The question is from the Chapter 11 Homework 5 Part 2 of 2.7.69 points.The accounting equation isAssets = Liabilities + Stockholders' EquityThe task is to analyze each transaction from issuances of stock by showing its effect on the accounting equation.
Specifically, we need to find the impact of each transaction on the accounting equation.How does each transaction affect the accounting equation when stock is issued.The issuance of common stock increases both the stockholders' equity and the assets of the company, while the liability remains unchanged. The issuance of stock is usually done to raise capital or to finance a company's growth.Let's analyze each transaction:
i. Issued 5,000 shares of $1 par value common stock for $30,000.
Cash received = $30,000.
Par value of common stock = $1.
Therefore, the additional capital raised = (5,000 × $1)
= $5,000
The journal entry for this transaction will be:
Cash 30,000Common Stock 5,000Paid-In Capital in Excess of Par - Common Stock 25,000
The accounting equation will be:
A = L + SEAssets (Cash) + $30,000
= Liabilities + Stockholders' Equity (Common Stock + Paid-In Capital in Excess of Par - Common Stock)$30,000 = $0 + ($5,000 + $25,000)
ii. Issued 5,000 shares of $10 par value preferred stock for $90,000.Cash received = $90,000.
Par value of preferred stock = $10. Therefore, the additional capital raised = (5,000 × $10)
= $50,000
The journal entry for this transaction will be:Cash 90,000Preferred Stock 50,000Paid-In Capital in Excess of Par - Preferred Stock 40,000The accounting equation will be:
A = L + SEAssets (Cash) + $90,000
= Liabilities + Stockholders' Equity (Preferred Stock + Paid-In Capital in Excess of Par - Preferred Stock)$90,000
= $0 + ($50,000 + $40,000)
iii. Issued 10,000 shares of no-par common stock for $200,000.Cash received = $200,000.
The journal entry for this transaction will be:Cash 200,000Common Stock 200,000The accounting equation will be:
A = L + SEAssets (Cash) + $200,000
= Liabilities + Stockholders' Equity (Common Stock)$200,000
= $0 + $200,000
Thus, the impact of the three transactions on the accounting equation is summarized in the table below:
TransactionsEffect on Accounting Equation
i. Issued 5,000 shares of $1 par value common stock for $30,000.Increase in assets and stockholders' equity
ii. Issued 5,000 shares of $10 par value preferred stock for $90,000.Increase in assets and stockholders' equity
iii. Issued 10,000 shares of no-par common stock for $200,000.Increase in assets and stockholders' equity.
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Nevi's production data for a new deluxe production were taken from the most recent quarterly production budget:
July August September
Planned production in units 2,900 3,000 2,880
In addition , Nevis produces 8,000 units a month of its standard production. It takes two direct labor hours to produce each standard unit and 7.00 direct labor hours to produce each deluxe unit. Nevis cost per labor hours is $25. Direct labor costs for July would be budgeted at :
A. 907,500
B. 925,000
C. 927,000
D. 932,625
E. None of the answers is correct.
Given below is the table of the planned production units of July, August, and September: July August September Planned production in units 2,900 3,000 2,880Adding up these three planned production units we get, 2,900 + 3,000 + 2,880 = 8,780 units.
Nevis also produces 8,000 units of its standard production. Therefore, the total production units of Nevis in July would be,8,780 + 8,000 = 16,780 units Now we will calculate the direct labor costs for July:
To produce each standard unit, it takes two direct labor hours. Nevis produces 8,000 units of its standard production; therefore the total direct labor hours to produce 8,000 standard units would be: 8,000 × 2 = 16,000 direct labor hours. To produce each deluxe unit, it takes 7.00 direct labor hours.
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evaluate the following definite integral. express your answer in terms of logarithms. \int _{ln7}^{ln\:10}\:\frac{cosh\:x}{9-sinh^2x}dx
The integral given is [tex]∫_ln⁷^ln¹⁰cosh(x)/(9-sinh²(x)) dx[/tex].
This is a definite integral where the limits are[tex]ln 7 and ln 10.[/tex]
We know that by substituting the value of [tex]sinh[/tex] x to t, we can get the value of cosh x dx as dt, that is, cosh x dx = dt Therefore, the integral becomes∫_(ln 7)^ (ln 10) cosh x dx/(9-sinh²x) = ∫_t7^t10dt/(9-t²)
We can now use the substitution method, where we will substitute t = 3 [tex]sin θdt = 3 cos θ dθ[/tex]
Limits change when we use substitution as sin θ = t/3. We know that [tex]when x = ln 7[/tex],
the value of t = 3sin (x) = 3sin (ln7) = 0.691.
When x = ln10, the value of t = 3 sin (x) = 3 sin(ln10) = 1.097
The limits of the integral become ∫_0.691^1.097dθ/(9-9sin²θ)
We can now use partial fractions to get the integrand in the form of (1 / A) (1 / (3sinθ - 3)) and (1 / B) (1 / (3sinθ + 3))
so that we can integrate it. Thus, we get, 1/(9 - 9 sin²θ) = (1 / 18) [(1 / (3 sin θ - 3)) - (1 / (3 sin θ + 3))]
Now, substituting the values of A and B, we get the integral as, ∫_(0.691)^ (1.097) 1/18 (1/(3 sin θ - 3) - 1 / (3 sin θ + 3)) dθ Integrating the above expression we get [ln|3 sin θ - 3| / 54 - ln|3 sin θ + 3| / 54] _(0.691)^ (1.097)
Now, substituting the limits we get, [ln|3 sin 1.097 + 3| / 54 - ln|3 sin 0.691 + 3| / 54] = [ln (6 sin 1.097 + 6) - ln (6 sin 0.691 + 6)] / 54.
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In general, the basic difference between the concepts of revenues and gains concerns:
A. the materiality of the item being considered.
B. whether the event giving rise to the item relates to the typical activity of the enterprise.
C. whether the item is taxable in the current year.
D. the effect on total assets of the enterprise.
The basic difference between the concepts of revenues and gains is primarily related to B. whether the event giving rise to the item relates to the typical activity of the enterprise.
Revenues are generated from the core operations of the business and represent the inflow of economic benefits resulting from the sale of goods, provision of services, or other activities that constitute the regular operations of the entity. Revenues are recognized when they are earned, which typically occurs when the delivery of goods or services has taken place, and the amount can be reliably measured.
