Given: Price Demand = $150-8QPrice Supply = $10+2Q
The equilibrium quantity is calculated by setting both equations equal to each other:
[tex]$150-8Q = $10+2Q$140 = 10Q Q = 14[/tex]
At the equilibrium quantity, the price can be determined from either the demand or the supply equation.
P = $150-8Q = $150 - 8(14) = $34Part
(B):Consumer Surplus (CS) is the difference between the highest price the consumer is willing to pay (i.e., the demand curve)
and the actual market price.
[tex]Ps = $10 + 2Q = $10 + 2(14) = $38[/tex]
Producer surplus (PS) is the difference between the market price and the lowest price the producer is willing to accept (i.e., the supply curve).
PS = (34-10) x 14 / 2 = $168
Part (D):At $10 per bag, the new price paid by the consumer will be:
$150-8Q+$10 = $160-8Q
and the price received by the producer will be $10 less than before:
$10+2Q-$10 = 2Q
The new equilibrium quantity is calculated by setting price demand equal to price supply:
$160-8Q = 2Q+10Q = 13.3
The new producer's price will be $10 + $13.3 = $23.3.
The new consumer's price will be $150 - 8(13.3) + $10 = $55.40Part (E):
The new producer surplus is calculated as the area of the trapezoid with base width of 13.3 units,
height of $23.3 - $10 = $13.3, and legs of $38 - $23.3 and $34 - $23.3, respectively.PS2 = (13.3)($13.3 + $38 - 2($23.3))/2 = $60.11
The new consumer surplus is calculated as the area of the triangle formed by the new price, the quantity from the new equilibrium, and the y-axis.
CS2 = (1/2)($150 - $55.4)(13.3) = $703.75
The change in PS is PS2 - PS1 = $60.11 - $168 = -$107.89.
The change in CS is CS2 - CS1 = $703.75 - $686.00 = $17.75.
Part (F):The tax revenue is calculated as the product of the tax rate and the new equilibrium quantity.
R = $10 x 13.3 = $133
The deadweight loss (DWL) is the area of the triangle bounded by the two equilibrium points and the point where the vertical line through the new equilibrium intersects the demand curve. It is equal to:
(1/2)($38-$34)(14-13.3) = $1.05.
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In a country such as South Africa, the most important characteristic of the business world in which it operates includes. a. the freedom of individuals to establish any business of their choice b. the state owning and controlling the community's resources or factors of production c. the limited choice of products and services that the state offers d. the allocation of resources which are not affected by free markets
The country has a relatively free-market economy, which means that resources are allocated according to supply and demand and are not affected by the state
In a country such as South Africa, the most important characteristic of the business world in which it operates is the freedom of individuals to establish any business of their choice.
As an emerging economy, South Africa has made strides towards promoting economic growth through entrepreneurship, small business development, and foreign investment.
The government of South Africa has implemented a number of policies to support the establishment and growth of small and medium enterprises. These include the Small Enterprise Development Agency (SEDA), which provides training, advisory services, and funding support to entrepreneurs.
However, the government still plays a significant role in the economy through regulation and intervention.
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. How would you apply Facing History and Ourselves (FHAO) in
your own classroom, school, district, or workplace?
Facing History and Ourselves (FHAO) is an organization that offers resources and training for educators to help students understand historical and current events and develop critical thinking skills. FHAO aims to help students become informed and engaged citizens who can recognize and confront injustice in their communities and the world.
In order to apply FHAO principles and strategies in a classroom, school, district, or workplace, there are several steps that can be taken. These include:
1. Familiarize yourself with FHAO resources and strategies: To apply FHAO principles and strategies, it is important to first understand them. Take advantage of the many resources that FHAO offers, such as books, videos, and lesson plans, and attend training sessions or workshops if possible.
2. Incorporate FHAO content into your curriculum or workplace: Once you are familiar with FHAO principles and strategies, find ways to incorporate them into your curriculum or workplace. For example, you could use FHAO lesson plans to teach about historical events such as the Holocaust or the Civil Rights Movement, or you could use FHAO strategies to facilitate discussions about current events or social issues.
3. Encourage student-led discussions and activities: FHAO emphasizes the importance of student-led discussions and activities that promote critical thinking and engagement. Encourage your students or colleagues to take an active role in discussions and activities, and provide opportunities for them to share their perspectives and ideas.
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Xavier put $50000 down on his first condo. He borrowed the rest from his parents at an interest rate of 3.5% compounded weekly. For the first 10 years, he mady weekly mortgage payments of $300 before increasing the amount he repaid them to $415 per week for seven more years. (a) What was the purchase price of the property? (b) How much interest did Xavier pay his parents?
Roth individual retirement accounts (IRAs) are taxed neither when you make contributions nor when you make withdrawals.
Roth IRAs offer a unique tax advantage compared to traditional IRAs. Contributions to a Roth IRA are made with after-tax dollars, meaning you've already paid taxes on the income used for contributions. As a result, you do not receive an immediate tax deduction for Roth IRA contributions. However, the benefit comes during retirement when you make qualified withdrawals from the account. Withdrawals from a Roth IRA are typically tax-free, including both the contributions and any investment gains, as long as certain conditions are met. This tax-free treatment applies to both the initial contributions and the accumulated earnings.This tax structure makes Roth IRAs an attractive option for individuals who anticipate being in a higher tax bracket during retirement or those who prefer the flexibility of tax-free withdrawals. It allows for potential tax-free growth over time and provides a source of tax-free income in retirement.
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In Countryland, there are only 3 goods: coffees, books, and chairs. The table below shows the prices and quantities produced of these goods in 2019, and 2020: a) Calculate the nominal GDP in 2019 and 2020 for Countryland. (5 marks) b) Calculate the real GDP in both years for this economy using 2019 as the base year. Compare the growth rate of nominal GDP and real GDP. Explain. (5 marks) c) Given your answers in a) and b) calculate the GDP deflator in both years and the inflation rate.
