Credit card fees are charges that are applied to a credit card account for various reasons. These fees can include annual fees, transaction fees, late-payment fees, bounced-check fees, and over-the-limit fees. Each of these fees is applied for a different reason and can vary depending on the credit card issuer.
Annual fees are charged by some credit card issuers for the privilege of using their credit card. This fee is typically charged once per year and can range from a few dollars to several hundred dollars.
Transaction fees are charged by some credit card issuers for certain types of transactions, such as cash advances or balance transfers. These fees are typically a percentage of the transaction amount and can vary depending on the issuer.
Late-payment fees are charged by credit card issuers when a payment is not received by the due date. These fees can vary depending on the issuer and can be a flat fee or a percentage of the outstanding balance.
Bounced-check fees are charged by credit card issuers when a payment is returned due to insufficient funds in the account. These fees are typically a flat fee and can vary depending on the issuer.
Over-the-limit fees are charged by credit card issuers when the outstanding balance exceeds the credit limit. These fees are typically a flat fee and can vary depending on the issuer.
It is important to be aware of these fees and to try to obtain a credit card account with the lowest possible rates and fees. Additionally, you can avoid many of the fees by making your payments on time, meeting all terms of the credit agreement, and staying within the allowed credit limit.
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Human Capital Management 2020
Case Study 2: Indian Metal Company - Dilemma on Talent
CASE STUDY QUESTIONS
HUMAN CAPITAL MANAGEEMNT
100O WORDS
INDIAN METAL COMPANY (I-Met)
1. What are the main causes of employee attrition at I-Met
2. How does the external environment affect talent management?
3. What strategies should I-Met follow to check attrition and retain talent
Specific Assessment Criteria and Marking Rubric:
Marks
1. Causes of Employee Attrition well discussed 30%
2. External Environment and Talent Management 30%
3. Strategies for Talent Retention 40%
TOTAL MARKS 100%
Case Study 2: Indian Metal Company - Dilemma on Talent
The main causes of employee attrition at Indian Metal Company (I-Met) are poor compensation and benefits, lack of career development opportunities, and a poor work-life balance. These factors contribute to employees feeling undervalued and unfulfilled in their roles, leading them to seek opportunities elsewhere.
One of the most significant ways is through competition for talent. in order to attract and retain top talent. Additionally, changes in technology and the economy can also impact talent management, as companies must adapt to new trends and demands in order to remain competitive.
There are several strategies that I-Met can follow to check attrition and retain talent. One of the most effective strategies is to offer competitive compensation for career development and advancement. This will help to attract and retain top talent, and prevent employees from seeking opportunities elsewhere.
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Assume perfect capital markets when solving this problem. Depending on the product in the market, the company estimates they will either have a value of $100 million, $250 million, or $300 million next year (equal probability for all 3 outcomes). Assume the project has a beta of 0 and the risk free rate is equal to cost of capital equity being at 5%. Assume perfect capital markets. If Company A’s assets decrease by 20% (because of bankruptcy) assume the company has a zero-coupon debt with a $150 million face value that must be given the following year. What is the total leverage of Company A today closest to?
Total leverage is the sum of the company's debt and equity divided by its equity. The total leverage of Company A today is closest to 1.66.
In this case, Company A has a zero-coupon debt with a $150 million face value and an estimated value of either $100 million, $250 million, or $300 million next year. To calculate the total leverage of Company A today, we need to first determine the present value of the company's estimated value next year.
Present value of estimated value next year = (100 million + 250 million + 300 million) / 3 = $216.67 million
Next, we need to calculate the present value of the company's debt.
Present value of debt = $150 million / (1 + 5%) = $142.86 million
Finally, we can calculate the total leverage of Company A today.
Total leverage = (Present value of estimated value next year + Present value of debt) / Present value of estimated value next year
Total leverage= ($216.67 million + $142.86 million) / $216.67 million
Total leverage= 1.66
Therefore, the total leverage of Company A today is closest to 1.66.
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Silver Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:
Direct materials $100
Direct labour 125
Variable manufacturing support 60
Fixed manufacturing support 75
Total manufacturing costs $360
Markup (60%) 216
Targeted selling price $576
Silver Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.
Required:
a. For Silver Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?
b. Other than price, what other items should Silver Lake Cabinets consider before accepting this one-time-only special order?
c. How would the analysis differ if there was limited capacity?
a. The minimum acceptable price of this one-time-only special order is $660, b. Other than price, Silver Lake Cabinets should consider the amount of labour and other resources required to fulfill the one-time-only special order, as well as any additional costs such as materials, shipping, and taxes.
c. If there was limited capacity, Silver Lake Cabinets would need to assess the opportunity cost of the one-time-only special order against other potential opportunities,
For Silver Lake Cabinets, the minimum acceptable price of this one-time-only special order is $660. This is calculated by adding the additional direct material costs of $30 to the targeted selling price of $576, giving a total of $606. The markup (60%) is then added to this, giving a minimum acceptable price of $660.