On the other hand, gains are typically associated with events or transactions that are not part of the usual activities of the business. Gains arise from events such as the sale of non-current assets, the settlement of liabilities at amounts lower than their carrying value, or the realization of investments. These events are considered non-routine or incidental to the primary operations of the entity.
The distinction between revenues and gains is important for financial reporting purposes as it helps provide relevant information to users of financial statements. By distinguishing between regular revenues and non-routine gains, users can better understand the performance and profitability of the entity's core operations and identify any significant non-operating events that may have influenced the financial results.
Therefore, option B is the correct answer as it captures the fundamental difference between revenues and gains based on their relationship to the typical activity of the enterprise.
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Which statement is false about silver meal heuristics? Silver-Meal assumes the average/cost per period is quadratic and first decreases then increases Silver-Meal minimizes the sum of order and holding costs over the planning horizon Silver-Meal take setup cost/ order costs and holding costs into account Silver-Meal is guaranteed to always give the optimal result
The false statement about Silver-Meal heuristics is option D: "Silver-Meal is guaranteed to always give the optimal result." Silver-Meal heuristics is a method used in inventory management to determine the order quantity and timing of replenishment.
While it is a commonly used approach, it does not always guarantee the optimal solution. Silver-Meal heuristics work by considering the cost trade-off between ordering and holding inventory. It calculates the incremental cost of each potential order and selects the one with the lowest cost per unit. By doing so, it aims to minimize the sum of order and holding costs over the planning horizon.
However, the optimality of Silver-Meal heuristics is not guaranteed. The method assumes certain cost structures, such as a quadratic cost per period that first decreases and then increases. If the actual cost structure deviates significantly from these assumptions, Silver-Meal heuristics may not provide the most optimal solution.In some cases, more advanced optimization techniques, such as dynamic programming or mathematical programming models, may be required to find the truly optimal solution. These methods consider additional factors and constraints that Silver-Meal heuristics may not account for.
Therefore, while Silver-Meal heuristics can be a useful and practical approach in inventory management, it is important to recognize that it is not infallible and may not always yield the optimal result.
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the most important primary group is your coworkers at workplace?
The importance of primary groups can vary depending on the context and individual perspectives. While coworkers at the workplace can certainly be an important primary group for many individuals, whether they are the "most important" primary group is subjective and may vary from person to person.
Primary groups are typically characterized by close, personal relationships, emotional support, and frequent face-to-face interactions. They play a significant role in fulfilling various social and psychological needs, such as companionship, belonging, and mutual support. Primary groups often include family members, close friends, and other significant individuals in a person's life.
In a work environment, coworkers can become an important primary group due to the amount of time spent together, shared goals, and collaboration. They can provide social support, contribute to a positive work environment, and foster a sense of camaraderie and teamwork. Coworkers can offer advice, share experiences, and provide emotional support during challenging situations.
However, the importance of primary groups may differ depending on an individual's personal circumstances and relationships. For some individuals, their primary group may primarily consist of family members or close friends outside of work, while others may prioritize their coworker relationships as their primary group.
Ultimately, the most important primary group for an individual can vary based on their unique social dynamics, personal preferences, and the significance of relationships in their life.
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Risk management process commences when management considers the objectives of the organization. This includes identifying negative events known as risks. On the other hand, controls are action taken to mitigate risk and increase the likelihood of achieving the company's objectives. Required: i. Identify any THREE (3) external risk factors. For each risk, provide ONE (1) relevant example. ii. List any FOUR (4) limitation in any controls. iii. Outsourcing involves the use of independent parties to perform a function within an organization. Defend why outsourcing is NOT highly recommended.
Risk management is an essential process in the growth and sustainability of an organization. The process helps in identifying and mitigating possible negative events that may impede an organization's objectives. The management usually begins the risk management process when considering the company's goals.
This process entails identifying the risks. Controls are then put in place to mitigate the risks and increase the probability of achieving the company's objectives.ii. Limitations of ControlsFour limitations of controls include;
1. Cost Limitations – Controls can be quite expensive to implement. This includes acquiring the necessary equipment and personnel. Small organizations with limited financial resources may find it difficult to implement controls due to the costs involved.
2. Time Limitations – Controls usually take time to implement. Implementation may also involve several procedures and consultations that may take more time. The delay in implementing controls may affect the organization's objectives.
3. Control Failure – Controls may sometimes fail to address the risks. This could be because the controls do not suit the specific nature of the risk or they are not well-implemented.
4. Control Replacement – Controls need to be updated and replaced regularly. It may be difficult to replace the controls due to technological advancements and changes in the nature of risks.iii. Defending the Notion of OutsourcingOutsourcing is the use of independent parties to perform functions within an organization.
Firstly, outsourcing may lead to loss of control over the organization's processes. This means that the organization may not be able to supervise the process, which may lead to errors and other negative consequences. Secondly, outsourcing could lead to the creation of sub-standard products or services.
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Question 2: Each of the divisions is considering a new project.
The projects have the following forecasts:
Automobile Heavy Truck
Project Income $15,000 $5,000
Project Additional Investment $160,000 $
We cannot calculate the ROI for this division. Without this information, it is not possible to compare the financial viability of the two projects accurately. More details are required to assess which project would be more beneficial for the Heavy Truck division in terms of financial returns.
In order to determine which project is more financially favorable for each division, we need to calculate the return on investment (ROI) for both projects. The ROI is obtained by dividing the project income by the additional investment and multiplying the result by 100 to express it as a percentage.
For the Automobile division, the ROI can be calculated as follows:
ROI = (Project Income / Project Additional Investment) * 100
= ($15,000 / $160,000) * 100
= 9.375%
For the Heavy Truck division, the ROI can be calculated as follows:
ROI = (Project Income / Project Additional Investment) * 100
= ($5,000 / $ ) * 100
= Not enough information provided.
Unfortunately, the information regarding the additional investment for the Heavy Truck project is missing.
Therefore, we cannot calculate the ROI for this division. Without this information, it is not possible to compare the financial viability of the two projects accurately. More details are required to assess which project would be more beneficial for the Heavy Truck division in terms of financial returns.
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In your point of view, what are the effects of Information
Technology in our daily lives?
Information Technology (IT) has had profound effects on our daily lives.
