the oil industry, the liquefied petroleum gas industry, coal mining and uranium mining. It had been supervising the railways until October 1, 2005, which was undertaken by the Texas Department of Transportation. It is the oldest regulator in the United States, established in 1891 according to the Texas State Legislative Council. From 1930, he established the international oil price until he was displaced by the Organization of Petroleum Exporting Countries (OPEC) in 1973. In 1984, the federal government gained competence in transportation and regulation of railways, trucks and buses, but continued to be called the Texas Railway Commission. With an annual budget of $ 79 million, its management focuses entirely on oil, gas, mining, LPG, oil and gas pipelines.
An orange grower has discovered a process for producing oranges that requires two inputs. The production function is Q = min{2x1, x2}, where x1 and x2 are the amounts of inputs 1 and 2 that he uses. The prices of these two inputs are w1 = $5 and w2 = $2, respectively. The minimum cost of producing 140 units is therefore
a. $980.
b. $630.
c. $1,400.
d. $280.
e. $700.
Answer:
Option (B) is correct.
Explanation:
The prices of two inputs 1 and 2 are as follows:
w1 = $5
w2 = $2
Q = min{2x1, x2}
Cost is minimized when 2x1 = x2
140 = min{2x1, x2}
2x1 = 140
x1 = 70
x2 = 2x1 = 140
Total cost, C = w1.x1 + w2.x2
= 5x1 + 2x2
C($) = (5 × 70) + (2 × 140)
= 350 + 280
= $630
Is there a pricing policy that would have filled the ballpark for the Phillies game?
A. The Philadelphia Phillies could raise ticket prices to imply a shortage of baseball tickets in the market, thus increasing attendance.
B. Since the quantity supplied exceeds the quantity demanded, the Philadelphia Phillies could lower ticket prices to increase attendance.
C. Since consumers of baseball tickets must prefer the San Francisco Giants to the Philadelphia Phillies, no pricing policy is likely to be successful.
D. The Philadelphia Phillies could maintain their current pricing policy and instead renovate the stadium to increase game attendance.
Answer:
The correct answer is letter "B": Since the quantity supplied exceeds the quantity demanded, the Philadelphia Phillies could lower ticket prices to increase attendance.
Explanation:
According to the context, all the attention was on the Los Angeles Dodgers and the San Francisco Giants game since both teams had chances to win the championship. It will imply the rest of the day matches were not going to have a lot of attendance. The ballpark for the Phillies game could have been filled in the case ticket prices were lowered for basic demand theory (if prices decrease, quantity demanded will increase).
The best pricing policy for the Philadelphia Phillies, given the circumstances, would be to lower ticket prices, due to the greater supply than demand. Raising prices or renovating the stadium do not relate directly to the pricing policy and assuming consumer preference is also inaccurate.
Explanation:The subject of this question lies in the field of business, specifically it pertains to the pricing decisions of an organization, in this case, the Philadelphia Phillies, a baseball team. The most effective pricing policy that could increase attendance at Phillies games would most likely be option B. Given the situation where the quantity supplied exceeds the quantity demanded, a possible strategy would be to lower ticket prices.
This could make the games more accessible to a larger audience and therefore, increase attendance. Option A would not necessarily have the desired effect because higher prices could actually deter potential attendants rather than attract them. Option C assumes consumer preference, which is not necessarily accurate or related to the pricing policy. Option D could potentially lead to higher attendance, but it’s not a direct pricing policy, which is asked in the question.
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Whether exchange is between individuals, firms, or countries, voluntary trade occurs because:
a.only one party is made better off.
b.both parties are made better off.
c.financial agents devote resources to arranging such trades.
d.these trades create employment for the economy.
e.of mandates from the government.
Answer:
b.both parties are made better off.
Explanation:
People voluntary to trade when they will better off after the trade. Since individual or nation has different proficiency and endowment resources, the ability to produce some product will be different for each country.
For example, German people are skillful of making beer. They have efficient production. Whereas France have expertise in making perfume. It is reasonable for German people to buy perfume from France since it is cheaper and has better quality than making it themselves. On the other hand, if french want to drink beer, it is cheaper to buy from Germany. Thus, both Germany and France will be better of after the trade.
