Answer:
Net income under absorption costing is $904,370.
Explanation:
Note: This question is not complete and it contains an error in the only available data. The complete correct question is therefore provided before the question is answered as follows:
Kluber, Inc. had net income of $908,000 based on variable costing. Beginning and ending inventories were 55,800 units and 53,600 units, respectively. Assume the fixed overhead per unit was $1.65 for both the beginning and ending inventory. What is net income under absorption costing?
The explanation to the answer is now given as follows:
Variable costing is a costing technique that takes only the variable cost into consideration and exclude the fixed manufacturing overhead from the production production cost of a product.
Absorption costing is a costing technique in which the fixed overhead cost of production is allocated to products produced.
For this question, net income under absorption costing can be determined as follows:
Net income based on variable costing = $908,000
Total beginning fixed overhead = Beginning inventories * Fixed overhead per unit = 55,800 * $1.65 = $92,070
Total ending fixed overhead = Ending inventories * Fixed overhead per unit = 53,600 * $1.65 = $88,440
Adjustment for fixed overhead for the period = Total ending fixed overhead - Total beginning fixed overhead = $88,440 - $92,070 = -$3,630
Net income under absorption costing = Net income based on variable costing + Adjustment for fixed overhead for the period = $908,000 + (-$3,630) = $908,000 - $3,630 = $904,370
Therefore, net income under absorption costing is $904,370.
In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called
Answer:
Closing escrow
Explanation:
Closing escrow refers to completing the sale and transfering the ownership from the seller to the buyer in a process in which a third party that would be the escrow agent maintains the papers and the money until the operation is closed. According to this, the answer is that in some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called closing escrow because the escrow agent keeps the funds and the paperwork until the transaction is complete and because of that the buyer and the seller don't need to meet at closing.
"If a portfolio manager believes that the market will be stable over the next 6 months, to generate extra income, the manager could:"
Answer and Explanation:
For earning an extra income, the options contracts could be sold at the premium i.e. collected or in short word sell naked index calls.
Now if the index calls writer exercised, so the delivering of the stock could not be held as it delivers only cash
And, also the writing of index call oppose to the securities portfolio should be termed as a naked writing strategy
While on the other hand in case of the income writing, if the call writer owns the physical instrument than the writer expected to the market for staying neutral
Shelley wants to cash in her winning lottery ticket. She can either receive fourteen, $188,000 semiannual payments starting today, or she can receive a single-amount payment today based on a 6% annual interest rate. What is the single-amount payment she can receive today
Answer:
$2,123,661.75
Explanation:
We are to find the present value of the payments
but first we are to determine the future value of the payments
The formula for calculating future value = A (B / r)
B = [(1 + r)^n] - 1
R = interest rate = 6% / 2 = 3%
N = number of years = 14
(1.03^14 - 1 ) / 0.03 = 17.086324
$188,000 x 17.086324 = $3,212,228.94
Present value = future value(1 + r ) ^-N
$3,212,228.94(1.03)^-14 = $2,123,661.75
Match each activity that generates portfolio income to the context in which it is generated.
Let's match each portfolio asset with its defintion
trading paper assets. It involves buying and selling of stocks, bonds, mutual funds, derivatives, and currencies. The paper asset is a representation of an underlying asset that can be of many types: stock, bonds, etc. Literally it is a piece of paper where the ownership of an asset is stated.
stocks: It represents ownership in a corporation. The capital of such company is divided in equally-valued shares which are sold in the financial markets and the buyers become its owners in the proportion of the value of the shares they have purchased.
mutual funds: It is a financial investment that pools money from investors to invest in securities. They have certain advantages if compared to investing individually on securities. They enable to reach economies of scale when conducting investments, they involve a higher level of diversification, more liquidity and they are controlled by professionals.
derivative: It is a contract whose value derives from other financial assets. More specifically, its value depends on an underlying, which can be an asset, an index, etc. Derivative contracts can be issued with a multiplicity of objectives: to protect other investment against price variations (insurance), to speculate, etc.
Classify the following cash flows as either operating, investing, or financing activities assume indirect method.
1. Received cash from sale of equipment at a gain.
2. Received cash dividends from investments.
3. Cash paid to purchase investments in securities.
4. Issued preferred stock for cash.
5. Paid interest on the debt.
6. Paid accounts payable with cash.
7. Paid cash for rent.
8. Received cash from the sale of property at a loss.
9. Paid short-term debt with cash. 10. Paid long-term debt with cash.
Answer:
Cash Flow Method
1. Received cash from sale of Investing activities
equipment at a gain -
2. Received cash dividends Operating activities
from investments.