Given the information of prices and quantities produced in 2019 and 2020, let us calculate the nominal GDP for both the years. Here is the data given:
Year | Good | Price | Quantity Produced2019 | Coffee | 2.50 | 40 2019 | Books | 7.50 | 20 2019 | Chairs | 25 | 102020 | Coffee | 3.50 | 60 2020 | Books | 10 | 30 2020 | Chairs | 30 | 12
a) Nominal GDP Calculation : Nominal GDP = (Price of Good * Quantity of Good) + (Price of Good * Quantity of Good) + (Price of Good * Quantity of Good)
Nominal GDP 2019 = (2.50 * 40) + (7.50 * 20) + (25 * 10)
Nominal GDP 2019 = $1750
Nominal GDP 2020 = (3.50 * 60) + (10 * 30) + (30 * 12)
Nominal GDP 2020 = $1890
b) Real GDP Calculation : Real GDP = (Price of Good in the Base Year * Quantity of Good) + (Price of Good in the Base Year * Quantity of Good) + (Price of Good in the Base Year * Quantity of Good)
Real GDP 2019 = (2.50 * 40) + (7.50 * 20) + (25 * 10)
Real GDP 2019 = $1750
Real GDP 2020 = (2.50 * 60) + (7.50 * 30) + (25 * 12)
Real GDP 2020 = $1875
Growth Rate of Nominal GDP = [(Nominal GDP of 2020 - Nominal GDP of 2019)/Nominal GDP of 2019] * 100
Growth Rate of Nominal GDP = [(1890 - 1750)/1750] * 100
Growth Rate of Nominal GDP = 8%
Growth Rate of Real GDP = [(Real GDP of 2020 - Real GDP of 2019)/Real GDP of 2019] * 100
Growth Rate of Real GDP = [(1875 - 1750)/1750] * 100
Growth Rate of Real GDP = 7.14%
The growth rate of Nominal GDP is more than the growth rate of Real GDP. This is because the price levels have increased between the two years, thus showing an increase in Nominal GDP but the increase in Real GDP is relatively low due to the adjustment of price levels with the base year.
c) Calculation of GDP Deflator : GDP Deflator = (Nominal GDP/Real GDP) * 100
GDP Deflator 2019 = (1750/1750) * 100
GDP Deflator 2019 = 100
GDP Deflator 2020 = (1890/1875) * 100
GDP Deflator 2020 = 101.6
Inflation Rate = [(GDP Deflator of 2020 - GDP Deflator of 2019)/GDP Deflator of 2019] * 100
Inflation Rate = [(101.6 - 100)/100] * 100
Inflation Rate = 1.6%
Thus, the GDP Deflator has increased between the two years and hence there is a positive inflation rate.
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one could argue that gdp is not a good measure of the standard of living in a nation because it
GDP fails to account for income inequality, non-market activities, environmental sustainability, and social factors, limiting its ability to measure the standard of living accurately.
GDP measures the total economic output of a country, primarily focusing on the production and consumption of goods and services. However, it does not provide a comprehensive assessment of the standard of living for several reasons.
Firstly, GDP does not consider income distribution. It aggregates all economic activity, meaning that high GDP figures can coexist with significant income inequality. A country with a high GDP may have a small elite enjoying vast wealth while a large portion of the population struggles with poverty and limited access to basic necessities.
Secondly, GDP does not account for non-market activities and the informal economy. It does not capture unpaid work, such as household chores and caregiving, which are crucial for the functioning of society but are not accounted for in GDP calculations.
Similarly, activities within the informal sector, such as small-scale businesses and subsistence farming, often go unrecorded, leading to an incomplete picture of economic activity.
Additionally, GDP fails to consider environmental sustainability and resource depletion. Economic growth measured by GDP can come at the expense of natural resources, ecological damage, and increased pollution, which negatively impact long-term well-being and quality of life.
Moreover, GDP does not capture factors like education, healthcare, social services, and cultural aspects that contribute to the overall standard of living. A nation with high GDP may still have inadequate access to quality education or healthcare, limiting opportunities and well-being for its citizens.
In summary, while GDP provides a measure of economic activity, it falls short in reflecting the overall standard of living and well-being. It overlooks income distribution, non-market activities, environmental sustainability, and various social factors that are vital for a comprehensive assessment of the standard of living in a nation.
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Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $12 million, and production and sales will require an initial $1 million investment in net operating working capital. The company's tax rate is 25%. Enter your answers as a positive values. Enter answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places. a. What is the initial investment outlay? $ million b. The company spent and expensed $150,000 on research related to the new project last year. What is the initial investment outlay? $ milion c. Rather than build a new manufacturing facility, the company plans to install the equipment in a buing in building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay? $ million
a. The initial investment outlay is calculated as follows:
Initial Investment Outlay = Manufacturing Equipment Cost + Initial Working Capital Investment
[tex]Initial Investment Outlay = $12,000,000 + $1,000,000[/tex]
[tex]Initial Investment Outlay = $13,000,000[/tex]
Therefore, the initial investment outlay is[tex]$13 million[/tex].
b. The initial investment outlay, considering [tex]$150,000[/tex] spent and expensed on research related to the new project last year, is calculated as follows:
Initial Investment Outlay = Manufacturing Equipment Cost + Initial Working Capital Investment + Expenses on Research
[tex]Initial Investment Outlay = $12,000,000 + $1,000,000 + ($150,000 × 0.75)[/tex]
[tex]Initial Investment Outlay = $12,000,000 + $1,000,000 + $112,500[/tex]
[tex]Initial Investment Outlay = $13,112,500[/tex]
Therefore, the initial investment outlay, considering [tex]$150,000[/tex]spent and expensed on research related to the new project last year, is [tex]$13.11 million[/tex]. c. The initial investment outlay, considering that the building could be sold for[tex]$1.5 million[/tex] after taxes and real estate commissions, is calculated as follows:
Initial Investment Outlay = Manufacturing Equipment Cost + Initial Working Capital Investment - After-Tax Proceeds from Sale of Old Building
[tex]Initial Investment Outlay = $12,000,000 + $1,000,000 - ($1,500,000 × 0.75)[/tex]
[tex]Initial Investment Outlay = $12,000,000 + $1,000,000 - $1,125,000[/tex]
[tex]Initial Investment Outlay = $11,875,000[/tex]
Therefore, the initial investment outlay, considering that the building could be sold for[tex]$1.5 million[/tex] after taxes and real estate commissions, is [tex]$11.88 million[/tex].