Semi-Salt Industries began its operation in 1975 and remains the only firm in the world that produces and sells commercial-grade polyglutamate. While virtually anyone with a degree in college chemistry could replicate the firm’s formula, due to the relatively high cost, Semi-Salt has decided not to apply for a patent. Despite the absence of patent protection, Semi-Salt has averaged accounting profits of 5.5 percent on investment since it began producing polyglutamate—a rate comparable to the average rate of interest that large banks paid on deposits over this period.
1. Do you think Semi-Salt is earning monopoly profits? Why?
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Prepare journal entries to record the following transactions entered into by the Ayayai Corp.: (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
2021
June 1 Received a $12,000, 8%, 1-year note from Dan Gore as full payment on his account.
Nov. 1 Sold merchandise on account to Barlow, Inc., for $16,000, terms 3/10, n/30.
Nov. 5 Barlow, Inc., returned merchandise worth $1,300.
Nov. 9 Received payment in full from Barlow, Inc.
Dec. 31 Accrued interest on Gore's note.
2022
June 1 Dan Gore honored his promissory note by sending the face amount plus interest.
Answer:
note receivables 12,000 debit
accounts receivables 12,000 credit
--to record reception of note from Dan Gore to settle his account--
Accounts receivables 16000 debit
Sales revenues 16.000 credit
--to record sale in account--
sales returns&allowance 1,300 debit
Accounts receivables 1,300 credit
--to record returned goods--
cash 14,259 debit
sales discount 441 debit
Accounts receivable 14,700 credit
--to record payment from Barlow--
cash 12,960 debit
interest revenue 960 credit
note receivable 12,000 credit
--to record collection of promissory note from Dan Gore--
Explanation:
Barlow invoice transactions:
16,000 invoice nominal
- 1,300 returned goods
14,700 amount subject to discount of 3%
- 441 discount as collected within first ten days
14,259 cash proceeds
Dan Gore promissory note:
principal x rate x time
12,000 x 8% per year x 1 year = 960 interest revenue
total 12,000 + 960 = 12,960
This answer provides journal entries to record various transactions entered into by Ayayai Corp, including receiving a note from Dan Gore, selling merchandise on account, receiving payment in full, and honoring the promissory note.
Explanation:June 1: Ayayai Corp receives a $12,000, 8%, 1-year note from Dan Gore as full payment on his account. The journal entry would be:
Notes Receivable $12,000
Accounts Receivable $12,000
Nov. 1: Ayayai Corp sells merchandise on account to Barlow, Inc., for $16,000, terms 3/10, n/30. The journal entry would be:
Accounts Receivable $16,000
Sales Revenue $16,000
Nov. 5: Barlow, Inc., returns merchandise worth $1,300. The journal entry would be:
Sales Returns and Allowances $1,300
Accounts Receivable $1,300
Nov. 9: Ayayai Corp receives payment in full from Barlow, Inc. The journal entry would be:
Cash $15,540 ($16,000 - $460 discount)
Sales Discount $460
Accounts Receivable $16,000
Dec. 31: Ayayai Corp accrues interest on Gore's note. Since it is a 1-year note, the journal entry would be:
Interest Receivable $800 ($12,000 x 8% x (7/12))
Interest Revenue $800
June 1, 2022: Dan Gore honors his promissory note by sending the face amount plus interest. The journal entry would be:
Notes Receivable $13,920 ($12,000 + $1,920
Interest Receivable $1,920
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Which of the following is a win-win strategy? Group of answer choices
a. Avoid arguments that might lead to anger and hurt feelings.
b. Know what you are willing to give up if the other person agrees to give up something.
c. Vote and abide by majority decision.
d. None of these answers is a win-win strategy.
Answer:
The correct answer is letter "B": Know what you are willing to give up if the other person agrees to give up something.
Explanation:
A win-win strategy implies that two parties are involved in a problematic situation and the outcome is beneficial for both of them. So, not only one of them "wins" but the two of them. In most cases, the two parties come to a midpoint giving up their individual interests.
AS/AD model - If there is a decrease in Aggregate Income and Spending in this economy, then the equilibrium could shift from ________________ and that would be a _____________..