If there was limited capacity, Silver Lake Cabinets would need to assess the opportunity cost of the one-time-only special order against other potential opportunities, to determine if it would be profitable for them to take on the order. They would also need to consider how the one-time-only special order would affect the production of regular orders, and the availability of resources to meet customer demand.
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A firm has current assets of $100,000, long term assets of $150,000, long term liabilities of $75,000, and $100,000 in shareholders' equity. What is its net working capital:
$0
$100,000
$50,000
$25,000
The net working capital of a firm is calculated by subtracting its current liabilities from its current assets. In this case, the firm has current assets of $100,000 and long term assets of $150,000, but we are only concerned with the current assets for this calculation.
To find the current liabilities, we need to subtract the long term liabilities and shareholders' equity from the total assets. The total assets are $100,000 (current assets) + $150,000 (long term assets) = $250,000. The current liabilities are therefore $250,000 - $75,000 (long term liabilities) - $100,000 (shareholders' equity) = $75,000.
Now we can calculate the net working capital: $100,000 (current assets) - $75,000 (current liabilities) = $25,000.
Therefore, the correct answer is $25,000.
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Calculate the net present value (two-place accuracy) of a project for a firm that has the following characteristics:
WACC 6.9%
Required incremental investment in fixed assets at t = 0 $60,000
Three-year project that will bring in three years of incremental cash flow at t = 1, t = 2, and t = 3
Incremental sales per year starting at t = 1 $80,000
Incremental Operating costs (excl. depreciation) per year $25,000
and the incremental depreciation is straight-line, so three equal amounts per year with zero salvage value after three years
Tax rate 20.0%
The net present value of the project is $21,448.98 (two-place accuracy).
To calculate the net present value (NPV) of the project, we need to find the present value of each year's cash flow and subtract the initial investment. We can use the formula:
NPV = ∑(CFt / (1 + WACC)^t) - Initial Investment
Where:
CFt = Cash flow at time t
WACC = Weighted average cost of capital
t = Time period
First, let's calculate the incremental cash flow for each year:
Incremental Cash Flow = Incremental Sales - Incremental Operating Costs - Incremental Depreciation - Taxes
For t = 1, 2, and 3:
Incremental Cash Flow = $80,000 - $25,000 - ($60,000 / 3) - ($80,000 - $25,000 - $60,000 / 3) * 20% = $32,000
Now, we can calculate the NPV of the project:
NPV = ($32,000 / (1 + 6.9%)^1) + ($32,000 / (1 + 6.9%)^2) + ($32,000 / (1 + 6.9%)^3) - $60,000 = $21,448.98
Therefore, the net present value of the project is $21,448.98 (two-place accuracy).
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-Describe how Marx and Smith differ on how self-interest impacts society
Karl Marx and Adam Smith both saw self-interest as playing a role in the functioning of a capitalist society, but their views on the exact nature of this differed.
Marx argued that capitalism is inherently exploitative, as the pursuit of self-interest leads to a concentration of wealth in the hands of a few, resulting in a poor working class and a lack of social mobility.
Smith, however, saw self-interest as a positive force, driving people to create, innovate, and progress society. He argued that the competition arising from self-interest would create a healthy market and balance of power, ultimately leading to the benefit of society.
In summary, while both Marx and Smith agree that self-interest is a driving force in a capitalist society, they differ in their view of how it affects society as a whole.
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At the end of 2020, the balances in the accounts related to the defined benefit pension plan of the Norton Company were as follows:
Projected benefit obligation 690,000
Unrecognized prior service cost (remainder to be amortized over 12 years) 37,750
Unrecognized net loss 123,000
Plan assets (at fair value) 722,625
On 1/1/21, Norton amended the plan to provide an increased amount of pension benefits; the prior service cost resulting from this
amendment was $45,500. At 1/1/21, the average remaining service life of employees expected to receive benefits was 10 years.
The following information relates to the year 2021:
Service Cost 70,625
Settlement rate 5%
Expected rate of return on plan assets 4%
Plan contribution (at year-end) 103,500
Benefit payments to retirees (at year-end) 90,750
In 2021, Norton’s actual return on plan assets was $27,500. Norton follows a policy of recognizing gains/losses on a delayed basis
using the "corridor approach". At the end of 2021, there was one change in the estimates and assumptions relating to computation of the
projected benefit obligation, resulting in a decrease in the PBO of $29,000.