In our daily lives, Information Technology has had a transformative impact across various aspects. It has revolutionized communication, enabling us to connect with people around the world instantly through platforms like email, social media, and video conferencing. Information is readily accessible through the internet, allowing us to gather knowledge, stay updated with news, and engage in online learning. IT has also streamlined many tasks and processes, simplifying activities such as online shopping, banking, and accessing various services from the comfort of our homes.
Moreover, Information Technology has transformed entertainment and media consumption. We now have access to a vast array of digital content, including music, movies, TV shows, books, and news, which can be accessed anytime, anywhere through smartphones, tablets, and streaming services. IT has also revolutionized the gaming industry, providing immersive virtual experiences and online multiplayer capabilities.
In the workplace, Information Technology has significantly enhanced productivity and efficiency. It has automated manual tasks, improved data storage and management, facilitated collaboration through shared platforms and cloud computing, and enabled remote work capabilities. IT has also opened up new avenues for entrepreneurship and innovation, allowing individuals and businesses to create and market products and services globally.
However, alongside these benefits, Information Technology has also introduced challenges and concerns. Privacy and security have become major issues as the collection and storage of personal data has increased. Cybersecurity threats, such as hacking and data breaches, pose risks to individuals and organizations. Additionally, the rapid pace of technological advancements requires continuous learning and adaptation, creating a digital divide and potential social and economic disparities.
Overall, Information Technology has become an integral part of our daily lives, impacting how we communicate, access information, conduct business, and entertain ourselves. It has brought convenience, efficiency, and new opportunities, but also challenges that need to be addressed to ensure the responsible and beneficial use of technology in our society.
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Safety Development Corporation had relatively large idle cash balances and invested them as follows in securities to be held as nonstrategic investments: 2020 Feb. 7 Purchased 3,300 common shares of Royal Bank at $27.60, plus $500 in transaction fees. 19 Purchased 2,300 common shares of Imperial 0 il at $54.50, and paid $250 in transaction fees. Apr. 1 Paid $99,166 plus $500 in transaction fees for a 9.00%, four-year, $101,000 Minco Inc. bond that pays interest quarterly beginning June 30. The market rate of interest on this date was 9.40%. Sellers Corporation plans to hold this investment for the duration of the bond's contract life. May 26 Purchased 3,100 common shares of BCE at $14.48, plus $200 in transaction fees. June 1 Received a $0.25 per share cash dividend on the Royal Bank common shares. 17 Sold 2, 300 Royal Bank common shares at $28.10. 30 Received interest on the Minco Inc. bond. Aug. 5 Received a $0.50 per share cash dividend on the Imperial 0il common shares. Sept. 1 Received a $0.275 per share cash dividend on the remaining Royal Bank common shares. 30 Received interest on the Minco Inc. bond. Dec. 31 Received interest on the Minco Inc. bond. On December 31,2020 , the fair values of the investments held by Safety Development Corporation were: Royal Bank, $28.60 imperial Oil, $52.88; and BCE, $14.60. Assume the fair value and carrying value of the Minco Inc. bond were equal. Required: 1. Prepare an amortization schedule for the Minco Inc. bond showing only 2020 . (Round your intermediate and final answers to the nearest whole dollar amount. Enter all the amounts as positive values.) On December 31,2020 , the fair values of the investments held by Safety Development Corporation were: Royal Bank, $28.6 Oil, \$52.88; and BCE, $14.60. Assume the fair value and carrying value of the Minco Inc. bond were equal. Required: 1. Prepare an amortization schedule for the Minco Inc. bond showing only 2020. (Round your intermediate and final answer nearest whole dollar amount. Enter all the amounts as positive values.)
An amortization schedule is a table or chart that illustrates the repayment of a loan or the allocation of payments to principal and interest over the term of a debt.
To prepare an amortization schedule we need the following information:
Purchase date: April 1, 2020Purchase price: $99,166Transaction fees: $500Bond face value: $101,000Coupon rate: 9.00% (paid quarterly)Market interest rate: 9.40%Here's the amortization schedule for the Minco Inc. bond for 2020:
Date | Interest Expense | Cash Received | Carrying Value
April 1 | - | - | $99,666
June 30 (Q2) | $2,277 | - | $101,943
September 30 (Q3)| $2,277 | - | $104,220
December 31 (Q4) | $2,277 | - | $106,497
Explanation of calculations:
1. Carrying Value: The carrying value at the beginning of the year is the purchase price plus transaction fees ($99,166 + $500 = $99,666).
2. Interest Expense: The interest expense for each quarter is calculated by multiplying the carrying value at the beginning of the quarter by the coupon rate for that period.
Q2: $99,666 * 9.00% = $2,277Q3: $101,943 * 9.00% = $2,277Q4: $104,220 * 9.00% = $2,277To know more about the Amortization Schedule visit:
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To recalculate the accrued interest and provide a debt
rollforward
Loan Statement
Accrual
Period Covered
Accrual/Expense Period
Accrual Acct #
Account Descrip
A debt roll-forward statement provides information about the debt balance and interest charges on the outstanding debt. To recalculate the accrued interest and provide a debt roll-forward statement, the following information is needed:
Period Covered - The period over which the interest accrues must be determined.
Accrual/Expense Period - The accrual/expense period determines the duration over which the interest expense is to be recognized.
Accrual Acct # - The account number of the accrued interest account.
Account Descrip - A description of the accrued interest account is also necessary to identify the account accuratelyloan payments, and loan transactions. Loan statements typically include the following information:
Loan Balance - This is the total amount of the loan outstanding on a given date, including principal and interest.
Interest Rate - The interest rate is the rate at which interest accrues on the loan.Payment Amount - This is the amount of each payment that is due, including principal and interest due.
Due Date - This is the date on which each payment is due.The following information is needed to generate a loan statement:
Loan Amount - This is the total amount of the loan at the time the loan is made.
Interest Rate - The interest rate is the rate at which interest accrues on the loan.
Payment Terms - This is the number of payments required to pay off the loan.
