Answer:
a. The expected rate of return on this risk-free portfolio is 12%.
b. No, the equilibrium rƒ CANNOT be greater than 12.00%. This is because the equilibrium rƒ must be equal to the expected rate of return on this risk-free portfolio.
Explanation:
Given:
The characteristics of two of the stocks are as follows:
Stock Expected Return Standard Deviation
A 10% 25%
B 18% 75%
Correlation = –1
a. Calculate the expected rate of return on this risk-free portfolio?
SDA = Standard Deviation of Stock A = 25%, or 0.25
SDB = Standard Deviation of Stock B = 75%, or 0.75
WA = Weight of Stock A = ?
WB = Weight of Stock B = (1 - WA)
Portfolio standard deviation = (WA * SDA) – ((1 - WA) * SDB) = (WA * 0.25) – ((1 - WA) * 0.75)
With a perfect negative correlation, Portfolio standard deviation has is taken to be zero. Therefore, we have:
0 = (WA * 0.25) - ((1 - WA) * 0.75)
0 = 0.25WA - (0.75 - 0.75WA)
0 = 0.25WA - 0.75 + 0.75WA
0.75 = 0.25WA + 0.75WA
WA = 0.75
Therefore, we have:
WB = 1 - WA = 1 - 0.75 = 0.25
Portfolio expected rate of return = (WA * Expected Return of Stock A) + (WB * Expected Return) = (0.75 * 10%) + (0.25 * 18%) = 0.12, or 12.00%
Therefore, the expected rate of return on this risk-free portfolio is 12%.
b. Could the equilibrium rƒ be greater than 12.00%?
No, the equilibrium rƒ CANNOT be greater than 12.00%. This is because the equilibrium rƒ must be equal to the expected rate of return on this risk-free portfolio.
On December 1, 2020, Junction Company issued at 104, 800 of its 9%, 10-year, $1,000 par value, nonconvertible bonds with detachable stock purchase warrants. Each bond carried two detachable warrants; each warrant was for one share of common stock at a specified option price of $15 per share. Shortly after issuance, the warrants were quoted on the market for $3 each. No fair value can be determined for the bonds without the warrants. Interest is payable on December 1 and June 1. Provide the entry to record issuance of the bonds by Junction Company on December 1, 2020.
Answer:
Junction Company
Journal Entry
December 1, 2020:
Debit Cash $832,000
Credit Bonds Payable $800,000
Credit Bonds Premium $27,038
Credit Warrants Liability $4,962
To record the issuance of the bonds.
Explanation:
a) Data and Calculations:
December 1, 2020:
Face value of nonconvertible bonds with detachable stock purchase warrants = $800,000
Issue price of bonds = $832,000 (1.04 * 800 * $1,000)
Number of bonds issue = 800
Par value per bond = $1,000
Maturity period = 10 years
Coupon interest rate = 10%
Option price of each warrant = $15 per common stock share
Market price of the option = $3
Value of warrant = $4,800 ($3 * 800 * 2)
Allocation of bond price:
Bonds = $827,038 ($800,000/$804,800 * $832,000)
Warrants = $4,962 ($4,800/$804,800 * $832,000)
Capital budgeting is the process of planning and controlling investments in assets that are expected to produce cash flows for one year or less. This statement is:
Answer:
True
Explanation:
It is True that Capital budgeting is the process of planning and controlling investments in assets that are expected to produce cash flows for one year or less.
Resource X is necessary to the production of good Y. If the price of resource X falls, the equilibrium price of Y will ______________ and the equilibrium quantity of Y will ________________.
Answer:
fall
rise
Explanation:
If the cost of resource x falls, it becomes cheaper to produce good y. This leads to an increase in supply of y. the supply curve of good y shifts out. As a result, equilibrium price falls and quantity rises
a) Take a real time example of a company of your own choice working in Pakistan and then discuss the factors that lead to pressure for local responsiveness. Discuss it in detail. Draw diagram to show the effect.
Answer:
This responsiveness also promotes the local market orientation of a subsidiary and therefore the strength of its existing network with the businessmen and government authorities.