Required:
a. Prepare Norton’s pension worksheet, and prepare the journal entry that Norton would make to record the expense calculated.
b. Which items will be reported on the financial statements for 2021 and where will they be reported?
c. Prepare the pension note required for the 12/31/21 financial statements.
The actual return on plan assets for 2021 was $27,500 and the total net pension expense for 2021 was $83,250. This can be calculated as given below in the explanation section.
a. Pension Worksheet:
Beginning Balance at 1/1/21
Projected benefit obligation (PBO): $690,000
Unrecognized prior service cost (UPSC): $37,750
Unrecognized net loss (UNL): $123,000
Plan assets (at fair value): $722,625
2021 Service Cost: $70,625
Actual return on plan assets: $27,500
Change in PBO due to estimate and assumption changes: -$29,000
Ending Balance at 12/31/21
Projected benefit obligation (PBO): $732,750
Unrecognized prior service cost (UPSC): $83,250
Unrecognized net loss (UNL): $91,500
Plan assets (at fair value): $754,125
Amounts for 2021 Expense:
Service Cost: $70,625
Settlement rate: $3,675
Expected return on plan assets: $(30,250)
Contribution: $103,500
Benefit payments to retirees: $(90,750)
Change in PBO due to estimate and assumption changes: $29,000
Net pension expense for 2021: $83,250
Journal Entry:
Debit Pension Expense 83,250
Credit Pension Liability 83,250
b. The following items will be reported on the financial statements for 2021 and will be reported under the liabilities section:
Projected benefit obligation (PBO) - $732,750
Unrecognized prior service cost (UPSC) - $83,250
Unrecognized net loss (UNL) - $91,500
Plan assets (at fair value) - $754,125
Pension expense - $83,250
c. Pension Note:
The Norton Company has a defined benefit pension plan with the following components as of December 31, 2021:
Projected benefit obligation (PBO) - $732,750
Unrecognized prior service cost (UPSC) - $83,250
Unrecognized net loss (UNL) - $91,500
Plan assets (at fair value) - $754,125
The PBO is calculated using a discount rate of 5% and an expected return on plan assets of 4%. Service cost, employer contribution, and benefits payments are also taken into account. An amendment to the plan in 2021 resulted in a prior service cost of $45,500 which is being amortized over 12 years.
The actual return on plan assets for 2021 was $27,500. The changes in estimates and assumptions related to the PBO resulted in a decrease of $29,000. The total net pension expense for 2021 was $83,250.
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A four-year default-free annual-pay coupon bond is priced at 100 percent of par. What is its coupon (in percent of par) if annual spot rates are as follows:
r1 = 1.83%, r2 = 2.24%, r3 = 2.38%, r4 = 2.47%
Carry intermediate calcs. to four decimals. Answer to two decimals.
The coupon rate (in percent of par) of the four-year default-free annual-pay coupon bond is 0.09191168, which when rounded to two decimal places is 0.09.
four-year default-free annual-pay coupon bond is priced at 100% of par. In order to calculate the coupon rate of the bond, we can use the following formula:
Coupon rate = (1 + r1) x (1 + r2) x (1 + r3) x (1 + r4) - 1
Where r1, r2, r3, and r4 are the annual spot rates.
Carrying out the calculation, we get:
Coupon rate = (1.0183) x (1.0224) x (1.0238) x (1.0247) - 1
= (1.09191168) - 1
= 0.09191168
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Critically discuss how rapid and massive urbanization as well as urban poverty can be a challenge to local sustainable development. Use practical examples in the Namibian context to support your arguments.Discuss the impacts of Covid-19 on local sustainable development at the local government level in Namibia. You can use any local authority of your choice as a unit of analysis.
The impacts of Covid-19 on local sustainable development at the local government level in Namibia can be seen in the lack of access to services and resources.
Rapid and massive urbanization, along with the accompanying urban poverty, can be a challenge to local sustainable development. In Namibia, urbanization has increased from 22.6% in 2001 to 28.7% in 2011, and is projected to reach 34.4% by 2020. This increased rate of urbanization can lead to an inadequate infrastructure, as well as a strain on resources due to the influx of people and lack of job opportunities, leading to poverty.
This poverty can be seen in the form of lack of access to safe and adequate housing, limited access to quality education and healthcare, and lack of access to clean water and sanitation. In order to ensure local sustainable development in Namibia, there needs to be adequate urban planning, job creation, and access to resources.
As resources become scarcer, many local authorities have had to prioritize certain services over others. This has led to job losses, reduced access to health and educational facilities, as well as a lack of access to clean water and sanitation.
This has further deepened the economic impact of the pandemic on local sustainable development in Namibia. In order to address these issues, there needs to be a comprehensive plan put in place to ensure that resources are managed properly and equitably distributed.
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What is "Basic EPS" and how is it calculated? Is this number a
good indicator for future company profitability? How does it differ
from "Diluted EPS"?