Answer: The equilibrium will shift from right to left, and that would be a recessionary gap
Explanation:
Aggregate supply is the quantity of goods and services producers make available for sale and is equal to the money income received by the owner's of the factors of production. Aggregate demand is the total demand for final goods and services in the economy at a given period of time and at a given price level. It is the sum of money consumers planned to spent on the purchase of output in an economy at a given period of time.The equilibrium level of income is the income level at which aggregate supply equals aggregate demand. The Aggregate income on the other hand, is the total amount of income received by all factors of production in an economy at a given period.
If there is a decrease in aggregate income and spending in an economy, the equilibrium level of income shift from right to left and that would be a recessionary gap. The recessionary gap occurs when when the aggregate demand consisting of consumption, investment and government expenditure is not enough to create condition of full employment. It is the difference of the amount by which aggregate expenditure falls short of the level needed to generate equilibrium national income at full employment without inflation.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits. Refer to Scenario 29-1. Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply of Namdia change?
a. 60 million dias
b. 50 million dias
c. 40 million dias
d. None of the above is correct.
Answer:
Option (C) is correct.
Explanation:
Demand deposits = 1000 million dias
Excess reserves = 25 million dias
Percent of demand deposits held as excess reserves = 25%
Therefore,
when 5 million dias are loaned by Central bank, keeping the excess reserves and demand deposits constant,
Banks can create credit = (1 ÷ 25)%
= 4 times or 0.04
Money supply of Namdia change:
= Demand deposits × 0.04
= 1,000 × 0.04
= 40 million dias
On January 1, 2017, Garzon purchased 6% bonds issued by PBS Utilities at a cost of $40,000, which is their par value. The bonds pay interest semiannually on July 1 and January 1. For 2017, prepare entries to record Garzon's July 1 receipt of interest and its December 31 year-end interest accrual. (Do not round your intermediate calculations.)
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Underline all of the following costs that are included in the cost of land.
a) Removal of unwanted buildings
b) Lighting
c) Fencing and paving
d) Brokerage commission
e) Survey fees and legal fees
f) Purchase price
g) Security system
Answer:
a) Removal of unwanted buildings
d) Brokerage commission
e) Survey fees and legal fees
f) Purchase price
Last year, Stephen Company had 20,000 units in its ending inventory.
During the year, Stephen's variable production costs were $12 per
unit. The fixed manufacturing overhead cost was $8 per unit in the
beginning inventory. The company's net income for the year was $9,600
higher under variable costing than it was under absorption costing.
Given these facts, the number of units of product in the beginning
inventory last year must have been:
a. 21,200.
b. 19,200.
c. 18,800.
d. 19,520
Answer:
D) 19,520
Explanation:
The company uses a last-in-first-out (LIFO) inventory flow assumption. Given these facts, the number of units of product in the beginning inventory last year must have been:D) 19,520
A one-year call option contract on Cheesy Poofs Co. stock sells for $1,170. In one year, the stock will be worth $49 or $70 per share. The exercise price on the call option is $62. What is the current value of the stock if the risk-free rate is 3 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
The current value of the stock if the risk-free rate is 3 percent $78.29
Explanation:
stock value
= [(max.V - min.pr)/(max.V - exer.pr)*call price] + min.pr/(1+RFr)
= [(max.V - min.pr)/(max.V - exer.pr)*stock price/number of contracts] + min.pr/(1+RFr)
= [(70 - 49)/(70 - 62)*1170/100] + 49/(1 + 3%)
= $78.29
Therefore, The current value of the stock if the risk-free rate is 3 percent $78.29
Final answer:
The current value of the stock is $61.84. To calculate it, find the expected future value of the call option using risk-neutral probabilities and discount it at the risk-free rate.
Explanation:
To determine the current value of Cheesy Poofs Co. stock, we need to use the information given for the call option and apply the concept of risk-neutral probability. The call option will have value only if the stock price exceeds the exercise price of $62. Therefore, the payoff for the call option will be $8 ($70 - $62) if the stock price is $70, and $0 if the stock price is $49 after one year.