Explanation:
Usually, firms working within the global market confront two sorts of competitive pressure. They face pressure to scale back costs and pressure to react locally. These competing forces throw a corporation into conflict. It's going to also need a corporation to supply a consistent product on the international market to downstream the experience curve as soon as feasible. In response to local pressures, however, it's necessary for a firm to differentiate its product offering and marketing strategy from one country to a different in an effort to satisfy the various demands arising from domestic consumer preferences, business practices, channels of distribution, competitive conditions and public policies. Because it's going to entail substantial redundancy and a scarcity of product standards to adapt products to varied domestic needs, the result could also be a rise in prices.
While some organizations, like Company A, face a high to scale back cost and low for the reaction of locally, while others, like Company B, face low to scale back costs and high for local reaction, many companies are within the situation of Company C. It suggests and supports three layers of variables, including environmental, structural, and organizational responsiveness. The analysis of 168 MNE companies within the People's Republic of China shows that environmental complexity and therefore the uniqueness of business culture increase local reaction. Structural variables like the intensity of competition, heterogeneity of demand and localisation of components increase local reaction.
The Omega started the year with $650,000 in the common stock account and $1,318,407 in the additional paid-in surplus account. The end-of-year balance sheet showed $720,000 and $1,299,310 in the same two accounts, respectively. What is the cash flow to stockholders if the firm paid $68,500 in dividends
Answer:
$17,597
Explanation:
Calculation to determine the cash flow to stockholders
Using this formula
Cash flow to stockholders = Dividends paid - Common stock issued
Let plug in the formula
Cash flow to stockholders= Dividends 68,500 - (1299,310+ 720,000)- (1318407+ 650000)
Cash flow to stockholders= Dividends 68,500 - (2,019,310-1,968,407)
Cash flow to stockholders= 68,500-50,903
Cash flow to stockholders= $17,597
Therefore the cash flow to stockholders if the firm paid $68,500 in dividends is $17,597
In 2010 the Federal Reserve Board (the Fed) reported that nonfinancial companies in the United States had around $2 trillion in cash and short-term liquid assets. As the U.S. economy was still struggling, consumer spending remained low, and companies resisted in investing in new projects that would create value for their stakeholders.
As the economy improves, uncertainty in the markets decreases, and companies will start investing in projects. However, the challenge of analyzing and selecting projects that would generate cash flows and returns and add value to the firm would remain.
The assumptions in the analysis about cost of equity and debt—overall and for projects—have a significant impact on the type and the value of investments that a company makes.
According to the Association of Finance Professionals’ report, published in 2011 on current trends in estimating and applying the cost of capital, companies use a discount rate that is usually above or below 1% of the company’s true rate. Using this information and certain inputs from the Fed, Michael Jacobs and Anil Shivdasani estimated that a 1% drop in the cost of capital leads U.S. companies to increase their investment by about $150 million over three years.
Based on your understanding of the concept of cost of capital, which of the following statements are valid?
a. Companies always use the weighted average cost of capital (WACC) as the discount rate to analyze the financial viability of projects.
b. A company’s estimate of cost of capital impacts its application in the analysis of new investments that, consequently, affects the value of the firm and shareholders’ wealth.
c. Investors care about the incremental value addition that new projects are making; they are least concerned with the discount rates that the company uses.
d. Companies incorporate the required rate of return in the cost of capital to compensate investors for the components’ risks.
Answer:
b. A company’s estimate of cost of capital impacts its application in the analysis of new investments that, consequently, affects the value of the firm and shareholders’ wealth. d. Companies incorporate the required rate of return in the cost of capital to compensate investors for the components’ risks.Explanation:
A company's estimate of cost of capital, is serious because it is used in the calculations of the returns from a new investment which is used to calculate the value of the firm and its shareholders. They therefore need to make these estimates as accurate as possible.
Companies also incorporate the required rate of return in the cost of capital so that the investors who provided this capital, can be ensured of a return on their investment because it would be accounted for in analysis of new investments.
A company wants to have $20,000 at the end of a ten-year period by investing a single sum now. How much needs to be invested in order to have the desired sum in ten years, if the money can be invested at 12%? (Ignore income taxes.) Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.
Answer:
$6,439.56
Explanation:
The computation is shown below:
As we know that
Future value = Present Value × Future Value Interest Factor
where,
Future value interest factor = ( 1 + r )^10
= ( 1.12 )^10
= 3.1058
Now
Present value of the future sum is
= $20,000 ÷ 3.1058
= $6,439.56
Calculate the geometric average return earned by an investor over three years if she earned 6% in the first year of an investment, 12% in the second year and 10% in the third year.