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Acme Fashion Company Acme Fashion Company (Acme) was founded fifteen years ago in England, when a small retail store was opened to sell premium-priced women's clothing based on traditional Indian designs. During its first five years business expanded quite quickly and two more product ranges were introduced. The three product ranges have remained essentially the same, with minor styling changes, for the last ten years. Although Acme continues to own the original retail store, the store forms a small part of its operations and has little impact on the main business of selling premium-priced women's clothing to retailers in Europe. The market for their products is well defined and there are many similar supply companies. The business experienced many ups and downs during its lifetime before Acme recognised that the business was directly linked to changes in the various European economies. When the economy expanded super profits could be made. When the economy slowed it was necessary to curtail operations. Outsourcing some production to other manufacturers assists in handling the business peaks and troughs. Today, Acme has sales of around £10 million per annum, profits of £2 million, and around 200 employees who are organised on a functional structure. There are no borrowings. Mr Patel is now Chairman of the company and has an executive board of experienced professionals who have been with the company for many years. They have detailed knowledge of both the business and the European market places, but are more limited when it comes to discussing developments outside these markets. The Chairman called a meeting of the board to discuss the strategic development and direction for Acme. After the meeting, the following statement was prepared for circulation to the board members and senior managers for their comments and observations. Five-year plan for Acme Fashion Company Business Definition Acme remains committed to the business of selling premium-priced women's clothing based on traditional Indian designs. Key Objective To increase sales from £10 million to £20 million per annum over the next five years. Environment At present Acme sells only in Europe. Global competition is increasing and foreign players have been entering the European markets. To date, Acme has held its market share but there is some evidence that prices can be expected to fall in the near future. We foresee a slow expansion of the European and world economies during the next five years. Some of our European-based competitors, particularly the smaller ones, are now in difficulties as a result of the increases in competition and high labour costs. Labour forms a high percentage of our cost structure also and it may be necessary to consider moving some of our production offshore to lower-cost economies, for example in Asia. Most market places are believed to be facing similar conditions and if we are to grow we must expand our horizons and be more dynamic. Test marketing, through a retailer owned by a relative in New York, suggests the USA market finds our products attractive. Strategy To increase sales from £10 million to £20 million per annum by: - developing and selling new ranges of premium-priced women's clothing to retailers and wholesalers. This will give us a means of defending our home markets and attacking foreign markets. - entering new geographic markets, commencing with the USA. This will assist our growth. - acquiring a related business with a turnover in the range of £2 million to £4 million per annum. This will accelerate our growth as the sales levels will be difficult to achieve by organic growth alone. Critical Success Factors In order to deliver the strategy it is essential that we: 1. Maintain the quality of our products 2. Maintain inventory at current levels 3. Increase European PR and advertising spend 4. Increase sales by 20 per cent per year 5. Increase market share Key Business Activities By carrying out the following activities to the best of our abilities, we will ensure Acme's success. 1. Monitoring sales performance 2. Establishing new sources of supplies 3. Hiring experienced financial advisors, perhaps a merchant banker or consultant 4. Defining profiles for desirable market places 5. Hiring new designers Reward System The board intends to share the benefits of future success with the senior management team and has decided that a bonus will be paid annually of 25 per cent or more if the following targets are achieved: 1. Increase sales by 20 per cent per annum 2. Recruit new dealers and retailers 3. Maintain inventory at current levels 4. Maintain receivables at current level of 45 days outstanding You have been asked to review the above statement and answer the questions below. 2 Questions 1) Critically review the elements of the Making Strategies Work statement from business definition through to strategy inclusive and comment on how appropriate they are.
The statement from business definition to strategy inclusive consists of the following elements: Business Definition: Acme Fashion Company (Acme) was founded fifteen years ago in England, when a small retail store was opened to sell premium-priced women's clothing based on traditional Indian designs.
Key Objective: To increase sales from £10 million to £20 million per annum over the next five years. Environment: At present, Acme sells only in Europe. Global competition is increasing, and foreign players have been entering the European markets. To date, Acme has held its market share, but there is some evidence that prices can be expected to fall in the near future.
Strategy: To increase sales from £10 million to £20 million per annum by developing and selling new ranges of premium-priced women's clothing to retailers and wholesalers; entering new geographic markets, commencing with the USA; and acquiring a related business with a turnover in the range of £2 million to £4 million per annum.
This will accelerate our growth as the sales levels will be difficult to achieve by organic growth alone. Critical Success Factors: It is essential that Acme maintain the quality of its products; maintain inventory at current levels; increase European PR and advertising spend; increase sales by 20 per cent per year; and increase market share.
Key Business Activities: Monitoring sales performance; establishing new sources of supplies; hiring experienced financial advisors, perhaps a merchant banker or consultant; defining profiles for desirable market places; and hiring new designers. Reward System:
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Summarise the six tactics for managing supply shortfalls which are explained in the Sheffi, Y. (2020) - Who Gets What When Supply Chains Are Disrupted? MIT Sloan Management Review
– For each tactic in Sheffi (2020), identify a (one) complementary and/or opposing supply chain driver of competitive advantage in "Fundamentals of supply chain management twelve drivers of competitive advantage" (Mentzer, J. (2004)
– Provide at least one example of a situation (industry type/market segment/product type/supply chain configuration/geographical location/company size/etc.) where the suggested tactics and the complementary and/or opposing driver is suitable and one example where the selected strategies are not suitable. In other words, 1 tactic from Sheffi, Y. 2020 and a driver from Mentzer’s book that support/complement and/or oppose Sheffi’s (2020) suggested tactic; and provide suitability and unsuitability of each of Mentzer’s driver used in the context of industry type/market segment/product type/supply chain configuration/geographical location/company size/etc.) chosen above. Repeated for each of the six tactics and drivers selected.
The six tactics are the following as explained by Sheffi, Y. (2020):
Tactic 1: Reduce the Demand for Scarce Products/Services
Tactic 2: Increase Supply
Tactic 3: Allocate Inventory
Tactic 4: Substitute Products/Services
Tactic 5: Change Product/Service Specifications
Tactic 6: Prioritize Customers
What informs these tactics?Tactic 1: Reduce the Demand for Scarce Products/Services: Sheffi (2020) suggests reducing the demand for scarce products/services to manage supply shortfalls.
Complementary Driver from Mentzer (2004): Customer Service: can play a complementary role by effectively communicating changes to customers, managing their expectations, and providing suitable alternatives or substitutes.
Suitability Example:the airline industry, here, customer service plays a crucial role in proactively informing passengers about changes, offering alternative routes or travel options, and ensuring their satisfaction.
Unsuitability Example: In the fast-fashion industry, customers may quickly switch to alternative brands, resulting in lost market share and competitive disadvantage.
Tactic 2: Increase Supply: Sheffi (2020) suggests increasing supply to meet demand during shortages. This can involve actions like increasing production capacity, expanding supplier networks, or sourcing from alternative locations.
Complementary Driver from Mentzer (2004): Supplier Partnerships: Building strong partnerships with suppliers can help in securing additional supply during shortages. Collaborative relationships, trust, and shared risk can facilitate increased supply from existing or new sources.
Suitability Example: In the automotive industry, partnerships allow for quick access to additional supply and help maintain production levels.
Unsuitability Example: In the high-end luxury goods market, increasing supply during shortages may undermine the perception of scarcity and exclusivity, diminishing the brand's competitive advantage.
Tactic 3: Allocate Inventory: Sheffi (2020) recommends allocating inventory strategically to manage supply shortfalls. This involves prioritizing customers, regions, or products based on their criticality or profitability.
Complementary Driver from Mentzer (2004): Information Technology: Information technology can support inventory allocation by providing real-time visibility into inventory levels, demand patterns, and customer preferences. Advanced analytics and demand forecasting tools can help in making data-driven allocation decisions.
Suitability Example: In the pharmaceutical industry, information technology facilitates accurate demand forecasting and inventory optimization.
Unsuitability Example: In the fast-moving consumer goods sector, allocating inventory to only certain regions or customer segments during shortages may result in lost sales and dissatisfied customers.
Tactic 4: Substitute Products/Services: Sheffi (2020) suggests substituting products or services to overcome supply shortfalls. This involves identifying alternative offerings that can meet customer needs in the absence of the original product or service.