3. Cash paid to purchase Investing activities
investments in securities.
4. Issued preferred stock for Financing activities
cash.
5. Paid interest on the debt. Operating activities
6. Paid accounts payable with Operating activities
cash.
7. Paid cash for rent. Operating activities
8. Received cash from the sale Investing activities
of property at a loss.
9. Paid short-term debt with cash. Operating activities
10. Paid long-term debt with cash. Financing activities
You buy a stock at $100 and sell it for $140;what is the percentage return if the margin requirement is 40 % and the interest rate of borrowed funds is 10%.
Answer:
Return on your investment (ROI) = 60%
Explanation:
Return on investment would be the proportion of the amount invested that is earned as profit. Note the following :
The amount earned as cash return would be determined as the capital gains less the interest on the loan.
Also, the amount invested would refer to the personal capital contribution made by the investor. This implies the total cost of the stock less the interest earned on the amount borrowed.
The principles above are illustrated as follows:
Capital gain on stock = stock price at the end - stock price at the beginning
Stock price at the end = 140
Capital gain = 140 - 100 = 40
Cost of fund = interest rate × amount borrowed
Amount borrowed = 40% × 100 = 40
Cost of fund = 10% × (40% × 100) = 4
Return on investment = Capital gains - cost of funds /(Total cost - amount borrowed)
ROI = (40 - 4)/(100 - 40)× 100 = 20%
Return on your investment (ROI) = 60%
Some of the following future cash flows have been expressed in then-current (future) dollars and others in CV dollars. Use an interest rate of 10% per year and an inflation rate of 6%. Find the present worth with all cash flows expressed in future dollars.
Year Cash flow, $ Expressed as
0 17,100 CV
3 46,500 Then-current
4 12,300 Then-current
7 26,900 CV
The present worth with all cash flows expressed in future dollars is $_______.
Answer:
$62,267.91
Explanation:
first we must calculate the interest rate = 10% + 6% + (10% x 6%) = 16.6%
now we can use the present value formula:
present value = future value / (1 + rate)ⁿ
present values for:
cash flow year 0 = $17,100cash flow year 3 = $46,500/1.166³ = $29,333.06cash flow year 4 = $12,300/1.166⁴ = $6,654.43cash flow year 7 = $26,900/1.166⁷ = $9,180.42total present value = $62,267.91
Answer:
The present worth with all cash flows expressed in future dollars is $62267.91Straight Cut beauty salon merges with Clean-Cut beauty salon. This is an example of
A) vertical merger.
B) horizontal merger.
C) conglomerate merger.
D) concentration ratio.
Answer:
The answer is B. horizontal merger
Explanation:
Horizontal merger is a type of merger found between two competing firms operating in the same industry. Straight Cut beauty salon and Clean-Cut beauty salon are in the same industry performing the same or similar function.
Horizontal merger are done to increase the market share or enjoys economies of scale.
Straight Cut beauty salon and Clean-Cut beauty salon after the merger can introduce a wide range of services within the beauty salon
On January 1, 2021, Laramie Inc. acquired land for $6.2 million. Laramie paid $1.2 in cash and signed a 6% note requiring the company to pay the remaining $5 million plus interest on December 31, 2022. An interest rate of 6% properly reflects the time value of money for this type of loan agreement. For what amount should Laramie record the purchase of land
Answer:
The amount Laramie should record the purchase of land is $6.2 million.
Explanation:
The costs of a fixed asset refer to the purchase price and other relevant costs which are incurred in order to the location and working condition required to operate the fixed asset in way that it is intended.
The other relevant costs that are added to the purchase price to arrive at the cost of the fixed assets include professional fees, non-refundable taxes or levies, and among others.
If any trade discount or rebate is given, this will be deducted from the purchase price to arrive at the cost.
Any interest required to be paid on the delayed payment in order to reflects the time value of money are not part of the cost of the asset but expensed in the year they are incurred.
From the question, the land acquired is a fixed asset. Based on the explanation above, the total cost of the asset is $6.2 million. The interest from the 6% interest rate on the remaining $5 million will be part of the cost of the land but it will be expensed in the year they are incurred.
