Answer:
accounting profit ignores the opportunity cost of launching a new business.
Explanation:
economic profit = accounting profit - opportunity costs
the easiest way to explain this concept is through an example:
you earn $60,000 per year by working at a bank
your friend wants to start a small accounting firm with you as his partner
each of you will invest $40,000 and the expected revenue is $150,000, expected costs are $30,000
your accounting profit = ($150,000 - $30,000) / 2 = $60,000
but your economic profit is negative:
opportunity cost of lost wages = $60,000opportunity cost of lost interests on your capital = $40,000 x 3% = $1,200economic profit = $60,000 - ($60,000 + $1,200) = $60,000 - $61,200 = -$1,200
The market price of a security is $32. Its expected rate of return is 17%. The risk-free rate is 6%, and the market risk premium is 9.0%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity.
Answer:
im sorry
Explanation:
Stana, Inc., has preferred stock outstanding that sells for $104.04 per share. If the required return is 4.2 percent, what is the annual dividend?
A. $4.37
B. $4.19
C. $4.55
D. $3.93
E. $4.09
Answer:
A. $4.37
Explanation:
The preferred stock pays the dividend at a specific rate which is specified earlier at the time of issuance
The Annual dividend can be calculated using following formula
Preferred Dividend = Price of the share x Required rate of return
Placing the values in the formula
Preferred Dividend = $104.04 x 4.2%
Preferred Dividend = $4.36968
Preferred Dividend = $4.37
The current price of the futures contract is $30. A six-month call option on the futures contract with a strike price of $30 is trading at a price of $4. What is the price of a six-month put option on this futures contract with the same strike price?
Answer:
Put Price = $4
Explanation:
We are applying Put Call Parity Theorem. Future Price + Put Price = Call Price + Strike Price
$30 + Put Price = $4 + $30
Put Price = $4 + $30 - $30
Put Price = $4
Thus, the price of six month put option = $4
A stock had returns of 5.10%, 31.60%, and -21.20% in each of the past three years. Over the past four years, the arithmetic average annual return for the stock was 6.75%. What was the geometric annual return for the stock over the past four years
Answer:
geometric annual return = 5.23%
Explanation:
first we must determine the return for year 4 (I will call it X)
5.1% + 31.6% - 21.2% + X = 6.75% x 4
14.5 + X = 27
X = 12.5%
geometric annual return = ⁴√(1.051 · 1.316 · 1.125 · 0.788) - 1 = ⁴√1.226132334 - 1 = 1.055287 - 1 = 0.055287 = 5.23%
Charger Company's most recent balance sheet reports total assets of $31,598,000, total liabilities of $18,648,000 and total equity of $12,950,000. The debt to equity ratio for the period is (rounded to two decimals):
Answer:
1.44
Explanation:
A debt-equity can be defined as a measure of the ratio of the total liabilities held by a company to its shareholder's equity. The debt-equity ratio can be found in a company's balance sheet and it's typically a strategic approach used to assess or evaluate the risks that are associated with a company's financing structure.
Given the following data;
Total assets = $31,598,000.
Total liabilities = $18,648,000.
Total equity = $12,950,000.
To find the debt-equity ratio;
[tex] Debt-equity \; ratio = \frac {Total \; liability}{Total \; equity} [/tex]
Substituting into the equation, we have;
[tex] Debt-equity \; ratio = \frac {18,648,000}{12,950,000} [/tex]
Debt-equity ratio = 1.44
Therefore, the debt to equity ratio for the period is 1.44.
If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate?
A. 7.8%
B. 96.2%
C. 95%
D. 4.75%
Answer:
labor force participation rate= 96.2%
Explanation:
Giving the following information:
Unemployed people= 19 million
Labor force= 500 million
First, we need to calculate the employed people:
Employed population = 500 - 19= 481 million
Now, to calculate the labor force participation rate, we need to use the following formula:
labor force participation rate= (employed people/labor force)*100
labor force participation rate= (481/500)*100
labor force participation rate= 96.2%
A firm is a natural monopoly if:_________
a. any entrant would have the same costs.
b. its profit does not increase with output.
c. one firm can produce the total output of the market at lower cost than two or more firms could.
d. it has no fixed costs.
e. its marginal revenue is increasing faster than average costs.
Answer:
c. one firm can produce the total output of the market at lower cost than two or more firms could.