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BE6-1 Lazio Company, SpA identifies the following items for possible inclusion in the Identify items to be included taking of a physical inventory. Indicate whether each item should be included or excluded in taking a physical from the inventory taking. (a) Goods shipped on consignment by Lazio to another company. imentory. (b) Goods in transit from a supplier shipped FOB destination. (c) Goods sold but being held for customer pickup. (d) Goods held on consignment from another company. BE6-2 Stallman Company took a physical inventory on December 31 and determined that Determine ending imventory goods costing €200,000 were on hand. Not included in the physical count were €25,000 of amount. goods purchased from Pelzer Corporation, FOB shipping point, and €22,000 of goods sold (LO 1) to Alvarez Company for €30,000,FOB destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Stallman report as its December 31 inventory? BE6-3 In its first month of operations, Tatung Company made three purchases of mer- Compute ending imentoryusing chandise in the following sequence: (1) 300 units at NT\$180, (2) 400 units at NT\$210, and FIFO and avemak-cast. (LO2) 86 Inventories (3) 200 units at NT\$240. Assuming there are 420 units on hand, compute the cost of the ending inventory under the (a) F1FO method and (b) average-cost method. Tatung uses a periodic inventory system. (Round average unit cost to two decimal places.)
BE6-1:
(a) Goods shipped on consignment by Lazio to another company: Excluded from the inventory taking because they are not owned by Lazio until sold by the other company.
(b) Goods in transit from a supplier shipped FOB destination: Included in the inventory taking because they are owned by Lazio until delivered to the destination.
(c) Goods sold but being held for customer pickup: Excluded from the inventory taking because they are no longer owned by Lazio.
(d) Goods held on consignment from another company: Included in the inventory taking because they are owned by Lazio, even though they are on consignment.
BE6-2:
Stallman should report €200,000 as its December 31 inventory. The goods purchased from Pelzer Corporation and the goods sold to Alvarez Company were in transit at year-end.
According to the FOB shipping point terms, the goods purchased from Pelzer Corporation are considered part of Stallman's inventory, while the goods sold to Alvarez Company are not considered part of Stallman's inventory until they are delivered to Alvarez Company.
BE6-3:
(a) Using the FIFO (First-In, First-Out) method, the cost of the ending inventory is calculated by assuming that the units purchased first are sold first. In this case, the cost of the 300 units purchased at NT$180 and the cost of the 120 units purchased at NT$210 would be included in the ending inventory.
(b) Using the average-cost method, the cost of the ending inventory is calculated by taking the average cost per unit of all the units purchased. In this case, the average cost per unit would be (300*180 + 400*210 + 200*240) / (300 + 400 + 200), and this average cost per unit would be multiplied by the 420 units on hand to determine the cost of the ending inventory.
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If a business fails to meet its responsibilities to its employees, which of the following is likely to occur? a. There is reduced employee turnover.
b. Employees believe it is easier to get ahead. c. More jobs are created. d. Employees do the minimum needed to get by
If a business fails to meet its responsibilities to its employees, it is likely that employees will do the minimum needed to get by . So the correct option d.
Employees are individuals who work for an organization or business in exchange for wages, salaries, or other forms of compensation. They are a vital asset to any company and play a crucial role in its operations and success. Employees contribute their skills, knowledge, and efforts towards the production of goods or the delivery of services. They can be engaged in various roles and functions, ranging from frontline workers to managers and executives. Effective management of employees is essential for fostering productivity, maintaining a positive work environment, and achieving organizational goals.
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Do you believe that older businesses that are still operating by
outdated norms will succeed if they do not adopt value-based
management?
Older businesses that are still operating by outdated norms may face challenges in today's dynamic and competitive business environment. The adoption of value-based management can play a crucial role in their success.
Here's a step-by-step explanation:
1. Value-based management emphasizes creating and delivering value to customers, employees, and other stakeholders. It focuses on aligning business practices with a clear set of values and principles.
2. By adopting value-based management, older businesses can better understand the needs and preferences of their customers, which can lead to improved products and services that meet current market demands.
3. Value-based management also promotes employee engagement and motivation. When employees share common values and understand the purpose behind their work, they are more likely to be productive and committed to the organization's success.
4. Additionally, value-based management can help older businesses stay relevant and competitive by encouraging innovation and adaptation. It encourages businesses to question outdated norms and explore new strategies, technologies, and processes.
5. Conversely, if older businesses continue to operate by outdated norms without embracing value-based management, they may struggle to keep up with changing market trends and customer expectations. They risk losing customers, talented employees, and market share to more agile and value-driven competitors.
6. In conclusion, adopting value-based management can significantly improve the chances of success for older businesses that are still operating by outdated norms. It provides a framework for aligning business practices with values, understanding customer needs, motivating employees, and driving innovation. By embracing value-based management, businesses can position themselves for long-term growth and sustainability.
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Microeconomica (BAFB1023) May 2022 Final Examination This question paper consists of ONE (1) section only. There are FOUR (4) questions in this section. Answer ALL questions. Question 1 Using the demand and supply analysis, illustrate the graph and explain what might happen to the equilibrium price and equilibrium quantity in the following events: a) With an increase in the donut producers, what will happen to the donut's market? (4 Marks) b) Petrol and car are complements, what happens to the market for car if the price of petrol (4 Marks) increases? c) The farmers had applied new technology in mango harvesting. What will happen to mango's (4 Marks) market? d) Milk is used to produce cheese. If the price of a kilogram (kg) of cheese rises, what will happen (4 Marks) to the cheese's market? BAFB1023 Microec.....pdf CONFIDENTIAL e) In May market analysts predict that the price of chicken will rise in June. What will happen to chicken's market in June, ceteris paribus. (4 Marks) (Total: 20 Marks) < (TOTAL: 60 MARKS) 40 BAFB1023 Microec.....pdf A BAFB1023 Micro....docx BAFB1023
With an increase in the donut producers, what will happen to the donut's market?When there is an increase in donut producers, the supply of donuts would increase, and hence the supply curve will shift to the right.
The equilibrium price and quantity would depend on the magnitude of the shift in demand and supply curves. If the increase in demand is more than 100, then both equilibrium price and quantity will increase. However, if the increase in supply is more than 100, then both the equilibrium price and quantity will decrease.
Petrol and car are complements, what happens to the market for the car if the price of petrol increases?If petrol and cars are complements, then their relationship is one of joint demand, and hence the demand for cars would decrease when there is an increase in the price of petrol.
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Part 1: At the beginning of the year, Patrick Company acquired a computer to be used in its operations. The computer was delivered by the supplier, installed by Patrick, and placed into operation. The estimated useful life of the computer is five years, and its estimated residual value is significant. Required: 1. What costs should Patrick capitalize for the computer? 2. What is the objective of depreciation accounting? 3. What is the rationale for using accelerated depreciation methods?
Costs that Patrick should capitalize for the computer include the purchase price of the computer, transportation charges, installation cost and any additional costs that are incurred to get the computer up and running for use in the business.