Answer:
8.96%
Explanation:
[tex]\sqrt[\frac{1}{n} ]{x1. x2.x3...}[/tex] = geometric average return
n = number of observations
x1 = observations
(0.06 x 0.12 x 0.1)^(1/3) = 0.0896 = 8.96%
Assume that the U.S. borrowing rate is 8% while the German is 10%. If Euros are borrowed by a U.S. firm for one year, they would have to _____ against the dollar by_____ to have the same effective financing rate as borrowing dollars. Group of answer choices Appreciate, 1.1818%. Appreciate, 1.8518%. Depreciate, 1.6363%. Depreciate, 1.8518%. Depreciate, 1.1818%.
Answer:
Depreciate 1.1818
Explanation:
U.S. has a borrowing rate of 8% and German has borrowing rate of 10%. If U.S. dollars are borrowed from firm then Euros will depreciate to match with the dollar borrowing.
[1 + 8% ] / [ 1 + 10%] - 1 = - 1.1818
One of the best sources of precall information is a prospect's own salespeople because they empathize with the salesperson's situation.
a. True
b. False
Answer:
a. True
Explanation:
In the case when the information is precalled so here the sources that considered to be best should be the own salespeople as it would emphathize the situation of the sales person
So as per the given situation, the given statement is true
Hence, the option a is correct
Therefore, the second option is wrong
The petty cash fund had an initial imprest balance of $110. It currently has $21 and petty cash tickets totaling $73 for office supplies. The entry to replenish the fund would contain:_______
a) a debit to Petty Cash for $89
b) a debit to Cash Short & Over for $16.
c) a credit to Petty Cash for $89
d) a credit to Cash Short & Over for $16
Answer:
B. Debit to cash short and over $16
Explanation:
The total entry to replenish the cash would be:
office supplies. 73
cash short and over 16
Cash. 89
The entry to replenish the fund would contain is Debit to cash short and over $16. Thus, option B is correct.
What is petty cash?Petty cash is a minuscule portion of discretion funds in the form of cash that is used for expenses when it would be inconvenient and costly to make a distribution by cheque due to the hassle and costs of drafting, signing, and then cashing the cheque.
Petty cash seems to be a small sum of money held on the corporate premises to cover minor monetary demands. Office supplies, cards, flowers, and other items are examples of these contributions. Petty cash is kept in a petty cash drawer or box close to where it is required.
The total entry to replenish the cash would be:
Office supplies 73
cash short and over 16
To Cash 89
Therefore, it can be concluded that the replenishment entry would be Debit to cash short and above $16. As a result, option B is correct.
Learn more about petty cash here:
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The lifetime of a particular brand of A batteries follows a normal distribution. The mean lifetime of particular brand of A batteries is 1000 hours, with a standard deviation of 100 hours.
1. What percentage of batteries last more than 1100 hours?
a. 2.5%.
b. 5%.
c. 16%.
d. 32%.
2. What is the probability that a randomly selected battery lasts more than 875 hours?
a. 0.3749.
b. 0.8944.
c. 0.8716.
d. 0.1056.
3. What is the probability that a randomly selected battery lasts between 1150 and 1250 hours?
a. 0.2417.
b. 0.4332.
c. 0.9915.
d. 0.3085.
Answer:
1. d. 32%
2. a. 0.3749
3. c. 0.9915
Explanation:
Percentage of battery is calculated by;
mean - sample / standard deviation
1100 hours - 875 / 100 = 225 / 875 = 0.3749
z-score calculated based on the probability of battery is 0.6549
[ 1250 - 1150 ] / 1250 = 0.9915
Umatilla Bank and Trust is considering giving Kingbird, Inc. a loan. Before doing so, it decides that further discussions with Kingbird, Inc.’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $253,450. Discussions with the accountant reveal the following.
1. Kingbird, Inc. sold goods costing $51,940 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
2.The physical count of the inventory did not include goods costing $88,290 that were shipped to Kingbird, Inc. FOB destination on December 27 and were still in transit at year-end.
3. Kingbird, Inc. received goods costing $25,690 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count.
4. Kingbird, Inc. sold goods costing $53,020 to Ehler of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Kingbird, Inc. physical inventory.
5. Kingbird, Inc. received goods costing $46,060 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $253,450.
Answer:
$286,100
Explanation:
Calculation to determine the correct inventory amount on December 31.