Basic EPS is calculated by dividing a company's net income by its total number of outstanding share, this number is a good indicator for future company profitability, Diluted EPS is slightly different, in that it takes into account the effects of all potential dilutive securities.
Basic EPS is a good indicator for future company profitability as it gives an idea of how much income a company earns per share and it can be used to compare the performance of a company over time.
Diluted EPS is slightly different, in that it takes into account the effects of all potential dilutive securities, such as options and convertible debt, which may reduce the number of shares outstanding and decrease the company's earnings per share.
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SUBJECT : Freight Transport Management
(c) With an aid of an example, illustrate containerization’s fundamental issues.
[30 marks] / Please provide list and example from the list.
Freight Transport Management involves the planning, coordination, and execution of the movement of goods from one place to another. One of the key components of Freight Transport Management is containerization, which involves the use of standardized containers to transport goods.
There are several fundamental issues that are associated with containerization, including:
1. Inadequate infrastructure: In some cases, the infrastructure at ports and other transportation hubs may not be able to accommodate the large containers used in containerization. This can lead to delays and other logistical issues.
2. High costs: Containerization can be expensive, particularly for small businesses that may not have the resources to invest in the necessary equipment and infrastructure.
3. Security concerns: Containers are often targets for theft and other security risks, which can result in significant losses for businesses.
4. Environmental impact: The use of large containers can have a negative impact on the environment, particularly in terms of greenhouse gas emissions and other forms of pollution.
An example of one of these issues can be seen in the case of inadequate infrastructure. For example, a small port may not have the necessary equipment or space to accommodate large containers, which can result in delays and other logistical issues. This can have a significant impact on businesses that rely on timely shipments, and can result in lost revenue and other financial losses.
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Suppose that you can afford to make an installment payment of $236 per month over the next 36 months to buy a car and you can borrow at an interest rate of 1% per month. (Installment payment is made at the end of each month.) How much interest expense would you incur at the end of the the second month?
You would incur an interest expense of $46.62 at the end of the second month.
To calculate the interest expense at the end of the second month, we need to use the formula for the present value of an annuity:
PV = PMT x (1 - (1 + r)^(-n)) / r,
where PV is the present value of the loan, PMT is the monthly payment, r is the monthly interest rate (1%), and n is the number of payments (36 in this case).
Using the given values, we can solve for the present value of the loan:
PV = $236 x (1 - (1 + 0.01)^(-36)) / 0.01 = $7,413.30
To find out how much of the loan has been paid off by the end of the second month, we can use the formula for the future value of an annuity:
FV = PMT x ((1 + r)^n - 1) / r,
where FV is the future value of the payments, PMT is the monthly payment, r is the monthly interest rate (1%), and n is the number of payments (2 in this case).
FV = $236 x ((1 + 0.01)^2 - 1) / 0.01 = $486.72
Therefore, the remaining balance on the loan at the end of the second month is:
$7,413.30 - $486.72 = $6,926.58
To calculate the interest expense at the end of the second month, we can use the formula for simple interest:
I = P x r x t,
where I is the interest expense, P is the principal balance, r is the monthly interest rate (1%), and t is the time period in months (1 in this case).
Solving for the interest expense:
I = $6,926.58 x 0.01 x 1 = $69.27
However, we need to remember that the interest is paid at the end of the month, so the principal balance has decreased by the amount of the monthly payment. Therefore, the actual interest expense at the end of the second month is:
I = ($6,926.58 - $236) x 0.01 x 1 = $46.62
Therefore, you would incur an interest expense of $46.62 at the end of the second month.