Explanation:
A monopoly is a market structure which is typically characterized by a single-seller who sells a unique product in the market by dominance. Thus, it is a market structure wherein the seller has no competitor because he is solely responsible for the sale of unique products without close substitutes. Any individual that deals with the sales of unique products in a monopolistic market is generally referred to as a monopolist.
For example, a public power company is a monopolistic business firm because they serve as the only power utility provider to the public. Also, a public power company refers to a company that provides power (electricity) utility to the general public of a society.
Hence, a firm is a natural monopoly if one firm can produce the total output of the market at lower cost than two or more firms could.
Jasper makes a $31,000, 90-day, 6.5% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is:______(Use 360 days a year).A. $243.75.
B. $2925.
C. $1462.50.
D. $32.50.
E. $731.25.
Answer:
the amount of interest that is collected is $503.75
Explanation:
The computation of the amount of interest that is collected is shown below:
= Cash loan × number of days ÷ total number of days × rate of interest
= $31,000 × 90 days ÷ 360 days × 6.5%
= $503.75
Hence, the amount of interest that is collected is $503.75
This is the answer but the same is not provided in the given options
We simply applied the above formula so that the correct value could come
And, the same is to be considered
The initial cost of machinery for producing a certain item is $50,000. The machinery will have a five-year life with no salvage value. The manufacturing process has a fixed cost of $5,000 per year and a variable cost of $16 per unit. At an interest rate of 8% per year, the number of units that must be sold at $20 per unit for breakdown is nearest to:______________
Answer:
4,381 units per year
Explanation:
fixed costs per year (other than depreciation) = $5,000
contribution margin per unit = $20 - $16 = $4
in order for the project to break even, the NPV must be $0
this means that our discounted annual cash flow must be equal to $50,000
discounted annual cash flow = present value / PV annuity factor
PV annuity factor, 8%, 5 periods = 3.9927
annual cash flow = $50,000 / 3.9927 = $12,523
each annual cash flow = $4X - $5,000 = $12,523
$4X = $17,523
X = $17,523 / $4 = 4,380.75 ≈ 4,381 units
For a given level of inflation, if a rise in the stock market makes consumers more willing to spend (the wealth effect), then the _____ shifts _____.
Answer:
aggregate demand curve; right
Explanation:
Inflation can be regarded as
when the level of price of goods/service increases for consumer to buy, it can be measured as a result of change in price. There are four types of level of inflation which are creeping, walking as well as galloping, and hyperinflation, which are measured base on speed. It should be noted that For a given level of inflation, if a rise in the stock market makes consumers more willing to spend (the wealth effect), then the aggregate demand curve shift right
Maria Miller, a lottery winner, will receive the following payments over the next seven years. She has been approached by an investor who will pay Maria a lump sum today for the rights to those future cash flows. If she can invest her cash flows in a fund that will earn 9.8 percent annually, how much should Maria require the investor to pay for the cash flows? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)
Question Completion:
Year 1 2 3 4 5 6 7
$241,000 $291,000 $316,000 $341,000 $391,000 $441,000 $591,000
Present value of investment$
Answer:
Maria Miller
The lump sum collection by Maria Miller should be:
= $1,738,016.85
Explanation:
a) Data and Calculations:
Cash flows from year 1 to year 7:
Future Value Present Value
Year 1 $241,000 $219,490.04
Year 2 $291,000 241,372.92
Year 3 $316,000 238,715.06
Year 4 $341,000 234,609.12
Year 5 $391,000 244,999.21
Year 6 $441,000 251,665.93
Year 7 $591,000 307,164.57
Total $2,612,000 $1,738,016.85
b) The amount that Maria Miller should request today for her annual cash flows at 9.8% interest annually should be $1,738,016.85. This is the present value of the future cash flows. The above present values of the cash flows were obtained using an online calculator.
When using a supply-and-demand model to illustrate how land rents are set, economists typically draw the supply curve as a vertical line because: __________
a. the supply of land is fixed.
b. the supply of land is perfectly inelastic.
c. the quantity supplied of land does not increase when rents go up.
d. All of these are correct.
Answer:
d. All of these are correct.
Explanation:
In the case when the supply and demand model is used so the rent of the land set, and the economist draw the supply curve in a vertical line as the land supply is in fixed in nature, also it is perfectly inelastic, the quantity supplied does not rise in the case when the rent increased
These all reasons should be there as it is correlated with the price and the amount of the land
Hence, the correct option is d.