The formula to find the current value of the option (C0) is given by:
C0 = [p * Price(up) + (1 - p) * Price(down)] / (1 + r)
where:
Price(up) = $8 (payoff when stock price is $70)
Price(down) = $0 (payoff when stock price is $49)
p = risk-neutral probability
r = risk-free rate (0.03 in this case)
The value of the call option is given as $1,170. Therefore, we need to solve for the risk-neutral probability (p) using this formula and the given option price.
Once we have p, we can calculate the current stock value (S0) using the following formula:
S0 = [p * Stock Price(up) + (1 - p) * Stock Price(down)] / (1 + r)
By substituting the known values and solving for S0, we obtain the current stock value. The exact calculations are intricate and require a financial calculator or software for precise results. With the information provided in the question alone, the exact numerical value of the current stock cannot be provided without the risk-neutral probability (p).
A company is considering the purchase of a new machine for $66,000. Management predicts that the machine can produce sales of $22,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $10,400 per year including depreciation of $5,800 per year. The company's tax rate is 40%. What is the payback period for the new machine?a. 3.00 years.b. 6.73 years.c. 5.17 years.d. 11.38 years.e. 17.19 years.
Answer:
After Tax Cashflow: $
Annual sales 22,000
Less: Annual expenses 10,400
Profit before tax 11,600
Less: Tax @ 40% 4,640
Profit after tax 6,960
Add: Depreciation 5,800
After-tax net cashflow 12,760
Payback period = Initial outlay
After-tax net cashflow
= $66,000
$12,760
= 5.17 years
Explanation:
In this question, there is need to calculate after-tax net cashflow, which is sales minus expenses - tax plus depreciation. Tax is calculated at 40% of profit before tax. Payback period is the ratio of initial outlay to after-tax net cashflow.
The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $ 2,058,300 with depreciation to date of $ 914,800 as of December 31, 2014. On December 31, 2014, management projected its future net cash flows from this equipment to be $ 686,100 and its fair value to be $ 526,010 .The company intends to use this equipment in the future.Prepare the journal entry (if any) to record the impairment at December 31, 2014.At December 31, 2015, the equipment
Answer:
Debit Fixed Asset account $ 457,400
Credit Impairment account (p/l) $ 457,400
Being entries to recognize impairment of asset.
Explanation:
According to IAS 36 impairment of assets, an asset is impaired when the carry amount is lower that the recoverable amount. The recoverable amount is the higher of the value in use or the fair value less cost to sell. The value in use is the present value of the future cash inflows expected from the use of the asset.
Cost of asset = $2,058,300
Depreciation to date = $ 914,800
Carrying amount = $2,058,300 - $ 914,800
= $ 1,143,500
Fair value = $526,010
Expected future net cash flows from the equipment = $686,100
The recoverable amount equals expected future net cash flows from the equipment since this is higher than fair value. This is $686,100.
Since this is lower than the carrying amount, the asset is impaired said to be impaired and will be written down to it's recoverable amount.
Hence
Amount to be written down = $ 1,143,500 - $ 686,100
= $ 457,400
To make the adjustment,
Debit Fixed Asset account $ 457,400
Credit Impairment account (p/l) $ 457,400
Being entries to recognize impairment of asset.
Calculate the WACC for TTT. Assume TTT is in the 35% tax bracket. TTT has $500 million face value of debt outstanding. The debt has a price of 101:08, a coupon of 6 ½ % (coupons are paid semi-annually), and a maturity of 10 years. TTT has 20 million shares of stock outstanding. The shares are currently priced at $7.67. The company pays no dividend, but estimates of the company’s beta are 2.1. The current risk-free rate is 3.2%, and the rate of return on the market portfolio is 11.4%.
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Explanation:
Calculate the WACC for TTT. Assume TTT is in the 35% tax bracket. TTT has $500 million face value of debt outstanding. The debt has a price of 101:08, a coupon of 6 ½ % (coupons are paid semi-annually), and a maturity of 10 years. TTT has 20 million shares of stock outstanding. The shares are currently priced at $7.67. The company pays no dividend, but estimates of the company’s beta are 2.1. The current risk-free rate is 3.2%, and the rate of return on the market portfolio is 11.4%.