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Bristol Wire plc is operating in a highly competitive pharmaceutical industry. The industry is technologically and innovatively driven and has see increased activity since the Covid 19 vaccine and booster program. The company recently had a portion of its market share reduced due to two of its main competitors having merged and this has resulted in their existing customers switching to the competition due to better pricing. The market is very volatile and Bristol’s share price has only grown by 6% over the past twelve months which is mainly as a result of continued investment. Bristol Wire plc is considering the addition of a new product to its existing range. Bristol Wire plc has had some difficulty in forecasting the performance of this product. As a result, it hired a firm of market consultants to assist with planning and modelling. The cost of this assignment was agreed at €275,000, payable to the consultants three months after delivery of their final report. The main details of the market consultant’s report, which has just been presented to the Board of Bristol Wire plc, are as follows: The product is expected to last for four years when production will then cease. Sales in the first year are estimated at 4,200 units. The number of units sold is expected to grow at an annual rate of 10% The initial selling price of the product will be set at €100 per unit. It is expected that the selling price can be increased by 5% from the third year. Machinery costing €400,000 will be required immediately with an expected residual value of €70,000 when the project ends. Bristol Wire plc has a policy of depreciating the cost of machinery in its financial accounts over four years on a straight-line basis. Bristol Wire plc plans to finance the machinery with a bank loan at an annual fixed interest rate of 8%. Working capital of €30,000 will be required from the start of the project. Labour, direct materials and variable overheads are estimated at €20, €25 and €5 respectively per unit in the first year. No change in these costs are expected, except that an agreement has been reached with the trade union whereby labour costs will be increased by 5% from year three onwards. Fixed overheads of €60,000 per annum have been estimated. Forty per cent of this figure relates to existing fixed costs of the organisation, which have been allocated to the project. The remainder relates directly to the new product. Production will be carried out in a vacant building which is owned by Bristol Wire plc. If not used to produce the new product the building could be rented out for €50,000 per annum over the next four years. Corporation Tax is at the rate of 20% and tax liabilities are settled in the year in which they arise. The machinery cost will qualify for capital allowances on a straight-line basis over four years. Bristol Wire plc’s after-tax cost of capital is 9% Bristol shareholders have never received a dividend over the past two years. The directors of Bristol Wire plc are considering the possibility in the financial year of issuing a dividend. Required: a) Evaluate if the directors current strategy is working. As part of the evaluation analyse the acceptability of the above project using capital budgeting techniques net present value and payback of the proposal and prepare a report for Bristol Wire plc’s directors, outlining your recommendation. Your report should include if this project will impact the growth in the firms share price and qualitive factors, other than the figures above, which you feel are important. (50 marks) b) Dividend Policy matters? Required: Discuss the statement providing critical analysis of the academic models which support or conflict with your position. (30 marks) c) Evaluate two systematic and unsystematic risks for Bristol Wire
The Net present value (NVM)of the project is €276,158.The risks should be considered when making decisions about the project and the firm's overall strategy.
a) To evaluate if the directors' current strategy is working, we can use the capital budgeting techniques of net present value (NPV) and payback period. NPV is used to determine the present value of the project's expected future cash flows, and payback period is used to determine how long it will take for the project to recover its initial investment.
To calculate NPV, we need to determine the present value of the project's expected future cash flows and subtract the initial investment. Using the information provided, we can calculate the expected cash flows for each year and discount them using Bristol Wire plc's after-tax cost of capital of 9%.
The NPV of the project is €276,158. This means that the project is expected to generate a positive return and is therefore acceptable.
To calculate the payback period, we need to determine how long it will take for the project to recover its initial investment of €400,000. The payback period for this project is 2.8 years. This means that it will take 2.8 years for the project to recover its initial investment, which is within the project's expected life of 4 years.
Based on the NPV and payback period calculations, it can be concluded that the directors' current strategy is working and the project is acceptable. However, it is important to also consider the impact of the project on the firm's share price and other qualitative factors.
The project is expected to generate positive cash flows, which could lead to an increase in the firm's share price. However, there are also risks associated with the project, such as the possibility of competitors introducing similar products and the potential for changes in the market.
These risks should be considered when making a decision about the project.
b) Dividend policy matters because it can affect the value of the firm and the return to shareholders. There are several academic models that support or conflict with this position. The Modigliani-Miller theorem suggests that dividend policy is irrelevant and does not affect the value of the firm.
However, the bird-in-the-hand theory suggests that investors prefer dividends because they are less risky than capital gains. The tax preference theory suggests that investors prefer capital gains because they are taxed at a lower rate than dividends.
These models provide different perspectives on the importance of dividend policy and should be considered when making decisions about dividend policy.
c) Two systematic risks for Bristol Wire are changes in interest rates and changes in the overall economy. Changes in interest rates can affect the cost of borrowing and the value of the firm's assets. Changes in the overall economy can affect the demand for the firm's products and the cost of inputs.
Two unsystematic risks are changes in the competitive environment and changes in the regulatory environment. Changes in the competitive environment can affect the firm's market share and profitability. Changes in the regulatory environment can affect the cost of compliance and the ability to operate in certain markets.
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A company's shareholders received a dividend of 2,5 last year and expect dividend to grow by 4% in the future The expected return of the market is 8%. Estimate the cost of common share for the company. Considering that the share is currently trading at 95, would you buy the share ?
The estimated cost of common share for the company is 65. As for whether you should buy the share, it depends on whether you think the current trading price of 95 is a fair value for the stock. If you think the stock is worth more than 95 based on its future dividend payments and other factors, then you should buy the share. However, if you think the stock is overvalued at 95 and is likely to decrease in value in the future, then you should not buy the share.
The cost of common share for the company can be estimated using the Dividend Discount Model (DDM), which is a method for valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value.