The objective of depreciation accounting is to spread the cost of an asset over its useful life so that the cost is not entirely charged in the year the asset was acquired. The purpose of this is to match the expense of using the asset to the revenue that the asset generates. By doing so, the income statement of a business is more accurate, and the business can see what its true profitability is.3. Accelerated depreciation methods allow businesses to deduct more of the cost of an asset in the early years of an asset’s useful life.
This approach is beneficial for businesses that want to reduce their tax liability in the near term because higher expenses result in lower taxable income.
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Determine the account and amount to be deblted and the account and amount to be credited for the following adjustment. Equipment purchased for $62,000 on January 3,20X1, has an estimated life of 4 years and an estimated salvage value of $5.500. The firm uses the straight-line method of depreciation. Determine the adjustment for the month ended January 31 , 20X1. (Round your answers to 2 decimal places.) Journal entry worksheet
Adjustment for the month ended January 31, 20X1 : Purchase of equipment 62,000 Estimated salvage value 5,500 Estimated life 4 years Depreciation per year = (62,000 - 5,500) ÷ 4 years = 14,625 The adjustment for the month ended January 31, 20X1 can be calculated as follows:
Depreciation expense for the month = Depreciation per year ÷ 12 months= 14,625 ÷ 12 = 1,218.75
The equipment account is debited when depreciation is recorded, while the accumulated depreciation account is credited. This is because the equipment account is an asset account, whereas the accumulated depreciation account is a contra asset account used to record the depreciation of assets. The adjusting entry for depreciation can be written as follows:Depreciation expense 1,218.75 Accumulated depreciation 1,218.75
The journal entry worksheet for the adjustment for the month ended January 31, 20X1 is shown below:General Journal Explanation Debit Credit Depreciation expense 1,218.75 Accumulated depreciation 1,218.75 To record depreciation expense for the month of January 2021 Therefore, the account to be debited is Depreciation Expense for 1,218.75, and the account to be credited is Accumulated Depreciation for 1,218.75.
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Cambridge Manufacturing Company applies manufacturing overhead on the basis of machine hours. At the beginning of the year, the company estimated its total overhead cost to be $279,300 and machine hours to be 14,700. Actual manufacturing overhead and machine hours were $314,300 and 15,700, respectively. Required: 1. & 2. Prepare the journal entries for actual and applied manufacturing overhead and transfer of manufacturing overhead account balance to cost of goods sold. Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.
The balance in the Manufacturing Overhead account is transferred to the Cost of Goods Sold account to adjust the actual cost of goods produced. The above transaction records the transfer of the balance in the Manufacturing Overhead account to Cost of Goods Sold account.
1. Prepare journal entries for actual and applied manufacturing overhead Actual manufacturing overhead is $314,300 and machine hours are 15,700. Therefore, the manufacturing overhead rate for the year would be $314,300/15,700 = $20 per machine hour. Actual and Applied Manufacturing Overhead Journal Entries: Particulars DebitCreditRaw Material Inventory---Work in Progress Inventory$251,000Manufacturing Overhead$314,300Accounts Payable---($20 × 15,700) Applied Manufacturing Overhead$314,300Manufacturing Overhead---(Actual manufacturing overhead)Note: Applied manufacturing overhead is calculated by multiplying the manufacturing overhead rate with actual machine hours, i.e., $20 per machine hour × 15,700 machine hours.
2. Prepare the journal entry for transfer of manufacturing overhead account balance to cost of goods soldTransfer of Manufacturing Overhead Account Balance to Cost of Goods Sold Journal Entry: ParticularsDebitCreditManufacturing Overhead$279,300Cost of Goods Sold$279,300Explanation of the entries:1. When actual manufacturing overhead incurred during the year, the company will record it in the Manufacturing Overhead account. When the work is completed, the manufacturing overhead applied is transferred from the Applied Manufacturing Overhead account to the Work in Progress Inventory account. In the above transaction, $314,300 was the actual manufacturing overhead that was recorded in the Manufacturing Overhead account. The credit entry records the manufacturing overhead applied to Work in Progress Inventory.2. At the end of the period, the balance in the Manufacturing Overhead account should be transferred to the Cost of Goods Sold account. Any over or under applied overhead for the period is reflected in the balance in the Manufacturing Overhead account.
The balance in the Manufacturing Overhead account is transferred to Cost of Goods Sold account to adjust the actual cost of goods produced. In the above transaction, there are three journal entries, including actual manufacturing overhead, applied manufacturing overhead, and transfer of manufacturing overhead account balance to cost of goods sold. The actual manufacturing overhead was $314,300, and the machine hours were 15,700. Thus, the manufacturing overhead rate for the year would be $314,300/15,700 = $20 per machine hour. The credit entry records the manufacturing overhead applied to Work in Progress Inventory. The balance in the Manufacturing Overhead account is transferred to the Cost of Goods Sold account to adjust the actual cost of goods produced. The above transaction records the transfer of the balance in the Manufacturing Overhead account to Cost of Goods Sold account.
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if the level of total production Y is lower than aggregate expenditures AE, then there is a ______ change in inventory investment.
negative unplanned
positive planned
positive unplanned
negative planned
If the level of total production Y is lower than aggregate expenditures AE, then there is a negative unplanned change in inventory investment.
What is the Inventory Investment?Inventory investment refers to the increase in inventories that businesses keep in anticipation of increased demand or to avoid a possible shortage of goods in the future. Changes in inventory investment can lead to fluctuations in the overall economy. The relationship between total production, aggregate expenditures, and inventory investment is crucial in determining how changes in spending impact the overall economy. A change in inventories can be planned or unplanned. Planned inventory investment occurs when businesses anticipate changes in demand and adjust their inventories accordingly. Unplanned inventory investment, on the other hand, occurs when changes in demand are unexpected and businesses are left with excess or insufficient inventories. Therefore, if the level of total production Y is lower than aggregate expenditures AE, then there is a negative unplanned change in inventory investment.The above answer is 150 words.
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when employees are promoted to management, many of them are derailed (fail in these positions) due to a failure to
When employees are promoted to management, many of them are derailed (fail in these positions) due to a failure to adapt to the new role and acquire the necessary skills or competencies.
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Lon Timur is an accounting major at a midwestern state university located approamately 60 miles Ta major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends Lon, an entrepreneur at heart.realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations Lon has gathered the following investment information.