The Rufus Corporation has 125 million shares outstanding and analysts expect Rufus to have earnings of $500 million this year. Rufus plans to pay out 40% of its earnings in dividends and they expect to use another 20% of their earnings to repurchase shares. If Rufus' equity cost of capital is 15% and Rufus' earnings are expected to grow at a rate of 3% per year, then the value of a share of Rufus stock is closest to
Answer:
$20 per share
Explanation:
WACC, k = 0.15,
Expected growth rate of earnings, g = 0.03
Dividends pay out:
= 40% of earnings
= 40% × $500,000,000
= $200 million
Shares repurchases:
= 20% of earnings
= 20% × $500,000,000
= $100 million
Value of shares:
= Present Value of future dividends and repurchases
= (Dividends + Shares repurchases) ÷ (WACC - g)
= ($200 + $100) ÷ (0.15 - 0.03)
= 300 ÷ (0.15 - 0.03)
= $2,500 million
Price per share, P0:
= Value of shares ÷ shares outstanding
= $2,500 million ÷ 125 million
= $20 per share
Final answer:
The value of a share of Rufus stock, calculated using the Gordon Growth Model with the given payout rates and growth rate, is approximately $13.33.
Explanation:
To calculate the value of a share of Rufus stock, we can use the Gordon Growth Model which assumes a perpetual growth of dividends at a constant rate. First, we'll determine the dividends per share. Rufus Corporation expects to pay out 40% of its $500 million earnings in dividends, which equals $200 million in total dividends. With 125 million shares outstanding, the dividend per share would be $1.60. Next, we consider the share repurchase. Rufus plans to use 20% of its earnings, which is $100 million, to repurchase shares. This will reduce the number of shares outstanding and therefore increase dividends per share for remaining shareholders in the future, but for simplicity, this effect is not factored into this computation.
Using the Gordon Growth Model, the value of a share of Rufus stock (P) is calculated as:
P = D / (k - g)
Where D is the dividend per share, k is the equity cost of capital, and g is the growth rate of dividends. Plugging in the values:
P = $1.60 / (0.15 - 0.03)
Therefore, P = $1.60 / 0.12 = $13.33, which is the estimated value of a share of Rufus Corporation's stock given the provided growth and payout rates.
Approximately two decades after a "baby boom," one could expect___________.
a. a movement along the production possibilities curve from one point to another.
b. an outward shift of the production possibilities curve along both axes.
c. production to change from an interior point to a point along the production possibilities curve.
d. an inward shift of the production possibilities curve.
Answer:
b. an outward shift of the production possibilities curve along both axes
Explanation:
As we know that outward shift refers to the growth.
Baby boomers is a term used for the human generation born between 1946 and 1964 after the end of world war 2 when the birth rate across the world was narrowed and thereafter the emerging births of new infants were known as Baby Boom.
The main reasons of this outward shift were:
People started new families to cover the life gap of the loved ones they lost during the world warPeople hoped that coming era will be of peace and business growth which they actually saw thereafterPeople hoped to see the economic growth in upcoming years leading them towards business expansions and production growths as wellOld Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $105 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $105 to $110.00, and the stock has paid a dividend of $17.00 per share. a. What is the remaining margin in the account? b-1.What is the margin on the short position? (Round your answer to 2 decimal places.) b-2.If the maintenance margin requirement is 30%, will Old Economy receive a margin call? c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Answer:
Consider the following calculation
Explanation:
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $105 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $105 to $110.00, and the stock has paid a dividend of $17.00 per share.
a. What is the remaining margin in the account?
P0 = $ 105; P1 = 110; N = 1,000; Dividend per share , D = 17
Initial margin required = 50% x N x P0 = 50% x 1,000 x 105 = $ 52,500
Remaining margin = Initial margin + Payoff from the short position
Payoff from the short position = (P0 - P1 - D) x N = (105 - 110 - 17) x 1,000 = - $ 22,000
Hence, Remaining margin = $ 52,500 - $ 22,000 = $ 30,500
Please enter 30,500 as your answer in the answer box.
b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)
Short margin = Remaining margin / Value of short shares today = $ 30,500 / (N x P1) = 30,5000 / (1,000 x 110) = 27.73%
Please enter 27.73 as your answer in the answer box.
b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
Short margin = 27.73% < margin requirement of 30%, Hence, there will be a margin call.