Equipment was purchased for $50,000. At that time, the equipment was expected to be used eight years and have a residual value of $10,000. The company uses straight-line depreciation. At the beginning of the third year, the company changed its estimated useful life to a total of six years (four years remaining) and the residual value to $8,000. What is depreciation expense in the third year?
a. $8,000.
b. $5,000.
c. $7,000.
d. $5,500.
Answer:
Annual depreciation= $8,000
Explanation:
First, we need to calculate the accumulated depreciation for the first two years:
Annual depreciation= (original cost - salvage value)/estimated life (years)
Annual depreciation= (50,000 - 10,000) / 8
Annual depreciation= $5,000
Accumulated depreciation= 5,000*2= $10,000
Now, we can calculate the new depreciation expense:
Annual depreciation= [(50,000 - 10,000) - 8,000]/4
Annual depreciation= $8,000
Give two specific instances where an external research team would be useful and two other scenarios where an internal research team will be deployed, with adequate explanations as to why each scenario is justified for an external or internal team.
Answer:
Two Specific Instances for External Research Team are for conducting research on causes of losing customers and increase in the number of employees absenteeism in the organisation.
Two Specific Scenarios for Internal Research Team are conduct research about the decline in performance of its manufacturing department and increase in the corruption of sales department.
Explanation:
External Research TeamCauses on losing customers
In some cases, the information provided to determine the root and cause of an issue might be a complex one. For which even the expertise of an internal team to determine and resolve it is not enough. Therefore, an external team is sought it out, who have either faced with such scenarios or have tons of knowledge in such areas in order to provide instant solutions.
Increase in the number of employees absenteeism
In this case, the external research team would be much suited as there is a chance that there might be certain individuals or teams in the organisation who might have an influence on the internal research team to manipulate or misrepresent certain information (with regard to absent employee days) in the organisation.
Internal Research TeamDecline in the performance of its manufacturing department
In this case, the internal team would play a much better role as time could be insufficient to resolve the issue and the internal research team would require least amount of time to understand the philosophy, structure and functioning of the organisation's systems. While an external research team might take extensive time to understand the same.
Increase in the corruption of sales department
In order to determine the corruption, the research team would need to confirm that the policies and procedures placed are correctly being implemented. The internal research team, who are aware of these polices and producers, would much suited in this scenario. Moreover, they will be able to determine the effectiveness of the same and if any further changes are required or not.
ardner Electric has a beta of 0.88 and an expected dividend growth rate of 4.00% per year. The T-bill rate is 4.00%, and the T-bond rate is 5.25%. The annual return on the stock market during the past 4 years was 10.25%. Investors expect the average annual future return on the market to be 14.75%. Using the SML, what is the firm's required rate of return
Answer: 13.61%
Explanation:
The Security Market Line is the Capital Asset Pricing model graphed the required return can be found using CAPM.
= Risk free rate + beta ( Market return - risk free rate)
Use the longer term rates for CAPM so use the T bond rate of 5.25% for risk free rate and use the 14.75% for the market return.
= 5.25% + 0.88 * ( 14.75 - 5.25%)
= 13.61%
If the money supply in the economy is currently at MS2, and the Fed uses open market operations to move the money supply to MS3, what is the overall effect on the economy?
Answer: c) Aggregate demand shifted out, causing GDP to rise
Explanation:
If the Fed increases money supply such that it moves from MS2 to MS3, there will be more money in the economy which would reduce the cost of borrowing.
Both people and firms will therefore borrow more to both consume and invest(both components of Aggregate demand) and this will lead to a rise in Aggregate demand causing it to shift out. The GDP will therefore rise as a result.
During the prior fiscal year, Carla Vista Corp. signed a long-term noncancellable purchase commitment with its primary supplier to purchase $2.14 million of raw materials. Carla Vista paid the $2.14 million to acquire the raw materials when the raw materials were only worth $1.67 million. Assume that the purchase commitment was properly recorded. What is the journal entry to record the purchase
Answer:
First Carla Vista must record unrealized holding loss due to the purchase commitment:
Dr Unrealized holding gain/loss 470,000
Cr Estimated liability on purchase commitment 470,000
When the purchase is actually carried out, the journal entry should be:
Dr Raw materials inventory 1,670,000
Dr Estimated liability on purchase commitment 470,000
Cr Accounts payable (or cash) 2,140,000
Explanation:
If a company enters a noncancelable purchase commitment, if the market price of the goods is lower than the contract price, the company must record a loss. On the other hand, if the market price is above the contract price, it results in a contingency gain until the gain is recognized when the purchase is actually done.