Complementary Driver from Mentzer (2004): Product Development and Innovation: Strong product development capabilities can support the identification and rapid development of substitute products/services. Innovation-driven organizations can effectively respond to supply disruptions by introducing new offerings or modifying existing ones.
Suitability Example: In the food industry, a company with a strong focus on product development and innovation can quickly adapt recipes and formulations to maintain product availability.
Unsuitability Example: In the luxury jewelry market, customers may expect a specific design or gemstone, and offering substitutes may not align with their preferences, potentially leading to customer dissatisfaction.
Tactic 5: Change Product/Service Specifications: Sheffi (2020) suggests changing product or service specifications to address supply shortfalls. This involves modifying the design, features, or composition of the product or service to align with available supply.
Complementary Driver from Mentzer (2004): Cost Management: Effective cost management practices can support the exploration and implementation of design changes that align with available supply. Cost-conscious organizations can identify opportunities to modify specifications while maintaining customer value.
Suitability Example: In the electronics industry, cost management practices enable companies to identify design changes that can be implemented without significantly impacting product quality or functionality.
Unsuitability Example: In the luxury fashion industry, changing product specifications during shortages may dilute the brand's image and weaken its competitive advantage.
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During the COVID-19 pandemic, the Australian government said China was responsible for the outbreak of the disease. The Chinese government was offended and decided to reduce the quantity of coal China imported from Australia. This resulted in a shortage of coal, needed to run energy power plants. To shield the public from the impact of the Coal Shortage (which includes high and rising energy prices), the government mandated price controls. In particular, the government froze retail prices of energy, including petrol and diesel.
a) What type of price control has China imposed, according to the information above? [2 marks]
Explain the impact of China’s price controls policy on the markets for coal, petrol, and diesel. Does the impact of the price control policy depend on the elasticity of demand and supply? Illustrate your answer with the demand and supply diagram. [5 marks]
b) Explain how China’s price controls have changed consumer surplus, producer surplus, total surplus, and the deadweight loss in the markets for coal, petrol, and diesel. [8 marks]
c) Is the outcome of China’s price control policy fair and efficient? Critically discuss. [5 marks]
According to the information provided above, the Chinese government imposed a retail price freeze of energy which included petrol and diesel.
Hence, the type of price control China has imposed is known as a price freeze or price ceiling.
This is a government-imposed limit on how high a price can be charged on a particular good or service.
The impact of China’s price controls policy on the markets for coal, petrol, and diesel is as follows:
Impact on coal market:
As the Chinese government reduced the quantity of coal China imported from Australia,
there was a shortage of coal which led to an increase in the price of coal.
However, with the implementation of price controls, the prices were maintained below the equilibrium level.
Hence, there was a decline in the quantity of coal supplied, and also, consumers' demand for coal increased leading to an increase in the quantity of coal demanded.
Impact on petrol and diesel markets:
With the imposition of price controls by the Chinese government,
the prices of petrol and diesel were maintained below the equilibrium level.
This led to an increase in the quantity of petrol and diesel demanded by the consumers and a decrease in the quantity of petrol and diesel supplied by the producers.
Yes, the impact of the price control policy depends on the elasticity of demand and supply.
The diagram below illustrates the effect of the price controls on the coal, petrol, and diesel markets.
The imposition of price controls by the Chinese government has changed the consumer surplus, producer surplus, total surplus,
and the deadweight loss in the markets for coal, petrol, and diesel as follows:
Coal market:
The imposition of price controls has resulted in a shortage of coal which increased the price of coal,
but the prices were maintained below the equilibrium level.
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Agarwal Technologies was founded 10 years ago. It has been profitable for the last 5 years, but it has needed all of its earnings to support growth and thus has never paid a dividend. Management has indicated that it plans to pay a 50.25 dividend 3 years from today, then to increase it at a relatively rapid rate for 2 years, and then to increase it at a constant rate of 8.00% thereafter. Management's forecast of the future dividend stream, along with the forecasted growth rates, is shown below. Assuming a required return of 11.00%, what is your estimate of the stock's current value? Use the dividend values provided in the table below for your calculations. Do not round your intermediate calculations. $12.23 $11.28 $13.65 $11.87 $13.30
Agarwal Technologies is a profitable company for the last five years but has not paid a dividend. Management plans to pay a dividend of $50.25 three years from today, then increase it for two years at a rapid rate and then increase it at a constant rate of 8.00%.
The present value of the dividends is calculated as follows: $50.25 ÷ (1 + 0.11)³ = $34.28. The future value of dividends is calculated as follows: Year 1: $50.25 × (1 + 0.20) = $60.30 Year 2: $60.30 × (1 + 0.25) = $75.38 Year 3: $75.38 × (1 + 0.08) = $81.37 Year 4: $81.37 × (1 + 0.08) = $87.85 Year 5: $87.85 × (1 + 0.08) = $94.77
The present value of future dividends is calculated as follows: PV = $60.30 ÷ (1 + 0.11)¹ + $75.38 ÷ (1 + 0.11)² + $81.37 ÷ (1 + 0.11)³ + $87.85 ÷ (1 + 0.11)⁴ + $94.77 ÷ (1 + 0.11)⁵PV = $49.19Total present value of dividends is $34.28 + $49.19 = $83.47 Therefore, the stock's current value is $83.47.
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Philippine Taxation:
Persons subject to the payment of percentage taxes
are engaged in business in the same manner as VATable persons are.
Should they be subjected to the same tax rates? Justify your
No, persons subject to the payment of percentage taxes should not be subjected to the same tax rates as VATable persons.
Here's :According to the Philippine Taxation law, percentage taxes are imposed on persons engaged in businesses that earn revenue of more than 100 thousand pesos annually.On the other hand, VATable persons are those who are engaged in businesses that earn revenue of more than 3 million pesos annually.
It is apparent from the above that percentage tax is imposed on a lower threshold of revenue than VAT. Thus, the tax rates should not be the same for both VATable and non-VATable persons. It would be unfair to expect persons who earn less revenue than the VATable persons to pay the same tax rates.
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Imagine there is a raffle for a single item: a brand-new Corolla to the value of $30,000. You have no belief in winning this raffle but because your friend put his heart into it, you want to prove they’re wrong. You buy only one 10$ ticket, but your friend buys two 10$ tickets. Three thousand tickets are sold. What is the expected value of your gain? What is the expected value of your friend’s gain? What would be the expected value of your friend’s gain if he/she purchased one 20$ ticket instead?
What if you purchase a 10$ ticket and you are entered into a chance of winning the car, a Yamaha motorcycle, and a Samsung S22 ultra. What is the expected value of your gain?
The expected value of your gain is positive, which means that you are more likely to make money than to lose money. The expected value is still relatively small, so you should not expect to get rich by buying raffle tickets.
The expected value of your gain is calculated as follows:
Expected value = (Probability of winning * Value of winning) + (Probability of losing * Value of losing)
The probability of winning is 1 ticket / 3000 tickets = 0.000333.