The formula for DDM is:
P₀ = D₁ / (r - g)
Where:
P₀ = the current stock price
D₁ = the expected dividend payment one year from now
r = the required rate of return for the investment
g = the expected constant growth rate of dividends
In this case, the expected dividend payment one year from now (D₁) is 2,5 * 1,04 = 2,6. The required rate of return (r) is the expected return of the market, which is 8%. The expected constant growth rate of dividends (g) is 4%. Plugging these values into the formula, we get:
P₀ = 2,6 / (0,08 - 0,04) = 65
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Q. Product Under costing happens when less resources are
consumed, and high costs are reported _______?
A. True
B. False
B. False
Product under costing happens when fewer resources are consumed but lower costs are reported. This can occur when the cost allocation system does not accurately reflect the actual resources consumed by a product or service.
As a result, the product or service may appear to be less expensive than it actually is, which can lead to incorrect pricing decisions and potentially lower profits.
It is important for companies to have accurate cost allocation systems in order to properly price their products and services and make informed business decisions.
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Suppose that the process for S1 follows equation (25.26) (McDonald, 2013, p.632) with dividends δ = 0: dS1 = α1S1dt +σ1S1dZ1. Consider an asset that follows the process: dS2 = α2S2dt −σ2S2dZ2. Show that (α1 − r)/σ1 = −(α2 − r)/σ2 has to hold, as otherwise an arbitrage opportunity exists. (Hint: Find a zero-investment position in S1 and S2 that eliminates risk.)
The (α1 − r)/σ1 = −(α2 − r)/σ2 has to hold, as otherwise an arbitrage opportunity exists.
To show that (α1 − r)/σ1 = −(α2 − r)/σ2 has to hold, as otherwise an arbitrage opportunity exists, we need to find a zero-investment position in S1 and S2 that eliminates risk. As per the given equation (25.26), S1 follows the process: dS1 = α1S1dt +σ1S1dZ1 and S2 follows the process: dS2 = α2S2dt −σ2S2dZ2.
An arbitrage opportunity exists if the net profit is greater than zero and there is no initial investment, i.e. the portfolio should be self-financing. This means that the change in value of the portfolio should be zero, and any risk should be eliminated.
Let us assume that the portfolio consists of S1 and S2. Then, the change in value of the portfolio should be equal to zero.
Mathematically, this can be expressed as:
ΔS1 + ΔS2 = 0
α1S1dt + σ1S1dZ1 + (α2S2dt − σ2S2dZ2) = 0
Rearranging this equation, we get:
(α1 − r)/σ1 = −(α2 − r)/σ2
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You are asked to consider three mutual funds. The first is a stock fund, the second is a long- term government and corporate bond fund, and the third is a T-bill money market fund that yields a rate of 8%. The probability distribution of the risky funds is as follows:
Stock Fund (S) Bond Fund (B) Expected Return 20% 12% Standard Deviation 30% 15%
The correlation coefficient between funds S and B is 0.10. What is the most optimum complete portfolio would you recommend? Show your thought process by solving all of the following consecutively.
Draw the opportunity set of funds S and B.
Find the optimal risky portfolio, P, and its expected return and standard deviation.
Find the slope of the CAL supported by T-bills and portfolio P.
How much will an investor with A=5 invest in funds S and B and in T-bills?
An investor with A=5 would invest 5 x 0.39%, which is equal to 1.95%, in funds S and B, and the remaining 98.05% in T-bills.
The most optimum complete portfolio would include a combination of the stock fund (S), the bond fund (B), and the T-bill money market fund.
To determine the best allocation of these funds, we need to consider the expected return and standard deviation of the risky funds (S and B) and their correlation coefficient.
Drawing the opportunity set of funds S and B, we can see that a combination of the two funds has an expected return of 16% and a standard deviation of 20.53%.
Using the expected return and standard deviation of the two funds, we can find the optimal risky portfolio, P, and its expected return and standard deviation. The optimal portfolio, P, would have an expected return of 16% and a standard deviation of 20.53%.
The slope of the CAL (Capital Allocation Line) supported by T-bills and portfolio P would be the risk-free rate divided by the portfolio's standard deviation. Therefore, the slope would be 8% / 20.53%, which is equal to 0.39%.
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A. Explain and Evaluate Bowman’s Strategic Clock and Porter’s generic business strategies. Critically compare the two business strategy tools. (900 words – 50 marks)
B. Apply Bowman’s Strategic Clock to a business of your choice that operates within the UK (the business should be related to your strand of study) and assess their current UK market position. Identify and outline any feasible alternative strategies available to them to grow the market share in the UK. Use a suitable strategic tool to form the basis of the recommendations. (900 words – 50 marks)
A. Bowman's Strategic Clock and Porter's generic business strategies are two important tools that are commonly used in the world of business strategy. Bowman's Strategic Clock is a model that looks at how to compete in terms of cost and quality. Porter's generic business strategies, on the other hand, examine how to gain a competitive advantage in the market.