Using this formula
Correct Inventory amount=Ending Inventory+ Goods received shipping points + Goods shipped FOB destination-Goods received FOB destination
Let plug in the formula
Correct Inventory amount=$253,450+$25,690+$53,020-$46,060
Correct Inventory amount=$286,100
Therefore the correct inventory amount on December 31 is $286,100
Suppose Skyler invests in an annuity that pays 3.2% annual interest, compounded monthly. If she contributes $155 every month for 10 years, how much interest would she earn during that time
Answer: $3,286.47
Explanation:
Find the future value of the annuity after 10 years.
Number of periods = 10 * 12 months = 120 months
Interest = 3.2% / 12 = 3.2/12%
Future value of annuity = Annuity * ( (1 + rate)^ number of periods- 1) / rate
= 155 * ( ( 1 + 3.2%/12) ¹²⁰- 1) / 3.2%/12
= $21,886.47
The find the amount that the money would have come to without being invested:
= 155 * 120 months
= $18,600
Interest is:
= 21,886.47 - 18,600
= $3,286.47
Ryan Company deposits all cash receipts on the day they are received and makes all cash payments by check. Ryan's June bank statement shows $27,861 on deposit in the bank. Ryan's comparison of the bank statement to its cash account revealed the following
Deposit in transit 3,350
Outstanding checks 1,350
Answer: $29,861
Explanation:
In order to adjust the bank statement balance to the books, the following is done:
= Bank statement + Deposit in transit - Outstanding checks
= 27,861 + 3,350 - 1,350
= $29,861
When the United States sends money to Japan to help earthquake survivors, in which account is this transaction recorded
Answer:
When the United States sends money to Japan to help earthquake survivors, in which account is this transaction recorded? o credit item in that country's balance of payments.
Kuley plans to retire in 8 years with $263,700 in her account, which has an annual return of 8.17 percent. If she receives annual payments of X, with her first payment of X received in 8 years and her last payment of X received in 15 years, then what is X, the amount of each payment
Answer:
Kuley
If she receives annual payments of X, with her first payment of X received in 8 years and her last payment of X received in 15 years, then the amount of each payment is:
X = $50,944.35
Explanation:
a) Data and Calculations:
Amount in savings account in 8 years' time = $263,700
Annual return rate = 8.17%
Period of savings from Year 8 to Year 15 = 7 years
Annual payments = X
X = $50,944.35
From an online financial calculator, the payment is determined as follows:
N (# of periods) 7
I/Y (Interest per year) 8.17
PV (Present Value) 263700
FV (Future Value) 0
Results
PMT = $50,944.35
Sum of all periodic payments $356,610.45
Total Interest $92,910.45
When capital is plotted on the vertical axis and labor is plotted along the horizontal axis, the marginal rate of technical substitution (MRTS) of labor for capital along a convex isoquant A. declines as more and more labor is used. B. equals the negative of the slope of the isoquant. C. equals the marginal product of labor divided by the marginal product of capital. D. All of the above are correct. E. Only answers A and B are correct.
Answer: D. All of the above are correct.
Explanation:
The marginal rate of technical substitution (MRTS) refers to the economic theory which explains the rate at which a particular factor of production must reduce in order for the same level of productivity to be maintained when there's another production factor which is increased.
When the capital is plotted on the vertical axis and labor is plotted along the horizontal axis, then the marginal rate of technical substitution of labor for capital along a convex isoquant will reduce as more and more labor is used. Also, the MRTS equals the negative of the slope of the isoquant and equals the marginal product of labor divided by the marginal product of capital that's MRTSL,K=-MPL/MPK
Therefore, the correct option is All of the above.
If the subtotal of the income statement debit column is $250,000, the subtotal of the income statement credit column is $300,000, and the total of the Statement of Retained Earnings debit column is $475,000, what is the beginning balance in Retained Earnings
Answer:
$425,000
Explanation:
Calculation to determine the beginning balance in Retained Earnings
First step is to prepare the Income Statement
Revenues $300,000
Less Expenses ($250,000)
Profit $50,000
Now let calculate the beginning balance in Retained Earnings
Using this formula
Beginning balance in Retained Earnings= Statement of Retained Earnings debit column -Income Statement Profit
Let plug in the formula
Beginning balance in Retained Earnings=$475,000-$50,000
Beginning balance in Retained Earnings=$425,000
Therefore the beginning balance in Retained Earnings is $425,000
Assume the money supply is $800, the velocity of money is 8, and the price level is 2. Using the quantity theory of money: a. Determine the level of real output.