The value of winning is $30,000.
The probability of losing is 1 - 0.000333 = 0.999667.
The value of losing is -$10.
Therefore, the expected value of your gain is:
Expected value = (0.000333 * 30000) + (0.999667 * -10) = -$2.99
The expected value of your friend's gain is calculated the same way, but they bought two tickets, so their probability of winning is doubled. So, their expected value of gain is:
Expected value = (0.000666 * 30000) + (0.999333 * -10) = -$1.99
If your friend bought one $20 ticket instead, their probability of winning would be the same, but the value of winning would be doubled. So, their expected value of gain would be:
Expected value = (0.000666 * 30000) + (0.999333 * -20) = -$9.99
Finally, if you purchase a $10 ticket and you are entered into a chance of winning the car, a Yamaha motorcycle, and a Samsung S22 ultra, the expected value of your gain:
Expected value = (Probability of winning * Value of winning) + (Probability of losing * Value of losing)
The probability of winning is 1 ticket / 3000 tickets = 0.000333.
The value of winning is $30000 + $5000 + $1000 = $36000.
The probability of losing is 1 - 0.000333 = 0.999667.
The value of losing is -$10.
Expected value = (0.000333 * 36000) + (0.999667 * -10)
Expected value = $10.89
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Which of the following is a constraint to the qualitative characteristics of useful accounting information?
a.conservatism
b.materiality
c.relevance
d.comparability
A. Conservatism is considered useful for decision-making purposes if it meets the following qualitative characteristics: relevance, reliability, comparability, and consistency.
In addition to these characteristics, the financial information must be presented in a format that is understandable and timely. However, there are certain constraints that can impact the accounting information's usefulness. One of those constraints is conservatism. Conservatism, which is an accounting principle, requires businesses to be cautious when valuing their assets and liabilities. This principle directs that losses be recorded as soon as they become apparent but profits should only be recorded when they are fully earned. This has the potential to affect the accuracy of financial statements, as well as the comparability of those statements over time. As a result, conservatism can be considered a constraint to the qualitative characteristics of useful accounting information.
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A community of practice is a social system in which individuals interact to share and develop knowledge. True (B) False \( \operatorname{Sin} \)
The statement "A community of practice is a social system in which individuals interact to share and develop knowledge" is true.
A community of practice is a group of people who come together to share and develop knowledge. This is a form of social learning that is organized around a common interest, a shared profession, or a specific domain of knowledge.
Members of the community learn from each other by sharing experiences, best practices, and the latest developments in their field.Individuals in a community of practice interact with each other to share and develop knowledge.
Members share a common interest in a particular area of expertise, and their interactions are based on mutual learning. They may share information, provide feedback on each other's work, and collaborate on projects.
The community of practice can also function as a forum for members to share challenges and receive feedback and support from others who have experienced similar problems.
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Imagine you have been assigned knowledge champion in a company, how and where will you establish knowledge management strategy and how ?
As a knowledge champion in a company, establishing a knowledge management strategy is critical to enhancing performance and achieving the goals and objectives of the company. The knowledge management strategy should be a holistic approach that is tailored to meet the needs of the company's stakeholders, customers, and partners.
The following are ways and places where a knowledge management strategy can be established:
1. Identify the needs of the stakeholders: Understanding the knowledge needs of the stakeholders is crucial to establishing a knowledge management strategy that meets their needs. This will involve conducting surveys and focus groups to identify the key areas of knowledge gaps.
2. Develop a knowledge management plan: A knowledge management plan should outline the objectives of the strategy and the steps that will be taken to achieve them. This includes establishing policies and procedures, assigning roles and responsibilities, and identifying resources that will be required to implement the plan.
3. Establish a knowledge management system: A knowledge management system should be established to capture, store, and disseminate knowledge across the organization. This includes developing a database that contains the company's knowledge assets, such as best practices, policies, and procedures.
4. Train employees: Employees should be trained on how to use the knowledge management system to ensure that they can effectively access and use the knowledge assets.
5. Monitor and evaluate the strategy: The knowledge management strategy should be monitored and evaluated on a regular basis to determine its effectiveness and make necessary adjustments.
In conclusion, the knowledge management strategy should be flexible and adaptable to meet the evolving needs of the stakeholders. A successful knowledge management strategy can lead to improved performance, increased innovation, and a competitive advantage.
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4. Give 2 concrete strategies and examples of how to build effective employee-employer relationships in an organization. Identify a company you know who has built an effective employee-employer relationship.
In every business organization, employees play a vital role in ensuring productivity and effectiveness in their respective duties. It is therefore important to establish and maintain a strong relationship between employers and employees to boost their morale and motivation towards the attainment of the organizational goals.
Below are two strategies and examples of how to build effective employee-employer relationships in an organization: Effective communication is one of the best strategies to build a good relationship between employees and employers. It is important to maintain an open-door policy to ensure that employees feel free to express their ideas.
Concerns, and suggestions on various issues affecting them in the organization. Employers should also organize regular team-building events and social activities to enhance interaction and teamwork between employees and employers.
The Coca-Cola Company is a good example of an organization that has built an effective employee-employer relationship. They maintain an open-door policy and encourage their employees to participate in decision-making processes, which makes them feel valued and recognized.
2. Offering opportunities for growth and development: Employees appreciate an organization that is committed to their personal and professional growth. Employers should offer opportunities for training, skills development, and career advancement to help their employees to develop their skills and progress in their careers.
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When you're preparing a formal work plan, include a ________ to clarify the problem you
face and a ________ to describe what you plan to accomplish.
A) statistical analysis; hypothesis
B) problem statement; purpose statement
C) yardstick; problem statement
D) descriptive standard; goal analysis
E) hypothesis; work plan
When preparing a formal work plan, include a problem statement to clarify the problem you face and a purpose statement to describe what you plan to accomplish.
B) problem statement; purpose statement
When preparing a formal work plan, it is important to include a problem statement to clarify the problem or challenge you are facing. This statement helps to define the issue at hand and provides a clear understanding of what needs to be addressed.
Additionally, a purpose statement should be included in the work plan to describe what you plan to accomplish. This statement outlines the goals, objectives, or desired outcomes of the project or task.
Therefore, option B) problem statement; purpose statement is the appropriate choice as it accurately describes the components needed in a formal work plan.
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Explain the concept of the fractional reserve system and multiple deposit expansion. Use T accounts, show the money creation potential if a commercial bank receives a $10,000 checking account deposit and where the reserve requirement ratio, (rrr), is 20%. Calculate the money multiplier and the impact on Money Supply. What if the rrrwas 10%? Does this work in reverse? What two factors tend to make the money multiplier smaller than the simple formula suggests?
The fractional reserve system is an arrangement where banks hold only a fraction of their customers' deposits in cash or with the central bank, while lending out the remainder.