Therefore, the amount Laramie should record the purchase of land is $6.2 million.
For what reason would government agencies and other firms use request for proposals(RFPs)? Name an example of a project that might require an RFP.
Answer:
Request for Proposals(RFPs)a) Reasons for government agencies and other firms to use request for proposal:
1. The proposal involves a complex project.
2. The project requires detailed technical information.
3. Hard data is required for analysis and comparison.
4. There is need for objective comparison of vendors' responses.
5. To outline a project's requirements to suppliers so that they can provide detailed solutions.
6. To establish joint understanding of the requirements with the suppliers.
7. To form the project's baseline and point for contract negotiation.
b) An example of a project that might require an RFP is a project to construct a stadium on an Island. In such a case, the prospects of the project have to be explored at the formation stage, with the costs and effectiveness of the solutions to be provided by various suppliers carefully studied for possible integration. A project may be cancelled after the submission of an RFP because it is understood that the project may not be feasible in terms of economy, efficiency, and effectiveness.
Explanation:
RFP is different from a request for quotation (RFQ). For RFQ, the need or problem is specific with specific solution, and there is no need for detailed technical information. An RFP requires a general problem that requires possible solutions to be offered. The acceptance of RFP or RFQ establishes the contract between the firm or governmental agency and the supplier.
The following information is from ABC Company's general ledger: Beginning and ending inventories, respectively, for raw materials were $16,000 and $20,000 and for work in process were $40,000 and $44,000. Raw material purchases and direct labor costs incurred were $72,000 each, and manufacturing overhead applied amounted to $40,000. Determine the total cost of goods manufactured during the period.
Answer:
cost of goods manufactured= $176,000
Explanation:
Giving the following information:
Direct materials:
Beginning inventory= $16,000
Ending inventory= $20,000
Purchase= $72,000
WIP:
Beginning inventory= $40,000
Ending inventory= $44,000
Direct labor= $72,000
Manufacturing overhead applied= $40,000
To calculate the cost of goods manufactured, we need to use the following formula:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
Direct material used= beginning inventory + purchases - ending inventory
Direct material used= 16,000 + 72,000 - 20,000= 68,000
cost of goods manufactured= 40,000 + 68,000 + 72,000 + 40,000 - 44,000
cost of goods manufactured= $176,000
Which of the following fall risk factors apply to William Jefferson? Select all that apply.
a. Confusion
b. Postural hypotension with dizziness
c. Unable to ambulate independently
d. History of falls
e. Impaired judgment
f. Incontinence
g. Sensory deficit
h. Increased anxiety
i. Medications affecting blood pressure or consciousness
j. Age (older than 65)
k. Decreased level of cooperation
Answer:
Treatment of dementia and or delirium comes with the following risk factors:
d) if it is related to head injury
j) Age
H) Increase anxiety
I) Medications affecting blood pressure or consciousness
Explanation:
Dementia refers to the gradual deterioration in memory and at least one other cognitive area in an alert person.
This can be caused by Age , Down’s Syndrome , Head injury etc.
Cheers!
Which of the following entries correctly reflects the entry for recording the wages of all factory workers?
a. Work in Process Inventory Wages Expense Cash
b. Work in Process Inventory Manufacturing Overhead Wages Payable
c. Wage Expense Work in Process Inventory
d. Direct Labor Expense Indirect Labor Expense Wages Payable
Answer; b. Work in Process Inventory Manufacturing Overhead Wages Payable
Explanation;
Factor workers are considered to be directly related to the production of the good. As a result, the wages paid to them are added to the inventories produced to show that they are part of the cost of the goods produced. Their wages will therefore be debited to Work in Process Inventory.
The wages will then be credited to the Manufacturing Overhead Wages Payable as this is the liability account that deals with wages owed to people working in the factory.
ABC Ltd (ABC) engaged the accounting firm of Ace & King to perform its annual audit. Ace amp; King performed the audit in a competent, non-negligent manner and billed ABC for $30 000, the agreed fee. Shortly after delivery of the audited financial report, Sam Lloyd, the assistant controller, disappeared, taking with him $40 000 of ABCâ s funds. It was then discovered that Sam had been engaged in a highly sophisticated, novel defalcation scheme during the past year. He had previously embezzled $50 000 of ABCâ s funds. ABC has refused to pay the auditorâ s fee and is seeking to recover the $90 000 that was stolen by Sam. Which of the following is correct?