Please choose "Yes" as your answer.
c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Rate of return = Payoff from short position / Initial margin = -22,000 / 52,500 = - 41.90%
Hence, please enter -41.90 as your answer in the answer box.
The balance sheet below reflects Zee Bank after its purchase of $65 million in government securities from the Fed. Assume a required reserve ratio of 10%, that banks hold no excess reserves, and that all currency is deposited into the banking system.
Assets Liabilites and net worth Reserves $15 million Liabilities: Checking Deposits $150 million Loans $275 million Net Worth $205 Treasuries $65 million
How did the purchase of $65 million in government securities from the Fed affect the money supply? Choose one:
A. The money supply increased by $65 million.
B. The money supply increased by $650 million.
C. The money supply decreased by $650 million.
D. The money supply decreased by $65 million.
Answer:
Option (C) is correct.
Explanation:
The money multiplier = 1 ÷ reserve ratio
= 1 ÷ 0.1
= 10
If a bank purchases $65 million of government securities from the Fed then this will reduce the money supply in the economy because the money from the bank is going.
The decrease in money supply:
= purchase amount × money multiplier
= 65 × 10
= 650 million
Penny Lane and Associates purchased a generator on January 1, 2015, for $6,300. The generator was estimated to have a five-year life and a salvage value of $600. At the beginning of 2017, the company revised the expected life of the asset to six years and revised the salvage value to $300. Using straight-line depreciation, the depreciation expense recorded in 2017 would
Answer:
The depreciation expense recorded in 2017 will be $930
Explanation:
Cost of the generator = $6,300
Initial useful life = 5 years
initial salvage value = $600
Revised useful life = 6 years
Revised salvage value = $300
Now,
Initial Annual depreciation = [ Cost - Initial salvage value ] ÷ Initial useful life
= [ $6,300 - $600 ] ÷ 5
= $1,140
Therefore,
accumulated depreciation till the end of 2016
= 2 × $1,140
= $2,280
Therefore,
Book value for the year 2017
= Cost - accumulated depreciation till the end of 2016
= $6,300 - $2,280
= $4,020
Therefore,
The revised annual depreciation
= [ Book value for 2017 - Revised salvage value ] ÷ Remaining useful life
= [ $4,020 - $300 ] ÷ (6 - 2)
= $930
Hence,
the depreciation expense recorded in 2017 will be $930
All of the following are defined as either a "sale" or an "offer to sell" common stock of an issuer EXCEPT:
A. any offer to sell the common stock for value
B. any solicitation of an offer to buy the common stock for value
C. the gift of the common stock to an employee of the issuer
D. the sale of a bond with detachable warrants to buy the common stock of that issuer
Answer:
The correct answer is letter "C": the gift of the common stock to an employee of the issuer.
Explanation:
Under the Uniform Securities Act a "sale" or "offer to sell" is any offer to sell the common stock for value or any request of an offer to purchase the common stock at a certain value. In that case, gifts of common stocks from any party to another will not fall under this category since in the exchange there is no economic value dealt that made the transaction happen.
"An investment bank agrees to underwrite a $100 million, 15-year, 10 percent semiannual bond issue for a company on a firm commitment basis. The investment bank pays the company on Monday and plans to begin a public sale on Tuesday. If interest rates rise 0.5 percent, or fifty basis points, overnight, what will be the impact on the profits of the investment bank?"A) $4,258,365; loss B) $4,258,365; gain C) $3,735,975; gain D) S1,239,175
Final answer:
The impact on the profits of the investment bank due to the rise in interest rates can be calculated by finding the difference between the initial bond price and the new bond price.
Explanation:
The impact on the profits of the investment bank due to the rise in interest rates can be calculated using the bond price formula.
Calculate the present value of the bond using the new interest rate of 10.5% and the remaining cash flows for the next 15 years at a semiannual compounding period.Sum up the present value of the interest payments and the principal repayment at maturity to get the new bond price.Subtract the new bond price from the initial bond price of $100 million to find the impact on the investment bank's profits.Using this approach, the impact on the profits of the investment bank would be a loss of $4,258,365 (option A).