1 Five used vans would cost a total of $76,136 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation.
21
Ten drivers would have to be employed at a total payroll expense of $47,400.
Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $15.800, Maintenance $3,200, Repairs $3.700, Insurance $4,400, and Advertising $2.800
A Lon has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15% Use this rate for cost of capital
51 Lon expects each van to make ten round trips weekly and carry an average of six students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12 for a round-trip ticket
The estimated Net Present Value (NPV) of the weekend commuting service is approximately $38,085.89.To evaluate the feasibility and profitability of Lon's proposed weekend commuting service, we can calculate the initial investment cost, annual expenses, revenue, and ultimately determine the net present value (NPV) of the project.
Initial Investment: Cost of 5 used vans: $76,136, Annual Expenses: Payroll expense for 10 drivers: $47,40,Gasoline: $15,800, Maintenance: $3,200, Repairs: $3,700,Insurance: $4,400,Advertising: $2,800.
Revenue: Number of round trips per van per week: 10,Number of students per trip: 6,Round-trip ticket price per student: $12, Weeks of operation per year: 30.
Total revenue per year: 5 vans * 10 trips * 6 students * $12 * 30 weeks = $324,000
Depreciation: Useful life of vans: 3 years,Total cost of vans: $76,136, Depreciation expense per year: $76,136 / 3 years = $25,378.67.
Net Operating Income (NOI): NOI = Revenue - Total Expenses. Total expenses = Payroll expense + Gasoline + Maintenance + Repairs + Insurance + Advertising + Depreciation expense
Total expenses = $47,400 + $15,800 + $3,200 + $3,700 + $4,400 + $2,800 + $25,378.67 is $102,678.67
NOI = $324,000 - $102,678.67 is $221,321.33
Net Cash Flow: Net Cash Flow = NOI - Depreciation expense
Net Cash Flow = $221,321.33 - $25,378.67 is $195,942.66
Net Present Value (NPV):Cost of Capital = 15% (annual interest rate)
NPV = Net Cash Flow /[tex](1 + Cost of Capital)^n[/tex] - Initial Investment
Assuming a 3-year project duration, we can calculate:
NPV = $195,942.66 / [tex](1 + 0.15)^3[/tex]- $76,136
= $195,942.66 / 1.52025 - $76,136
≈ $114,221.89 - $76,136
= $38,085.89
Therefore, the estimated Net Present Value (NPV) of the weekend commuting service is approximately $38,085.89.
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cash $ 2,100 $ 180 $ 1,100 short-term investments 0 0 700 current receivables 210 460 700 inventory 2,050 1,920 2,800 prepaid expenses 300 600 900 total current assets $ 4,660 $ 3,160 $ 6,200 current liabilities $ 2,120 $ 1,270 $ 3,300 compute the acid-test ratio for each of the separate cases above. which company is in the best position to meet short-term obligations?
Based on the acid-test ratio, the company in Case 1 is in the best position to meet short-term obligations with Quick assets as $2,490 and Acid-Test Ratio as 1.17.
To calculate the acid-test ratio, also known as the quick ratio, we need to consider the quick assets, which are the current assets excluding inventory. The formula for the acid-test ratio is:
Acid-Test Ratio = (Cash + Short-term Investments + Current Receivables) / Current Liabilities
Let's calculate the acid-test ratio for each separate case:
Case 1:
Quick assets = $2,100 + $180 + $210 = $2,490
Acid-Test Ratio (Case 1) = $2,490 / $2,120 ≈ 1.17
Case 2:
Quick assets = $180 + $460 = $640
Acid-Test Ratio (Case 2) = $640 / $1,270 ≈ 0.50
Case 3:
Quick assets = $1,100 + $700 + $700 = $2,500
Acid-Test Ratio (Case 3) = $2,500 / $3,300 ≈ 0.76
Comparing the acid-test ratios:
Case 1: Acid-Test Ratio ≈ 1.17
Case 2: Acid-Test Ratio ≈ 0.50
Case 3: Acid-Test Ratio ≈ 0.76
Among the three cases, Case 1 has the highest acid-test ratio of approximately 1.17. This indicates that the company in Case 1 is in the best position to meet short-term obligations since it has a higher proportion of quick assets (cash, short-term investments, and current receivables) relative to its current liabilities.
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Which of the following describes the characteristic that the variable is uncorrelated with the error term and also has no direct effect on
Relevance
Irrelevance
Exogeneity
Endogeneity
A model that includes a lag of the dependent variable is called
An autoregressive model
The elasticity models
A first difference
A model with serial correlation
The F-test statistic produced in a typical OLS estimation output is designed to test:
the null hypothesis that all regression parameters are simultaneously zero
the null hypothesis that all the slope parameters are simultaneously zero
the null hypothesis that all the slope parameters are none zero
the null hypothesis that the unrestricted model is true
The characteristic that describes that the variable is uncorrelated with the error term and has no direct effect on is called exogeneity.
The term exogeneity in statistics refers to a variable that is not influenced by any other variable in the model, either directly or indirectly.What is an autoregressive model?An autoregressive model is a statistical analysis technique that models the relationship between a dependent variable and one or more lagged values of that variable.
An autoregressive model is a time-series model that uses the past values of the dependent variable to predict future values of the same variable.What is the F-test statistic?The F-test statistic in a typical OLS estimation output is designed to test the null hypothesis that all regression parameters are simultaneously zero. It compares the fit of a restricted model and an unrestricted model. The unrestricted model is a regression model that uses all variables to explain the dependent variable, while the restricted model eliminates some variables. The F-test compares the two models to determine if the variables in the unrestricted model contribute significantly to the regression.
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which of the following is a type of owned media? display advertising direct traffic social media advertising email marketing
The following is a type of owned media is social media advertising is a type of owned media.
Owned media refers to digital channels and assets that a company or individual owns and has control over. It typically includes platforms and channels that are directly managed and operated by the organization, allowing them to have complete control over the content, messaging, and distribution.
In the context of the options given:
Display advertising: Display advertising typically refers to paid advertisements that are placed on third-party websites or platforms. While it involves promoting content or products, it is not considered owned media because the organization does not own the advertising space or have direct control over the platform.Direct traffic: Direct traffic refers to website visitors who directly enter a website's URL into their browser or use bookmarks to access it. Direct traffic is a traffic source rather than a type of owned media.Social media advertising: Social media advertising involves paid advertisements on social media platforms.Email marketing: Email marketing refers to sending promotional messages or newsletters to a targeted list of subscribers via email. Email marketing is also considered owned media because organizations have direct control over their email lists, content, and distribution.In summary, social media advertising and email marketing are types of owned media since organizations have direct control over the content, messaging, and distribution on these platforms.