This system enables banks to lend money and generate income on the interest charged on loans while keeping a portion of their customers' funds available to meet demand for withdrawals. Multiple deposit expansion refers to the ability of commercial banks to create money in the economy through the process of lending.
The following T-account shows the impact of a 10,000 deposit at a commercial bank with a reserve requirement ratio of 20%.
Assets Liabilities Reserves 2,000 Deposits 10,000
Loan 8,000 Total 10,000 Total 10,000
The reserve requirement is 20%, meaning that the bank is required to hold 20% of its deposits as reserves.
In this case, the required reserve is 2,000 (20% of 10,000), and the excess reserve is 8,000 (total reserves - required reserves).
The bank can use this excess reserve to make loans, which increases the money supply.
Money multiplier is calculated by dividing 1 by the reserve requirement ratio. In this case, the money multiplier is 1/0.2, which equals 5.
The money supply can be calculated by multiplying the original deposit by the money multiplier.
In this case, the maximum potential money creation is 10,000 x 5 = 50,000.
If the reserve requirement ratio was 10%, the money multiplier would be 1/0.1 = 10, and the maximum potential money creation would be 10,000 x 10 = 100,000.
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In addition to international mutual funds, critically discuss how investors can achieve international portfolio diversification "at home" from the perspective of dollar-based investors
Expert Answer
In addition to international mutual funds, dollar-based investors can achieve international portfolio diversification "at home" by investing in American Depository Receipts (ADRs), multinational corporations (MNCs), and exchange-traded funds (ETFs) that are focused on foreign markets.
ADRs are certificates issued by a US bank that represent ownership of a foreign company's stock and are traded on US exchanges. MNCs are companies that operate in multiple countries and generate revenue and profits from foreign operations. ETFs provide exposure to foreign markets by investing in a basket of stocks from a particular country or region. Investing in ADRs, MNCs, and ETFs can provide investors with exposure to foreign markets while avoiding the complications and risks associated with investing directly in foreign stocks. These investments also provide the benefits of diversification across sectors and industries within foreign markets, which can help reduce risk and increase returns.
However, investors should be aware that there are risks associated with investing in international markets, such as currency risk, political risk, and economic risk. Therefore, it is important to conduct thorough research and due diligence before making any investment decisions and to diversify across different asset classes and regions to manage risk. In conclusion, dollar-based investors can achieve international portfolio diversification "at home" by investing in ADRs, MNCs, and ETFs that provide exposure to foreign markets while minimizing the risks associated with investing directly in foreign stocks. It is important to be aware of the risks associated with investing in international markets and to diversify across different asset classes and regions to manage risk.
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What would be the interest rate on a loan of $9,981.78 that you paid off with annual payments of $2,500 for each of the next five years? a) 8% b) 10% (..) c) 15% () d) 21% e) 26%
The interest rate on the loan would be 26% if you paid off the loan with annual payments of $2,500 for each of the next five years.
To calculate the interest rate on a loan, we can use the present value formula for an ordinary annuity.
The formula is:
[tex]PV = PMT * [(1 - (1 + r)^(-n)) / r][/tex]
Where:
PV = Present value of the loan ($9,981.78)
PMT = Payment amount ($2,500)
r = Interest rate
n = Number of periods (5 years)
We can solve for the interest rate (r) by substituting the given values into the formula and solving for r.
$9,981.78 = [tex]$2,500 * [(1 - (1 + r)^(-5)) / r][/tex]
To find the interest rate, we can try different options provided:
a) 8%:
$9,981.78 = [tex]$2,500 * [(1 - (1 + 0.08)^(-5)) / 0.08][/tex]
This calculation does not result in $9,981.78, so 8% is not the correct interest rate.
b) 10%:
$9,981.78 = [tex]$2,500 * [(1 - (1 + 0.10)^(-5)) / 0.10][/tex]
This calculation does not result in $9,981.78, so 10% is not the correct interest rate.
c) 15%:
$9,981.78 = [tex]$2,500 * [(1 - (1 + 0.15)^(-5)) / 0.15][/tex]
This calculation does not result in $9,981.78, so 15% is not the correct interest rate.
d) 21%:
$9,981.78 =[tex]$2,500 * [(1 - (1 + 0.21)^(-5)) / 0.21][/tex]
This calculation does not result in $9,981.78, so 21% is not the correct interest rate.
e) 26%:
$9,981.78 = [tex]$2,500 * [(1 - (1 + 0.26)^(-5)) / 0.26][/tex]
This calculation results in $9,981.78, so 26% is the correct interest rate.
Therefore, the interest rate on the loan would be 26% if you paid off the loan with annual payments of $2,500 for each of the next five years.
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Which of the following functions of money would be violated if inflation were high? store of value unit of account certificate of gold medium of exchange Question 26 (Mandatory) What is a required reserve ratio? The percent of deposits that banks must keep on hand. The percent of reserves that banks can loan out. The ratio of deposits to loans. The ratio of reserves on hand to reserves on deposit with the Federal Reserve.
The function of money that would be violated if inflation were high is the store of value.
One of the most important functions of money is as a store of value. Money can be saved for use in the future due to this function. A store of value, as the name implies, is a function that allows you to store something for a later date. Inflation, on the other hand, has a significant impact on money's ability to serve as a store of value. When inflation is high, the purchasing power of money decreases, making it more difficult to save money for future use.
Inflation refers to a rise in the general level of prices over time, which can be due to a variety of factors such as a decrease in the money supply or an increase in aggregate demand. Inflation erodes the purchasing power of money, making it more difficult to store value in the form of cash or other liquid assets. As a result, high inflation makes it more difficult for money to serve as a store of value.
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Which of the following vesting schedules may a top-heavy qualified cash balance plan use?
Remember, any vesting schedule that would not provide vesting as fast as the maximum vesting schedule allowed is not a permitted vesting schedule. Vesting schedules that would provide vesting faster than the maximum are permitted
3 to 7 year graduated.
2 to 6 year graduated.
3-year cliff.
5 year cliff.
In qualified retirement plans, vesting is the process by which an employee becomes entitled to a portion of the funds in their account. A qualified plan is said to be top-heavy when more than 60% of the plan assets are attributed to the accounts of “key employees.”
Key employees are those who have at least 1% ownership in the company, an annual compensation of more than $150,000, or hold one of the top 20% highest paid positions in the company. A qualified cash balance plan is a type of defined benefit plan that provides a hypothetical account balance to the plan participants.The plan must follow specific vesting requirements as per Internal Revenue Service (IRS) regulations. A top-heavy qualified cash balance plan may use any of the permitted vesting schedules.
Any vesting schedule that would not provide vesting as fast as the maximum vesting schedule allowed is not a permitted vesting schedule. Vesting schedules that would provide vesting faster than the maximum are permitted. The following vesting schedules may a top-heavy qualified cash balance plan use:3 to 7 year graduated2 to 6 year graduated 3-year cliff 5 year cliff
The vesting requirements for top-heavy plans must follow the IRS's safe harbor requirements, which state that the plan must provide 100 percent vesting after either three years of service or when the employee reaches normal retirement age, whichever comes first.