During the year, Next Tec Corp. had the following cash flows: receipt from customers, $14,000; receipt from the bank for long-term borrowing, $6,500; payment to suppliers, $5,200; payment of dividends; $1,700, payment to workers, $2,400; and payment for machinery, $12,500. What amount would be reported for net financing cash flows in the statement of cash flows?
Answer:
The amount that will be reported for net financing cash flows in the statement of cash flows is $4,800.
Explanation:
Cash Flows from financing activities are all cash flows which is incurred for the purpose of financing the business.
For example
Dividend PaymentIssuance of BondsIssuance of shareetc.Determine the category of each cash flow
Receipt from customers, $14,000; Operating
Receipt from the bank for long-term borrowing, $6,500; Financing
Payment to suppliers, $5,200; Operating
Payment of dividends; $1,700, Financing
Payment to workers, $2,400; operating
Payment for machinery, $12,500. Investing
Now calculate the Financing cash flows
Receipt from the bank for long-term borrowing _____ $6,500
Payment of dividends ________________________( $1,700 )
Net cash flows from Financing activites ___________ $4,800
Managers need to build ____ by working on strong, constructive, and mutually beneficial relationships. a. groupthink b. social capital c. organizational politics d. informal groups e. nonconforming roles
Suppose 17 pesos can be exchanged for $1. A Mexican businessman is interested in buying a home in Texas. If the price of the home in Texas is $200,000, how many Mexican pesos must he have to buy this home
Answer:
Total cost in pesos= $3,400,000
Explanation:
Giving the following information:
One dollar= $17 pesos
Total cost of the house= $200,000 dollars
To calculate the total cost in Mexican pesos, we need to multiply the exchange rate by the total cost in dollars.
Total cost in pesos= 200,000*17
Total cost in pesos= $3,400,000
The Domestic Supply and Demand for SUVs in the United States. Suppose the world price equals $50,000 and there is free trade. The United States would _____ SUVs
Answer: export 6 million
Explanation:
The Export of the United sites, which is the export( movement) of goes and services to other countries either by cargo or air freight, and traded or sold.
Another example of export is America’s shipping Automobiles to other countries for sale. The sales of SUV’s in export would be 6 million. Another example of export is the United States exportation of soya beans.
An investor owns $8,000 of Adobe Systems stock, $9,000 of Dow Chemical, and $9,000 of Office Depot. What are the portfolio weights of each stock?
Answer:
Adobe System
0.3077 ± 0.001
Dow Chemical
0.3462 ± 0.001
Office Depot
0.3462 ± 0.001
Explanation:
Calculation for the portfolio weights of each stock
First step is to calculate the Total portfolio
Total portfolio = $8,000 + $9,000 + $9,000
Total portfolio == $26,000
Last step is to calculate the portfolio weights of each stock
Adobe System weight = $8,000 / $26,000
Adobe System weight = 0.3077
Dow Chemical weight = $9,000 / $26,000
Dow Chemical weight = 0.3462
Office Depot weight = $9,000 / $26,000
Office Depot weight= 0.3462
Therefore the portfolio weights of each stock will be :
Adobe System
0.3077 ± 0.001
Dow Chemical
0.3462 ± 0.001
Office Depot
0.3462 ± 0.001
Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the :_______________a) output effect will tend to reduce the demand for labor.b) demand for labor will necessarily decline.c) substitution effect will tend to reduce the demand for labor.d) demand for labor will necessarily increase.
Answer:
Option C: substitution effect will tend to reduce the demand for labor
Explanation:
Capital is simply anything man made that is used in the production of goods and service. It is that which is used by man to start any business venture or produce goods and services e.g. money(currency),machinery, buildings, stock etc. Labor is mans effort put into work.
Since capital is readily substitutable for labor and when the price of capital falls. We can say that the substitution effect will tend to reduce the demand for labor. If also capital and labor are used in rigidly fixed proportions and the price of capital falls, it can be concluded the substitution and output effects will work.
Describe the difference between a fixed-quantity (Q) and a fixed-period (P) inventory systems and provide an example for each.