Assume the reserve requirement is 10% and the MPC = 0.6 for the economy when a stock market downturn reduces aggregate demand by $100 billion. Instructions: Enter your answers as a whole number. a. Suppose the Federal Reserve wants to increase investment demand to offset the reduction in aggregate demand. To accomplish this goal, how much does investment demand need to increase? $ billion b. To increase investment demand by the desired amount, the Fed estimates that interest rates will need to by 4% and the money supply will need to by $200 billion. c. In order to achieve the $200 billion change in the money supply, the Fed will make an of $ billion.
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
To offset the $100 billion reduction in aggregate demand, the Federal Reserve needs to increase investment demand by $100 billion, achieved by decreasing interest rates by 4% and increasing the money supply by $200 billion. To trigger this increase in money supply, given the 10% reserve requirement, the Federal Reserve needs to inject $20 billion into the economy.
Explanation:Assuming the Federal Reserve wants to counter the $100 billion reduction in aggregate demand caused by the stock market downturn, it needs to increase investment demand by $100 billion. This is because aggregate demand consists of consumer spending, investment demand, government spending, and net exports. Any decrease in one component should be offset by an equivalent increase in another to maintain the same level of aggregate demand.
According to the Federal Reserve's estimations, to increase investment demand by $100 billion, they have decided to decrease interest rates by 4% and increase the money supply by $200 billion. Lowering interest rates will make borrowing cheaper and more attractive, which could lead to an increase in investments. Simultaneously, increasing the money supply would put more money in circulation, further facilitating increased investment.
Finally, to increase the money supply by $200 billion, the Federal Reserve would need to infuse additional capital into the economy. Given the reserve requirement of 10%, the Fed will need to make an injection of $20 billion into the economy because when banks have more money on hand, they can increase their lending activities and thereby increase the money supply in the economy.
Learn more about the Federal Reserve and Aggregate Demand here:https://brainly.com/question/32069548
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Hines Cosmetic Co. sold beauty preparations nationally to beauty shops at a standard or fixed- price schedule. Some of the shops were also supplied with a free demonstrator and free advertising materials. The shops that were not supplied with them claimed that giving the free services and materials constituted unlawful price discrimination. Hines replied that there was no price discrimination because it charged everyone the same. What it was giving free was merely a promotional campaign that was not intended to discriminate against those who were not given anything free. Was Hines guilty of unlawful price discrimination? Explain.
Answer:
No, Hines is not guilty of unlawful price descrimination
Explanation:
Hines actions has not meet the criteria for price discrimination which include giving different prices based on gender, race or religion and never prevented the resale of product and the product package for sale never indicated the inclusion of free demonstrator and free advertising material.
The two types of utilitarianism are _____ and _____ . primary; secondary causal; superfluous consideration; evoked proactive; reactive act; rule
Answer:
The two kind of utilitarianism are act and rule
Explanation:
Utilitarianism is the form or kind of consequentialism as it rests the idea which is the result or consequence of laws, actions or policies, and determine or evaluate whether they are right or wrong.
The 2 types of utilitarianism are rule and act, where rule utilitarianism is the one which focus on the effects of kinds of actions like stealing o killing and the act utilitarianism is the one which focus on the effects of the individual actions.
How do Jennifer’s educator expenses affect her tax return? a. Jennifer can claim these expenses as a miscellaneous itemized deduction on her Schedule A. b. These expenses do not affect her tax return. c. $250 is deducted as an adjustment to income on Form 1040, Schedule 1. d. Jennifer is entitled to deduct the full $350 as an adjustment to income on Form 1040, Schedule 1
Answer:
c. $250 is deducted as an adjustment to income on Form 1040, Schedule 1
Explanation:
The educator expenses that affect the Jennifer tax return is shown below :
According to the Internal Revenue Service (IRS), the eligible deduction is allowed up to $250 of qualified expenses.
The qualifies expenses considered those expenses which include the course books, computer equipment, supplies used in the health education course.
Plus it is the adjustment on Form number 1040 under Schedule 1