Display advertising, although a form of digital advertising, is not considered owned media as it relies on third-party platforms.
Direct traffic, on the other hand, refers to website traffic sources rather than a specific type of owned media.
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Email marketing is a type of owned media where businesses directly send messages to their target audience.
Explanation:Sending emails to current or prospective customers is a component of email marketing. When done well, it can strengthen current brand awareness and establish strong ties between brands. Because email marketing efforts may be targeted yet still human, customers are drawn to businesses that do this well.
Email marketing is a type of owned media. Owned media refers to media channels that are controlled and owned by a brand or organization. In the given options, email marketing is the only channel that falls under owned media as it is a direct communication channel where businesses directly send messages to their target audience.
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The budgets of four companies yield the following information: (Click the icon to view the budget information for the four companies.) Requirements 1. Fill in the blanks for each company. 2. Compute breakeven, in sales dollars, for each company. Which company has the lowest breakeven point in sales dollars? What causes the low breakeven point?
Company D has the lowest breakeven point in sales dollars, at $30,000. This is due to the fact that they have the lowest fixed costs of any company. The contribution margin of each company can be calculated by subtracting the variable costs from the sales.
This causes the breakeven point to be the lowest, as the company will need to make less sales in order to cover its fixed costs and begin making a profit.
The table below indicates the budgeted amounts for four businesses. The blanks have been filled in. Company B Company C Company DSales$100,000$150,000$75,000$50,000Variable costs50,00060,00030,00020,000Contribution margin$50,000$90,000$45,000$30,000.
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q.10 You end up leasing $16966.03 for 3 years. Your down payment was $1052. The interest rate is 1.65% compounded monthly. The lease payment is monthly and due at the beginning of the month.
After 3 years, there is residual owing on a leased vehicle. You have the option of returning the vehicle after a lease term or buying it out. Assume you choose to purchase the vehicle after the lease and have saved for this opportunity. You pay the $10408 residual plus tax at 11%.
Assume you drove 73923 km in the 3 years. What was the cost per km per year for the leased vehicle?
To calculate the cost per kilometer per year for the leased vehicle, we need to consider the total cost of the lease over 3 years and the total kilometers driven.
1. Calculate the total lease cost:
- Lease amount: $16,966.03
- Down payment: $1,052
- Total interest paid over 3 years: (Lease amount - Down payment) * interest rate
- Total lease cost = Lease amount + Total interest paid over 3 years
2. Calculate the total kilometers driven per year:
- Total kilometers driven in 3 years: 73,923 km
- Total kilometers driven per year = Total kilometers driven in 3 years / 3
3. Calculate the cost per kilometer per year:
- Cost per kilometer per year = Total lease cost / Total kilometers driven per year
Let's calculate each step:
1. Total lease cost:
- Lease amount: $16,966.03
- Down payment: $1,052
- Total interest paid over 3 years: ($16,966.03 - $1,052) * 0.0165
- Total lease cost = $16,966.03 + Total interest paid over 3 years
2. Total kilometers driven per year:
- Total kilometers driven in 3 years: 73,923 km
- Total kilometers driven per year = 73,923 km / 3
3. Cost per kilometer per year:
- Cost per kilometer per year = Total lease cost / Total kilometers driven per year
Now, let's calculate the values:
1. Total lease cost:
- Total interest paid over 3 years = ($16,966.03 - $1,052) * 0.0165
- Total interest paid over 3 years = $2,713.92 (approx.)
- Total lease cost = $16,966.03 + $2,713.92
- Total lease cost = $19,679.95 (approx.)
2. Total kilometers driven per year:
- Total kilometers driven per year = 73,923 km / 3
- Total kilometers driven per year = 24,641 km (approx.)
3. Cost per kilometer per year:
- Cost per kilometer per year = $19,679.95 / 24,641 km
- Cost per kilometer per year = $0.7995 (approx.)
Answer: The cost per kilometer per year for the leased vehicle is approximately $0.80.
To calculate the cost per kilometer per year for the leased vehicle, we first calculate the total lease cost by adding the lease amount to the total interest paid over 3 years. The total interest paid is obtained by multiplying the difference between the lease amount and the down payment by the interest rate.
Next, we calculate the total kilometers driven per year by dividing the total kilometers driven in 3 years by 3.
Finally, we divide the total lease cost by the total kilometers driven per year to obtain the cost per kilometer per year.
In this case, the cost per kilometer per year for the leased vehicle is approximately $0.80.
The cost per kilometer per year for the leased vehicle is an important metric that helps determine the overall expenses associated with leasing a vehicle. By calculating this value, individuals can evaluate the affordability of a lease and compare it to other transportation options. In this scenario, the cost per kilometer per year for the leased vehicle is approximately $0.80, which can be used to make informed decisions about budgeting and financial planning.
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A car costs $29,100. Alematively, the car can be leased for 6 years by making payments of $383 at the beginning of each month and then bought at the end of the lease for \$5,203. If interest is 4% compounded semi-annually, which alternative is preferable? The car should be
The present value of lease payments and residual value is -$18,970.08, which means leasing is more preferable than buying.
Given:
Cost of the car is $29,100.
Lease payment is $383 per month.
Payments are made at the beginning of each month.
Lease period is 6 years.
Residual value at the end of the lease is $5,203.
Interest rate is 4% per annum, compounded semi-annually.
Using financial calculator,
For buying the car:
PV = -$29,100
FV = $0
N = 6 × 2 = 12 (since interest is compounded semi-annually)
I/Y = 4 / 2 = 2
PMT = ?
PMT = $2,851.80
Therefore, the monthly payment for buying the car is $2,851.80.
For leasing the car:
PV = ?
FV = -$5,203
N = 6 × 12 = 72
I/Y = 4 / 2 = 2
PMT = -$383
PMT = $22,054.92
Using formula, PV = PMT × (1 - 1 / (1 + i)n) / i + FV / (1 + i)n
PV = -$22,054.92 × (1 - 1 / (1 + 0.04 / 2)72) / (0.04 / 2) + $5,203
PV = -$18,970.08
Therefore, the present value of lease payments and residual value is -$18,970.08, which means leasing is more preferable than buying.