Answer:
3200
Explanation:
The computation of the level of real output is given below;
We know that
Money supply × velocity of money = Price level × Real output
And,
Nominal output = Price level × real output.
Now
a) level of real output = money supply × velocity of money ÷ price level
= 800 × 8 ÷ 2
= $6400 ÷ 2
= 3200
The table below pertains to a small agricultural economy where the typical consumer's basket
consists of 10 pounds of apples and 20 pounds of oranges. If 2017 is the base year, then the CPI
for 2018 was?
Year
Price of Apples
Price of Oranges
2017
$2.0 per pound (Apples)
$2.00 per pound (Oranges)
2018
$1.5 per pound (Apples)
$3.00 per pound (Oranges)
A) 125.0
B) 100.0
C) 95.0
D) 110.0
Answer:
125
Explanation:
Given the table:
Year
Price of Apples
Price of Oranges
2017
$2.0 per pound (Apples)
$2.00 per pound (Oranges)
2018
$1.5 per pound (Apples)
$3.00 per pound (Oranges
Consumer price index is obtained using the formular :
CPI = (Cost of market basket In current period / Cost of market basket in base period) * 100
Current period (2018):
Cost of 10 pounds of apple and 20 pounds of oranges :
($1.5 * 10) + ($3 * 20) = $15 + $60 = $75
Base year (2017)
Cost of 10 pounds of apple and 20 pounds of oranges :
($2 * 10) + ($2 * 20) = $20 + $40 = $60
Hence,
CPI = ($75 / $60) * 100
CPI = 1.25 * 100
CPI = 125
Suppose there are three factories in Macroland and the following occurred in 2019: Metal, plastic and a car factory. Metal factory produces $200, plastic factory produces $500, and car factory produces $700, of its respective products. The metal factory sells all of its output to the car factory. The plastic factory sells $80 worth of plastic to the car factory, $20 to the government, and the rest to consumers. The Car factory exports $50 of its cars and sells the rest to consumers.
Required:
What is the GDP of Macroland in 2019?
Answer:
$1120
Explanation:
The computation of the GDP is shown below:
Y = C + I + G + X
Here Y denotes the GDP
C denotes the consumption = $500 - $80 - $20 = $400 and 700 - 50 = $650
I denotes the investment = $
G denotes the government purchase = $20
X denotes the net exports = $50
So,
Y = $400 + $650 + 0 + $20 + $50
= $1120
During normal economic times, unemployment in Europe tends to be ________ than in the United States mainly because of ________.
Answer:
higher; labor market regulations
Explanation:
I hope this helps you!
Often, an organization makes a portion of its ________ accessible to external parties as its extranet.a. blog.b. inner firewall.c. internet.d. intranet.
Answer:
d. intranet.
Explanation:
A local area network (LAN) refers to a group of personal computers (PCs) or terminals that are located within the same general area and connected by a common network cable (communication circuit), so that they can exchange information from one node of the network to another. A local area network (LAN) is typically used in small or limited areas such as a set of rooms, a single building, school, hospital, or a set of well-connected buildings.
Generally, some of the network devices or equipments used in a local area network (LAN) are an access point, personal computers, a switch, a router, printer, etc.
An intranet can be defined as a private computer network established within an organization and is typically used for securely sharing organizational informations, computing resources, operational system, and collaboration tools between employees through an internet protocol (IP). Thus, it's mainly a private network that is only accessible to authorized users or employees within an organization.
However, an organization often makes a portion of its intranet accessible to external parties such as vendors, authorized customers, partners, etc., as its extranet in order to have access to business information.