The auditor cannot recover the audit fee and is liable for $90 000.
The auditor is entitled to collect the audit fee and is not liable for $90 000.
ABC is entitled to recover the $40 000 defalcation of the current year and is not liable for the $30 000 fee.
ABC is entitled to rescind the audit contract and thus is not liable for the $30 000 fee, but it cannot recover damages.
Answer:
The auditor is entitled to collect the audit fee and is not liable for $90 000.
Explanation:
Ace & King did their job in a competent way, the fact that the company's controller was doing something illegal is not their responsibility. External auditors work with the information that is given to them and their job is limited to analyzing them and making their conclusions about them.
In this case, the controller was the person responsible for giving the information to the auditing company, so he had the chance to direct their conclusions. An external auditor is not responsible for what happens inside a firm, and if someone steals money or assets, he/she is responsible for it.
which of the following is most likely to perform all of the management functions
Answer:
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Explan
An investor who expects declining interest rates would maximize their capital gain by purchasing a bond that has a ___ coupon and a ___ term to maturity.
Answer: zero; long
Explanation:
An investor who expects declining interest rates would maximize their capital gain by purchasing a bond that has a zero coupon and a long term to maturity.
In this case, a zero-coupon bond will b chosen since the face value will have to be repaid when the bond matures.
Which of the following is a good example of a manufacturing-related key success factor?
a. Global distribution capabilities
b. High labor productivity
c. Accurate filling of buyer orders
d. Short delivery time capability
Answer:
b. High labor productivity
Explanation:
High labor productivity is a good example of a manufacturing related key success factor because it reduces wages expenses. The reduction of wages and overall efficiency in production result into increase in the profitability of the firm. It also gives the firm a good competitive advantage over others in the market.
What agency provides over 25,000 government publications?
1. The Department of Health, Education, and Welfare
2. The Office of Consumer Affairs
3. The Environmental Protection Agency
4. The Government Printing Office
Answer:
Correct Answer:
4. The Government Printing Office
Explanation:
The United States Government Publishing Office is an agency of the legislative branch of the United States federal government with the mandate to inform the Nation by producing, procuring, and disseminating printed and electronic publications of the Congress as well as the executive departments and establishments of the Federal Government.
The correct answer is the 4. Government Printing Office (GPO). The GPO is an agency of the United States federal government that is responsible for producing and distributing various government publications, including books, reports, and other documents
The Government Printing Office (GPO) provides over 25,000 government publications. GPO is an agency of the legislative branch of the U.S. government and produces a wide range of printed and electronic publications.: The Government Printing Office (GPO) is the agency responsible for providing over 25,000 government publications.
The GPO is an agency of the legislative branch of the U.S. government and produces a wide range of printed and electronic publications.The GPO has been providing printing services to the federal government since 1861. The agency produces publications for a variety of government agencies, including the Department of Defense, the Department of State, and the Department of Justice. The GPO also produces publications for Congress, including the Congressional Record and the Congressional Directory.
Additionally, the GPO provides printing and publishing services for the U.S. Government Publishing Office bookstore and for other private sector clients.The GPO has been responsible for printing many important government documents throughout U.S. history, including the Emancipation Proclamation and the Federalist Papers. Today, the agency continues to play an important role in providing government publications to the American public.
know more about Government Printing Office (GPO).
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Problem 14-12 Book Value versus Market Value [LO3] Dinklage Corp. has 4 million shares of common stock outstanding. The current share price is $76, and the book value per share is $7. The company also has two bond issues outstanding. The first bond issue has a face value of $105 million, a coupon rate of 5 percent, and sells for 95 percent of par. The second issue has a face value of $90 million, a coupon rate of 4 percent, and sells for 107 percent of par. The first issue matures in 25 years, the second in 8 years. Both bonds make semiannual coupon payments. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company’s capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights? Market value
Answer:
a. What are the company's capital structure weights on a book value basis?
common stocks' book value = 4,000,000 x $7 = $28,000,000
first bond = $105,000,000
second bond = $90,000,000
total book value = $223,000,000
capital structure:
common stocks = $28 / $223 = 0.1256
debt = $195 / $223 = 0.8744
b. What are the company’s capital structure weights on a market value basis?
common stocks' market value = 4,000,000 x $76 = $304,000,000
first bond = $99,750,000
second bond = $96,300,000
total book value = $500,050,000
capital structure:
common stocks = $304 / $500.05 = 0.6079
debt = $196.05 / $500.05 = 0.3921
c. Which are more relevant, the book or market value weights?