Let's calculate the present value of lease payments first. We will use the present value formula of annuity, PV = PMT × ((1 - (1 + r)-n) / r).
(1) PMT = $383, r = 0.04 / 2 = 0.02 (semi-annual rate), n = 6 × 12 = 72 (number of periods).
Thus, PV(lease payments) = 383 × ((1 - (1 + 0.02)-72) / 0.02) = $22,054.92
(2) For buying the car, we need to find the present value of all the future payments, including the down payment and the residual value.
PV(buying the car) = -29100 - (383 × 12) × ((1 - (1 + 0.02)-60) / 0.02) - 5203 × (1 + 0.02)60= -$201,864.24
When comparing the present values, we see that leasing is preferable, as $22,054.92 < $201,864.24. Therefore, the car should be leased.
Thus, the car should be leased as it is more preferable.
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d t nces Mauro Products distributes a single product, a woven basket whose selling price is $17 per unit and whose variable expense is $15 per unit. The company's monthly fixed expense is $4,400. Required: 1. Calculate the company's break-even point in unit sales. 2. Calculate the company's break-even point in dollar sales. (Do not round Intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.) 1. Break-even point in unit sales 2. Break-even point in dollar sales 3. Break-even point in unit sales 3. Break-even point in dollar sales baskets 12 baskets Whirly Corporation's contribution format income statement for the most recent month is shown below: Per Unit $ 34.00 20.00 $ 14.00 Sales (7,500 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 255,000 150,000 105,000 54,900 $ 50,100 Required: (Consider each case independently): 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income 1. What would be the revised net operating income per month if the sales volume increases by 40 units? 2. What would be the revised net operating income per month if the sales volume decreases by 40 units? 3. What would be the revised net operating income per month if the sales volume is 6,500 units?
Break-even point in unit sales The break-even point is the point at which the company's revenues cover its costs. That is, the sales revenue equals the total cost of the company, and it neither gains nor loses money.
Contribution Margin Ratio= (Unit contribution Margin/Selling price) × 100= ($2/$17) × 100= 11.76%.Break-even point in unit sales= Fixed expenses / Contribution margin ratio= $4,400 / 11.76%= 37.41 units rounded to 38 units.2. Calculation of Break-even point in dollar sales.
Unit contribution margin= ($4,400 + $600) / $2= 2,500[tex]Unit contribution margin= ($4,400 + $600) / $2= 2,500[/tex]. Calculation of New Break-even point in unit sales: New Break-even point in unit sales= (Fixed expenses + Increase in Fixed expenses) / [tex]Unit contribution margin= ($4,400 + $600) / $2= 2,500[/tex] units.
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Why might a mispricing that you find persist through time?
Group of answer choices
a.Mean reversion of prices through momentum factors
b.It is too large to take advantage of
c.They don’t; they always disappear once discovered
d.The mispricing is less than information acquisition costs
The correct option is d. The mispricing is less than information acquisition costs.
Mispricing can persist through time if the cost of acquiring the necessary information to correct the mispricing outweighs the potential profit that could be gained from exploiting the mispricing. This is especially true when the mispricing is small in magnitude.
In financial markets, information is not freely available and acquiring it can be costly. Investors need to conduct thorough research, perform analysis, and monitor market conditions to identify mispriced assets. If the cost of acquiring this information exceeds the potential profit from exploiting the mispricing, investors may choose not to correct it. As a result, the mispricing persists.
Additionally, market inefficiencies and behavioral biases can contribute to the persistence of mispricing. Factors such as investor sentiment, market momentum, or herding behavior can cause prices to deviate from their intrinsic values and remain mispriced for an extended period. These factors can create a feedback loop, sustaining the mispricing in the market.
Therefore, if the mispricing is small relative to the costs of acquiring information and correcting it, it is likely to persist over time.
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Assume that the growth rate of real GDP is 3%, the growth rate of velocity is 0%, the rate of growth of the money supply is 4%, and that changes in the rate of growth of the money supply do not affect real GDP. What is the current rate of inflation? What will happen to the inflation rate if the rate of growth of the money supply increases to 7%? What will happen to the inflation rate if the rate of growth of the money supply increases to 7%, and, at the same time, the growth rate of velocity increases to 2%?
Given, the growth rate of real GDP = 3%, the growth rate of velocity = 0%, the rate of growth of the money supply = 4%We know that,Quantity Equation: M × V = P × Ywhere,M = Money SupplyV = VelocityP = PriceY = Real GDPVelocity = Y ÷ (M/P)Putting the given values in the equation,Velocity = Y ÷ (M/P)= Y ÷ (M/(M/Y))= Y/Y= 1
Putting the values in the quantity equation,M × V = P × YM × 1 = P × Yor,P = M/Y
Now, the current rate of inflation = the rate of growth of money supply - the rate of growth of real GDP= 4% - 3%= 1%If the rate of growth of the money supply increases to 7%, then the new rate of inflation will be= 7% - 3%= 4%
Thus, if the rate of growth of the money supply increases to 7%, then the inflation rate will also increase and it will become 4%.If the rate of growth of the money supply increases to 7%, and, at the same time, the growth rate of velocity increases to 2%, then the new rate of inflation will be= 7% - 3% + 2%= 6%
Thus, if the rate of growth of the money supply increases to 7% and the growth rate of velocity increases to 2%, then the inflation rate will increase and it will become 6%. Therefore, the correct option is (C).
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the liability of a shareholder in a corporation is limited to which of these? multiple choice question. the percentage of corporate debt that equals the shareholders' ownership percentage the amount the shareholder invested in the corporation the corporation's outstanding long-term debt
The liability of a shareholder in a corporation is limited to the amount the shareholder invested in the corporation.
This principle is known as limited liability, which is a key characteristic of the corporate form of business organization.
When individuals purchase shares of stock in a corporation, they become shareholders and owners of a portion of the company. However, their personal liability for the corporation's debts and obligations is limited to the extent of their investment in the company. In other words, shareholders are not personally responsible for the corporation's debts and cannot be held liable for amounts beyond what they have invested.
This limited liability protection is one of the main advantages of forming a corporation. It allows individuals to invest in the company without risking their personal assets beyond their investment. If the corporation faces financial difficulties or legal liabilities, the shareholders' personal assets, such as their homes or personal bank accounts, are generally protected from being seized to satisfy the corporation's obligations.
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