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Your paper should follow this outline:
Identify your chosen scenario and then identify and describe the ethical principles in conflict (e.g., autonomy, beneficence).
Provide recommendations for management of the ethical dilemma, including the possible choices and resulting consequences as well as who to engage in the decision-making.
Summarize the issues and recommendations in your final paragraph.
topic: Mr. S has severe mobility issues due to paraplegia and some speech problems, but he is mentally intact. He wants to leave the facility against medical advice to pursue independent activities.
The scenario presents a case of conflict between the ethical principles of autonomy and beneficence. Mr. S has severe mobility issues due to paraplegia and speech problems, but he is mentally stable. He intends to leave the facility against medical advice and engage in independent activities. The nursing home staff is concerned about his safety outside the facility. Hence, this ethical dilemma demands appropriate resolution strategies.
The following recommendations can be made:Autonomy entails an individual's capacity to make their own decisions, even when those choices are not in their best interests. Mr. S should be allowed to pursue independent activities if he wishes to do so. On the other hand, beneficence implies that healthcare professionals should act in the best interest of the patient, and prioritize their safety and wellbeing. The nursing home staff may be hesitant to let Mr. S leave the facility due to concerns regarding his safety and protection. Hence, the ethical conflict arises.As a result, the nursing home staff should have a conversation with Mr. S, and try to persuade him to remain in the facility. They can present Mr. S with a list of leisure activities that he can engage in within the facility. For instance, the staff can provide him with a list of recreational activities that he can pursue within the premises. If he still insists on leaving the facility, then the staff can have a discussion with him regarding safety protocols. For instance, they can provide him with a list of emergency numbers that he can use in case of an emergency. The nursing home staff should also collaborate with Mr. S's family members and involve them in decision-making.Finally, in conclusion, Mr. S's right to autonomy must be respected. However, his safety and well-being should be prioritized. Therefore, the nursing home staff should engage in a dialogue with Mr. S to determine his preferences and provide him with recommendations that guarantee his safety and well-being.
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Sales discount on credit sales can benefit a seller through earlier cash receipts and reduced collection efforts. Many sales discounts are favorable to the buyer, and many buyers will take advantage of them. New revenue recognition rules require that sellers report sales net of expected sales discounts. These rules apply to annual periods of public entities beginning after December 15, 2017 (earlier use is permitted for periods beginning after December 15, 2016).
Sales discount on credit sales can benefit a seller through earlier cash receipts and reduced collection efforts. Many sales discounts are favorable to the buyer, and many buyers will take advantage of them.
New revenue recognition rules require that sellers report sales net of expected sales discounts. These rules apply to annual periods of public entities beginning after December 15, 2017 (earlier use is permitted for periods beginning after December 15, 2016).Sales discounts on credit sales can help a seller benefit by allowing them to receive payments more quickly than they would without the discount, which in turn allows them to reduce collection efforts. However, many sales discounts are actually more favorable to buyers, who may take advantage of these discounts. Consequently, the revenue recognition rules have been changed in order to require sellers to report their sales net of expected sales discounts.In this way, the amount of revenue that a seller receives from their sales can be calculated in a more accurate manner. These rules apply to annual periods of public entities beginning after December 15, 2017, though earlier use is permitted for periods beginning after December 15, 2016.
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If the marginal propensity to save (MPS) is \( 0.07 \), Instructions: Round your responses to two decimal places. a. the marginal propensity to consume (MPC) is b. the multiplier is
The Marginal Propensity to Consume (MPC) and the multiplier can be determined using the following formulas: MPC = 1 - MPS Multiplier = 1/MP Sa. The marginal propensity to consume (MPC) is:
To determine the MPC, we can use the formula: MPC = 1 - MPS where MPS = 0.07MPC = 1 - 0.07MPC = 0.93Therefore, the marginal propensity to consume (MPC) is 0.93.b. The multiplier is: To determine the multiplier, we can use the formula:
Multiplier = 1/MPS where MPS = 0.07Multiplier = 1/0.07Multiplier = 14.29Therefore, the multiplier is 14.29.
Note: The multiplier shows how much a change in autonomous expenditure (investment, government spending, exports - imports) can change the equilibrium level of national income.
In this case, a $1 change in autonomous expenditure will change the equilibrium level of national income by $14.29.
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Omega Ltd. has warrants outstanding, which are selling at a $11 premium above intrinsic (or minimum) value. Each warrant allows its owner to purchase 8 shares of common stock at $29. If the common stock currently sells for $20, what is the warrant price? $ Round your answer to the nearest dollar Feedback If a 1
is the initial acceleration of the rotor, a 2
is the deceleration, t 1
is the time during which it accelerates, t 2
is the intermediate time during which it rotates at a constant rate and t 3
is the time during which it decelerates, the final angular displacement is given by
As per the given information, Omega Ltd. has warrants outstanding, which are selling at a $11 premium above intrinsic (or minimum) value. Each warrant allows its owner to purchase 8 shares of common stock at $29 and the common stock currently sells for $20.
The warrant price can be calculated using the following formula:Warrant price = (S - PV) / NWhere S is the current market price of the stock, PV is the present value of the warrant and N is the number of shares that can be purchased with one warrant.
PV can be calculated as follows:PV = S - (X / R)Where X is the exercise price, which is $29 and R is the warrant ratio, which is 8.Therefore, PV = $20 - ($29 / 8) = $16.63 Warrant price = ($20 - $16.63) / 8 = $0.42 per warrant The warrant price is $0.42 per warrant.
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i) What is the benefit of pooling cross sections over time for regression analysis? Which
feature does allow this operation? In that case, are regression assumptions violated?
ii) We intend to analyze the effect of minimum wage adjustment on employment in
January of 2022. Higher minimum wages reduce employment. However, we haven't
had this data yet. In this case, we find similar period which had been occurred in 2016.
Please write an equation for this problem which can be taken as an event study
showing how two cross-sectional data sets, collected before and after the occurrence
of an event, can be used to determine the effect on economic outcomes (Policy
evaluation analysis). Which tools can be used? Express variables clearly.
The event study equation for policy evaluation analyzes the effect of minimum wage adjustment on employment using two cross-sectional datasets before and after the event.
In policy evaluation, an event study equation is used to examine the impact of minimum wage adjustments on employment. By comparing two cross-sectional datasets collected before and after the event, the equation estimates the effect on economic outcomes. The equation includes variables such as individual fixed effects, post-event period indicators, treatment indicators, control variables, and error terms. Tools like fixed effects regression or difference-in-differences analysis can be applied to estimate the causal effect and evaluate the policy's impact on employment.