The applicable tax rate is 25%. There are no other temporary or permanent differences. Franklin's taxable income ($ in millions) is:
Answer: $160
Explanation:
Taxable income = Pretax income + (Non deductible expenses) - Deductible expenses
= Pretax income + Overweight fees + Depreciation expense - Depreciation in the tax return
= 195 + 5 + 70 - 110
= $160
Martinique Fashion is an all-equity firm that has projected perpetual EBIT of $344,000. The current cost of equity is 12.4 percent and the tax rate is 34 percent. The company is in the process of issuing $989,000 worth of perpetual bonds with an annual coupon rate of 6.6 percent at par. What is the value of the levered firm
Answer:
$2,167,228
Explanation:
Calculation to determine the value of the levered firm
First step is calculate Unlevered firm value using this formula
Unlevered firm value = EBIT(1 - Tax) / Cost of equity
Let plug in the formula
Unlevered firm value = $344,000(1 - 0.34) / 0.124
Unlevered firm value = $344,000(0.66)/0.124
Unlevered firm value = $1,830,968
Now let calculate the Levered firm value using this formula
Levered firm value = Unlevered firm value + (Debt * Tax rate)
Let plug in the formula
Levered firm value = $1,830,968 + ($989,000 * 0.34)
Levered firm value = $1,830,968+$336,260
Levered firm value = $2,167,228
Therefore the value of the levered firm is $2,167,228
What is the amount of the risk premium on a U.S. Treasury bill if the risk-free rate is 2.8 percent and the market rate of return is 8.35 percent
Answer:
5.55%
Explanation:
risk premium = market rate of return - risk free rate
8.35 - 2.8 = 5.55
An increase in debit balances means more investing by naive investors and would be a bearish indicator.
a) true
b) false
Answer:
b) false
Explanation:
An increase in debit balances means more investing by naive investors and would be a bearish indicator.
A debit balance can be regarded as account balance that has positive balance at the left side of the account.
Some of the Accounts with debit balance are;expenses as well as
assets and losses. Some of these accounts Examples could be fixed assets accounts receivable as well as fixed assets. Some Contra accounts usually have debit balances , some of theses are;contra equity and contra liability. Typical example is the treasury stock account. bearish harami which can be regarded as candlestick chart indicator, ,that is responsible for reversal as regards bull price movement.
Delaware Chemical Company uses oil to produce two types of plastic products, P1 and P2. Delaware budgeted 28,300 barrels of oil for purchase in June for $71 per barrel. Direct labor budgeted in the chemical process was $221,000 for June. Factory overhead was budgeted at $361,700 during June. The inventories on June 1 were estimated to be:
Question Completion:
The inventories on June 1 were estimated to be:
Oil $15,200
P1 8,500
P2 8,600
Work in process 12,900
The desired inventories on June 30 were:
Oil $16,100
P1 9,400
P2 7,900
Work in process 13,500
Use the preceding information to prepare a cost of goods sold budget for June 2015
Answer:
Delaware Chemical Company
The Cost of goods sold budgeted for June 2015 is:
= $2,597,500.
Explanation:
a) Data and Calculations:
Budgeted purchase of barrels of oil for June = $2,009,300 (28,300 * $71)
Budgeted direct labor for June 221,000
Budgeted factory overhead for June 361,700
The inventories on June 1 were estimated to be:
Oil $15,200
P1 8,500
P2 8,600
Work in process 12,900
Beginning inventory $45,200
The desired inventories on June 30 were:
Oil $16,100
P1 9,400
P2 7,900
Work in process 13,500
Ending inventory $39,700
Cost of goods sold:
Beginning inventory $45,200
Budgeted purchase 2,009,300
Budgeted direct labor 221,000
Budgeted factory overhead 361,700
Ending inventory (39,700)
Cost of goods sold = $2,597,500
A cost-benefit analysis of a highway is difficult to conduct because analysts a. are unlikely to have access to costs on similar projects. b. cannot estimate the explicit cost of a project that has not been completed. c. are not able to consider the opportunity cost of resources. d. will have difficulty estimating the value of the highway.
Answer:
d. will have difficulty estimating the value of the highway.
Explanation:
Cost-benefit analysis (CBA) is used to examine and compare the cost associated with a project or task and the benefits derived from it.
Simply stated, cost-benefit analysis is a form of utilitarianism commonly used by individuals, business firms and government in the decision-making process, as all the cost incurred are determined and analyzed.
This ultimately implies that, it may be used to determine how changes in differing levels of activities such as costs and volume affect a company's operating income and net income.
Cost-benefit analysis (CBA) sums the total cost associated with a project (activity) and compares this cost against the total benefits that would be generated. Thus, it helps in the decision-making process by comparing the net present value (NPV) of the cost of a particular project with the net present value (NPV) of its benefits.
In this context, the cost-benefit analysis of a highway would be difficult to conduct because analysts will have difficulty estimating the value of the highway.
This ultimately implies that, the value or cost benefits associated with the highway is difficult to ascertain or estimate.