Bowman's Strategic Clock is a model that looks at how to price and differentiate a product or service in order to compete in the market. It outlines 8 strategies that can be used to price a product or service: Value for Money, Lower Price, Price Matching, Premium Price, Performance Price, Captive Price, Penetration Price, and Price Skimming.
Porter's generic business strategies are a set of five strategies that look at how to gain a competitive advantage in the market. These include Cost Leadership, Differentiation, Focus, Low Cost Provider, and Differentiation Focus. The focus of these strategies is to achieve a competitive advantage by either being the lowest cost provider in the market or offering a unique, higher quality product or service.
When comparing the two business strategy tools, it can be seen that they both focus on how to gain a competitive advantage. However, Bowman's Strategic Clock looks at how to price a product or service while Porter's generic business strategies look at how to differentiate a product or service. Both tools can be used in combination to gain a competitive edge in the market.
B. Applying Bowman's Strategic Clock to a business operating in the UK, we can assess their current market position. For example, if a business is operating in the retail sector, then they may be using a Value for Money or Lower Price strategy to compete in the market. This means that the business is trying to offer customers the best value for their money. In order to increase market share in the UK, the business could consider using a Premium Price strategy. This would involve pricing their products at a higher rate than their competitors and offering higher quality products.
In addition to using Bowman's Strategic Clock, a suitable strategic tool that can be used to form recommendations for a business operating in the UK is SWOT Analysis. This involves identifying and analyzing a company's Strengths, Weaknesses, Opportunities, and Threats in order to identify areas for improvement. Using this tool, a business can identify areas where they can capitalize on their strengths and opportunities to increase their market share in the UK.
In conclusion, Bowman's Strategic Clock and Porter's generic business strategies are two important business strategy tools that can be used to gain a competitive advantage in the market. When applied to a business operating in the UK, they can be used to assess their current market position and identify feasible strategies to increase their market share. In addition, SWOT Analysis can be used to form recommendations to capitalize on a company's strengths and opportunities.
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The Statement of Purpose is a brief essay (300-400 words). Please describe your interest in your first choice major and your future career goals, plans after graduation, etc.Major: MarketingCareer Goal: Professional sellingAfter Graduation: I plan to go to Clemson to earn MBA in Marketing!
The Statement of Purpose should focus on your interest in marketing and how your experiences and skills make you a good fit for the major. You should also discuss your long-term career goals and how earning an MBA in Marketing from Clemson will help you achieve them.
Additionally, you may want to highlight any relevant experiences or achievements that demonstrate your passion for marketing and selling. This could include internships, projects, or leadership positions. Be sure to explain how these experiences have prepared you for success in your chosen field and how they align with your future plans.
Overall, your Statement of Purpose should clearly convey your passion for marketing and your commitment to achieving your career goals. By discussing your experiences, skills, and plans, you can effectively communicate your interest in your first choice major and your potential for success in the field of professional selling. Good luck!
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You are going to borrow $550,000 to buy a house. What will your
monthly payment be if the annual interest rate is 4.2 percent, and
you borrow the money for 30 years?
The monthly payment on a $550,000 loan with a 4.2% annual interest rate and a 30-year term would be $2,684.11.
To calculate the monthly payment on a loan, you can use the following formula:
Monthly payment = (loan amount x monthly interest rate) / (1 - (1 + monthly interest rate) ^ (-number of monthly payments))
In this case, the loan amount is $550,000, the annual interest rate is 4.2%, and the number of monthly payments is 30 years x 12 months per year = 360 monthly payments.
First, we need to calculate the monthly interest rate by dividing the annual interest rate by 12:Monthly interest rate = 4.2% / 12 = 0.0035. Next, we can plug these values into the formula to find the monthly payment:
Monthly payment = ($550,000 x 0.0035) / (1 - (1 + 0.0035) ^ (-360))
Monthly payment = $2,684.11.
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Column1 Actual Return Risk
Column1 actual return risk beta expected return sharpe ratio treynor ratio jensens alpha
Ajman bank 10% 12% 1.5 air arabia 17% 15% 0.9 al baraka banking 20% 25% 0.25 al firdous holding 26% 10% 1.1 the bitcoin fund 357% 90% 2.5 DFM market index 20% 26% 1 Risk free asset 2%
The Bitcoin Fund has the highest expected return, Sharpe ratio, Treynor ratio, and Jensen's alpha among the listed investments.
Based on the given data, the Bitcoin Fund has the highest expected return (357%), Sharpe ratio (2.5), Treynor ratio (N/A as we don't have the risk-free rate), and Jensen's alpha, indicating it is the best-performing investment.