The market value is always more relevant and it is used to calculate the company's WACC.
The following data relate to direct labor costs for the current period: Standard costs 6,000 hours at $12.00 Actual costs 7,500 hours at $11.60 What is the direct labor rate variance?
A. $15,000 unfavorable
B. $3,000 favorable
C. $17,400 unfavorable
D. $2,400 favorable
Answer: $3000 favorable
Explanation:
The information provided in the question are:Standard costs 6,000 hours at $12.00 and the Actual costs 7,500 hours at $11.60.
The direct labor rate variance will be calculated as:
= (7,500 × $ 12) - (7,500 × $11.60)
= $90,000 - $87,000
= $3,000 Favorable
It is favorable since the standard rate is more than the actual rate.
You need a 25-year, fixed-rate mortgage to buy a new home for $210,000. Your mortgage bank will lend you the money at a 7.1 percent APR for this 300-month loan. However, you can afford monthly payments of only $950, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $950?
Answer:
$450,732, the loan's principal balance increases because the monthly payment doesn't even cover interest expense
Explanation:
In order for you to pay the debt completely in 25 years, you would need to pay $1,497.66 per month. But since you can only afford to pay $950 per month, the remaining balance will be $450,732.
I prepared an amortization schedule in an excel spreadsheet
Some shows are produced specifically for the syndication market. These are known as ________ syndication.
Answer: First-run syndication
Explanation:
Syndication refers to when multiple television and radio stations are able to lease the rights to a program without them having to do so through a broadcast network.
First-run syndication means that a show was first broadcast on several television stations because it was made to be broadcast as such. In other words the creators produced it specifically for the syndication market or purchased the rights from another country and then sold it into syndication in a country in which it was broadcasting for the first time.
Answer:
First-run syndication
Explanation:
Syndication refers to when multiple television and radio stations are able to lease the rights to a program without them having to do so through a broadcast network.
First-run syndication means that a show was the first broadcast on several television stations because it was made to be broadcast as such. In other words, the creators produced it specifically for the syndication market or purchased the rights from another country and then sold it into syndication in a country in which it was broadcasting for the first time.
A company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:
Activity Cost Pool Budgeted Cost Product A Product B
Activity 1 $87,000 3,000 2,800
Activity 2 $62,000 4,500 5,500
Activity 3 $93,000 2,500 5,250
Annual production and sales level of Product A is 34,300 units, and the annual production and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit of Product A under activity-based costing?
a. $3.00
b. $2.00
c. $10.28
d. $15.00
e. $2.33
Answer:
a. $3.00
Explanation:
Calculation of activity rate for activity 1
Activity rate = Budgeted cost of activity 1/Total budgeted activity
=$87,000 / (3,000 + 2,800)
=$87,000/5,800
=$15
Calculation of activity rate for activity 2.
Activity rate = Budgeted cost of activity 2 /Total budgeted activity
=$62,000 / (4,500+5,500)
=$62,000 / 10,000
=$6.20
Calculation of activity rate for activity 3
Activity rate = Budgeted cost of activity 3 / Total budgeted activity
=$93,000 / (2,500+5,250)
=$93,000 / 7,750
=$12
Calculation of total overhead cost of product A.
Total overhead cost = Activity1 + Activity2 + Activity3
Total overhead cost = (3,000×$15) + (4,500×$6.20) + (2,500×$12)
Total overhead cost = $45,000+$27,900+$30,000
Total overhead cost = $102,900
Thus, the total overhead cost allocated to product A is $102,900.
Calculation of overhead cost per unit.
Overhead cost per unit = Total overhead cost allocated / Number of units produced
= $102,900 / 34,300
= $3 per unit
Thus, the overhead cost per unit of product A is $3
The income summary account has expenses of $65,000 and revenues of $55,000. The company had which of the following: Select one: a. Net income of $10,000 b. Net income of $120,000 c. Net loss of $10,000 d. Net loss of $120,000
Answer: Net loss of $10,000
Explanation:
From the question, we are informed that the income summary account has expenses of $65,000 and revenues of $55,000.