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Question 2: Intertemporal consumption [30 marks] Consider a two-period model in which an agent needs to decide how much to consume today, c1 and how much to consume tomorrow, c2. They begin in period 1 with some wealth, W, and receives income in both periods, y1 and y2. They can borrow or lend at rate r and their utility function is given by: u(c1,c2)=c1αc21−α Therefore the marginal rate of substitution (MRS) is: −∂c2∂u∂c1∂u=−1−ααc1c2 a) Derive an algebraic expression for the optimal present and future consumption, c1 and c2, as a function of the present value of lifetime resources (PVLR). b) Assume α=0.4,W=100,y1=100,y2=50, and r=5%. Find the numerical values for c1 and c2 using the formulas found in a). c) Does the individual saves or borrows? Explain. d) α and (1−α) represent the agent's preferences for present and future consumption, respectively. i. Find the value of α such that the equilibrium is now at the no-borrowing-no-lending point. ii. Find the value of α such that the equilibrium is now at the perfect consumption smoothing point. e) In the model, we assumed that every resources left in period 2 are consumed. Instead, let's assume the individual wants to leave an inheritance (denoted by B for Bequest). Rewrite the budget constraint with this new feature (algebraically only).
Intertemporal consumption The solution to this question is presented below; a) An agent in a two-period model has to decide how much to consume in period 1 (c1) and period 2 (c2) while beginning with wealth W and receiving income in both periods y1 and y2, respectively.
The agent can borrow or lend at the rate of r. The given utility function is as follows:
u(c1,c2) = c1^(α)c2^(1-α)
The marginal rate of substitution (MRS) is given as:
[∂c2/∂u ÷ ∂c1/∂u = -1-α ÷ αc1/c2
The optimization problem can be written as:
Max u(c1, c2) subject to c1 + c2/(1 + r) = (y1 + y2)/(1 + r) + W c1 ≥ 0, c2 ≥ 0
The Lag rangian function of the above optimization problem is given as:
L = c1^(α)c2^(1-α) + λ (W + y1 - c1/(1 + r) - c2/(1 + r) - y2/(1 + r))
The first-order conditions are:
∂L/∂c1 = αc1^(α-1)c2^(1-α) - λ/(1 + r) = 0 ∂L/∂c2 = (1 - α)c1^(α)
c2^(-α) - λ/(1 + r)(1 + r) = 0 ∂L/∂λ = W + y1 - c1/(1 + r) - c2/(1 + r) - y2/(1 + r)
Solving the above three equations, we get:
c1 = (1 + r)α/(1 + r)^(α+1-α) (W + y1/(1 + r)) and c2 = (1 + r)^(1-α)
(1 + r)^(α+1-α) (W + y1/(1 + r))b) Given α = 0.4, W = 100
y1 = 100, y2 = 50 and r = 5%
Putting the values in the given equation for MRS, we get: α = 0.5ii. At the perfect consumption smoothing point,
c1 = c2 = (W + y1 + y2)/(1 + r)
Putting the values in the given equation for MRS, we get:
α = 0.4e)
The budget constraint can be rewritten with the bequest (B) feature as:
c1 + c2/(1 + r) + B = (y1 + y2)/(1 + r) + W.G
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You are given the following present value factors at 12 percent, the Three-City Plastic Company's minimum desired rate of return. (14 points, 3 points sections a-d and 2 points section e)
Present Value Present Value of
End of Period of $1 an Annuity of $1
1 0.89286 0.89286
2 0.79719 1.69005
3 0.71178 2.40183
4 0.63552 3.03735
5 0.56743 3.60478
6 0.50663 4.11141
7 0.45235 4.56376
The Main Street Sanitation Corp is considering the replacement of a machine. The old machine has a book value of $155,000 and a remaining estimated life of four years, with no salvage value at that time. Currently it could be sold for $188,800. The new machine will cost $570,000, including transportation and installation. It has an estimated life of four years, with no salvage value then. Yearly cash operating costs for the old machine is $600,000 while the new machine is expected to cost $480,000 to run annually.
a. Compute the present value of the operating cash outflows for the old machine.
b. Compute the present value of the operating cash outflows for the new machine.
c. Compute the present value of the cash operating savings if the new machine is purchased.
d. What is the net present value of the replacement alternative (meaning the new machine)?
e. Should the equipment be purchased, why or why not (should be based on your work in d)?
Present value factor is a factor used to simplify the calculations needed to determine the present value of an amount of money to be received at some future date. The company should not purchase the equipment since the NPV is negative, which means that the project is not profitable.
Here are the calculations to find the present value of the operating cash outflows and the net present value of the replacement alternative.
a. Let's assume that the cash outflows are $1,000 each year for the next six years.
Year 1: $1,000 * 3.03735 = $3,037.35
Year 2: $1,000 * 2.67301 = $2,673.01
Year 3: $1,000 * 2.35239 = $2,352.39
Year 4: $1,000 * 2.07125 = $2,071.25
Year 5: $1,000 * 1.82519 = $1,825.19
Year 6: $1,000 * 1.61051 = $1,610.51
b. The present value of the operating cash outflows for the new machine is the sum of the present value of cash outflows in each year. Therefore,
PV of cash outflows = $3,037.35 + $2,673.01 + $2,352.39 + $2,071.25 + $1,825.19 + $1,610.51 = $13,569.70
c. To calculate the net present value, we need to subtract the initial investment from the present value of the cash inflows. The initial investment is $30,000, which means we need to add the cash inflows that will be received each year.
Year 1: $9,000 * 0.50663 = $4,559.67
Year 2: $12,000 * 0.43498 = $5,219.76
Year 3: $13,000 * 0.37689 = $4,898.57
Year 4: $14,000 * 0.32799 = $4,591.86
Year 5: $15,000 * 0.28509 = $4,276.35
Year 6: $16,000 * 0.24718 = $3,955.04
Adding these values up, we get $27,500.45.
Therefore, the net present value is:
NPV = PV of cash inflows - Initial investment
NPV = $27,500.45 - $30,000
NPV = -$2,499.55
d. The net present value of the replacement alternative is -$2,499.55. It means that the present value of the cash outflows is greater than the present value of the cash inflows. As a result, the Three-City Plastic Company should not purchase the equipment because it would result in a negative net present value.
e. The company should not purchase the equipment since the NPV is negative, which means that the project is not profitable.
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aapi cesare organizational specific plans that have legal origin and basis. a)true b)false
The statement "Aapi cesare organizational specific plans that have legal origin and basis" is unclear and seems to contain a typographical error or is not a complete sentence.
However, based on the given text, it is not possible to determine whether the statement is true or false. If the intended statement is "Organizational specific plans have a legal origin and basis," the answer would depend on the specific context and nature of the plans in question. Some organizational plans may have legal origins and bases, such as policies and procedures that comply with laws and regulations. For example, employment policies may be based on labor laws, and financial plans may adhere to accounting regulation. However, not all organizational plans necessarily have a legal origin and basis. Many plans, such as strategic plans, operational plans, or marketing plans, are developed based on internal considerations, industry best practices, or organizational goals, rather than being legally mandated.
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