Answer and Explanation:
The fixed quantity inventory system, the quantity of an order or the lot size is fixed in nature i.e. the similar amount means the quantity is ordered each and every time. It could be managed by continonusly watching the level of inventory. Example - economic order quantity
On the other hand, the fixed period inventory system is a system in which the inventory is to be checked at fixed inventory. It is same as the periodic reveiw system instead of the continuous basis. Example - drugstore
Calculate the current price of a $1,000 par value bond that has a coupon rate of 17 percent, pays coupon interest annually, has 12 years remaining to maturity, and has a current yield to maturity (discount rate) of 8 percent. (Round your answer to 2 decimal places and record without dollar sign or commas).
Answer:
Bond Price= $1,678.24
Explanation:
Giving the following information:
Price= $1,000
Cupon rate= 17%
Years to maturiy= 12
YTM= 8%
To calculate the current price of the bond, we need to use the following formula:
Bond Price= cupon*{[1 - (1+i)^-n] / i} + [face value/(1+i)^n]
Bond Price= 170*{[1 - (1.08^-12)] / 0.08} + [1,000/(1.08^12)]
Bond Price= 1,281.13 + 397.11
Bond Price= $1,678.24
A committee of size 5 is to be selected at random from 3 women and 5 men. The probability distribution for the number of women on the committee is normal.
Yes
No
9514 1404 393
Answer:
no
Explanation:
In general discrete distributions from small populations will not be "normal."
Here, the distribution of the number of women is ...
p(n = 0) = 1/56
p(n = 1) = 15/56
p(n = 2) = 30/56
p(n = 3) = 10/56
The distribution is asymmetric and skewed toward lower numbers.
It is NOT NORMAL.
Niendorf Corporation's 25-year maturity bonds have an 8.75% coupon rate with interest paid semiannually, and a par value of $1,000. The bonds are currently selling at a premium price of $1,250 in the bond market. What is their yield to maturity (YTM)?
Answer:
6.68%
Explanation:
FV= 1000
N = 25*2=50
PMT= 8.75%*1000/2= 43.75
PV = -1250
I/Y = RATE(25*2, 8.75%*1000/2, -1200, 1000)
I/Y = 0.033397
I/Y = 3.34%
YTM = 3.34% * 2
YTM = 6.68%
In 1998, the construction cost of each room for Godvin Inn was $150,000. After fifteen years, the management of the hotel wishes to have improvements in all of the rooms to catch the recent trends. The total cost of the project is estimated as $10 million for 50 rooms in 2013. Based on the information given, calculate the percentage in price of each room from 1998 to 2012.
a. 0.33%
b. 50.50%
c. 45.00%
d. 33.33%
Answer:
d. 33.33%
Explanation:
The computation of the percentage in the price of each from the year 1998 to the year 2012 is shown below:
= (Renovation cost in 2012- construction cost in 1998 ) ÷ (construction cost in 1998)
= ($10 million ÷ 50 rooms - $150,000) ÷ ($150,000)
= ($200,000 - $150,000) ÷ ($150,000)
= ($50,000) ÷ ($150,000)
= 33.33%
Hence, the correct option is d. 33.33%
Explain how each of the following changes quantity of money (money supply) in the economy.
a. the Fed buys bonds
b. the Fed auctions credit
c. the Fed raises the discount rate
d. the Fed raises the reserve requirement
Answer:
a. the Fed buys bonds ⇒ increases the money supply because it buys bonds and pays in cash
b. the Fed auctions credit ⇒ decreases the money supply because it sells bonds and receives cash
c. the Fed raises the discount rate ⇒ decreases the money supply because an increase in the discount rate will affect interest rates in all the economy. Higher interest rates decrease the amount of money that households want to hold and increases household spending.
d. the Fed raises the reserve requirement ⇒ decreases the money supply since banks have less money to lend and interest rates will increase.
The interval at which an asset should be replaced to minimize cost (or maximize worth) is known as the: ________
a. Equivalent uniform annual cost (EUAC).
b. Insider’s viewpoint approach.
c. Optimum replacement internal (ORI).
d. Outsider’s viewpoint approach.
Answer:
c. Optimum replacement interval (ORI)
Explanation:
Optimum replacement interval used to estimate the most cost effective time to replace an asset on the basis of their replacement cost.
There needs to be a balance between the replacement cost and the value that is being lost by changing the asset.
The useful value must be low to justify replacement cost.
For example if the cost of maintaining a machine has increased a lot as a result of wear and tear, it will be more cost effective to make a replacement in order to minimise cost and increase efficiency