In this scenario, since the expense is more than the revenue, it means that there will be a net loss. Therefore, the net loss will be calculated as:
= $65,000 - $55,000
= $10,000
There's a net loss of $10,000.
The Equal Employment Opportunity Commission (EEOC) investigated Chen's complaint of workplace discrimination against his employer and sent him a notice stating that it found no reasonable cause for his complaint. What is Chen's next step if he wants to pursue the claim?
Answer: Chen has 90 days after he receives his "right-to-sue"letter from the EEOC to sue his employer in federal court
Explanation:
From the question, we are informed that The Equal Employment Opportunity Commission (EEOC) investigated Chen's complaint of workplace discrimination against his employer and sent him a notice stating that it found no reasonable cause for his complaint.
Chen's next step if he wants to pursue the claim is that Chen has 90 days after he receives his "right-to-sue"letter from the EEOC to sue his employer in federal court.
Do-well bonds have a face value of 1000 and are currently quoted at 86.725. The bonds have coupon rate of 6.5 percent. What is the current yield on these bonds?
Answer:
The current yield is 7.50 per cent.
Explanation:
The face value of the bonds = 1000
Current quoting = 86.725
The coupon rate = 6.5 %
Now we have to find the current yield by using the above information. Below is the calculation for current yield.
Price = 86.725% of 1000 = 867.25
Coupon = 0.065 * 1000 = 65
The Current yield = (Annual coupon/price) × 100
Current yield is = (65 / 867.25) * 100
Current yield is = 7.50 per cent.
Part 1: Firms in the real estate investment trusts (REITs), airlines, electric utilities, and paper products industries tend to have high leverage. Explain why firms in these industries would prefer to have high leverage. Part 2: Firms in the computer hardware, footwear, apparel and luxury goods, and data processing industries tend to have low leverage. Explain why firms in these industries would prefer to have low leverage.
Answer and Explanation:
1. Firms in the real estate industry have high leverage because they are capital intensive businesses, requiring higher capital for their operations and do not make profit or reach breakeven early. Therefore they are more inclined to leveraging than the share market .There is also the benefit of tax savings from debt sources
2. Firms in the computer hardware, footwear, apparel and luxury goods, and data processing industries have low leverage because they can reach breakeven or make profit early and so can rely on share market as against real estate industry.
Assume you are risk-averse and have the following three choices. Expected Value Standard Deviation A $ 1,870 $ 1,520 B 2,000 840 C 1,590 710 a. Compute the coefficient of variation for each. (Round your answers to 3 decimal places.) b. Which project will you select
Answer:
a. The Coefficient of variation is expressed as;
= Standard Deviation/Expected return
Choice A
= 1,520/1,870
= 0.813
Choice B
= 840/2,000
= 0.42
Choice C
= 710/1,590
= 0.447
b. The coefficient of variation measures the volatility of the return of the investment. The more volatile it is, the more risky it is. A risk Averse investor would go for the one with the least Coefficient which is Choice B in this case.
Consider a variant of the IS-LM model studied in class, where Investment, I = I0 + b1*Y - b2*r, and the demand for money, L(r,Y) = m0 + k*Y - h*r. We know with certainty that a tax increase must cause which of the following?
a. a decrease in the interest rate and an ambiguous effect on investment.
b. an increase in the interest rate and an upward shift in the LM curve.
c. no change in output if the Fed simultaneously pursues expansionary monetary policy.
d. a decrease in the interest rate and an increase in investment.
Answer:
The correct answer is D
Explanation:
Taxes have a regressive effect on Aggregate Consumption which in turn catalyses a decrease in output/income.
Lower income/output will lead to lower interest rate because a drop in demand will result in a drop in supply. When companies are not producing, there is no point seeking investment in the form of debt or equity. Hence interest rate also drops.
At this point, businesses become interested in borrowing funds given the low rate of interest.
Cheers!
Light Me Up Lamps has variable expenses of 40% of sales and monthly fixed expenses of . The monthly target operating income is . What is Light Me Up Lamps' operating leverage factor at the target level of operating income?
Answer: B. 3.25
Explanation:
Operating Leverage enables a company know how much their income will increase by if they manage to increase their revenue.
The formula is;
= Contribution Margin / Net Income
[tex]\frac{Fixed Costs + Net Income}{ Net Income} \\= \frac{80,000 + 180,000}{80,000} \\= 3.25[/tex]
= 3.25