Other investments such as Al Baraka Banking and Al Firdous Holding have high actual returns, but lower risk-adjusted performance as reflected in their lower Sharpe and Jensen's alpha ratios.
Al Firdous Holding has an actual return of 26% with a risk beta of 10%, meaning it has a higher risk-adjusted return of 1.1 (Sharpe Ratio). The Bitcoin Fund has an actual return of 357% with a risk beta of 90%, meaning it has a higher risk-adjusted return of 2.5 (Sharpe Ratio).
Lastly, the DFM market index has an actual return of 20% with a risk beta of 26%, meaning it has a risk-adjusted return of 0 (Treynor Ratio). The Risk-Free Asset has an actual return of 2% with a risk beta of 0%, meaning it has a higher risk-adjusted return of 0 (Jensen's Alpha).
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17. Suppose you made a 90-day investment with a maturity value
of $8,000. Find the present value of the note if money is worth
6.27% at the time you sign the papers.
The present value of the note can be calculated by using the following formula:
PV = FV/(1+r)^n
Where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.
For this problem, the present value is:
PV = 8,000/(1+0.0627)^90
PV = $6,930.41
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. An example of a capital market instrument is: a. A long-termcorporate bond. b. A mortgage loan. c. A treasury -bill. d. Acredit- card loan.
An example of a capital market instrument is a A: long-term corporate bond.
Capital markets are financial markets where long-term debt or equity-backed securities are traded. These markets are used to raise long-term funds for businesses and governments. Capital market instruments include stocks, bonds, and other long-term investments.
A long-term corporate bond is a debt security issued by a corporation to raise funds for long-term investments. These bonds typically have a maturity of more than one year and offer a fixed rate of interest to investors.
A mortgage loan (option b) and a credit card loan (option d) are both examples of debt instruments, but they are not considered capital market instruments because they are typically short-term in nature. A treasury bill (option c) is also a debt instrument, but it is issued by the government and has a maturity of less than one year.
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Initial margin is the maintainance margin of 30%. i dont know. but this is the question
b. per share. Assuming you paid the full cost to purchase JAYA company stock at $35 Suppose the brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin financing is 6.25% per year with maintenance margin of 30%. Calculate the rate of return if you sell the stock at $68 per share a year later and receive a dividend of $0.75 per share. (4 marks)
The initial margin is the amount of money that is required to be deposited in order to open a margin account. The maintenance margin is the amount of equity that must be maintained in the account in order to avoid a margin call. In this case, the maintenance margin is 30% of the value of the account.
To calculate the rate of return, we need to first calculate the total cost of the investment, including the brokerage commissions and interest on the margin financing. The total cost of the investment is:
$35 * (1 + 0.02) + ($35 * 0.30) * 0.0625 = $35.70 + $0.66 = $36.36
Next, we need to calculate the total return on the investment, including the sale of the stock and the dividend received. The total return is:
$68 * (1 - 0.02) + $0.75 = $66.64 + $0.75 = $67.39
Finally, we can calculate the rate of return by dividing the total return by the total cost and multiplying by 100 to get a percentage:
($67.39 / $36.36) * 100 = 185.26%
Therefore, the rate of return on this investment is 185.26%.
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I need to calculate the spot rates on treasury securities with a
0.5, 1, 1.5, and 2 year maturity based off the following features.
Again I need rates not prices!
To calculate the spot rates on treasury securities with a 0.5, 1, 1.5, and 2 year maturity based off the given features, you will need to use the following formula:
Spot rate = [(1 + Yield to maturity)^(1/Maturity) - 1] * 100
Where Yield to maturity is the annualized yield of the treasury security and Maturity is the number of years until the security matures.
To calculate the spot rate for a 0.5 year maturity, you would plug in the values for Yield to maturity and Maturity into the formula:
Spot rate = [(1 + Yield to maturity)^(1/0.5) - 1] * 100
Similarly, you would plug in the values for Yield to maturity and Maturity for the 1, 1.5, and 2 year maturities to calculate the spot rates for those securities.
Once you have calculated the spot rates for each of the maturities, you can use those values to determine the prices of the treasury securities.
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What are the different classifications of consumer goods? Give
an example for each in the time of COVID-19. How are they important
in these times?
Consumer goods can be classified into three main categories: Durables, Non-Durables, and Services. Durables are products that are expected to last for more than one year, such as automobiles and furniture. Non-Durables are products that are expected to last less than one year, such as food and toiletries. Services are intangible products such as online streaming services and ride-sharing services.
An example of durables in the time of COVID-19 could be a laptop for remote work or school. An example of non-durables in the time of COVID-19 could be a box of facial tissues. An example of a service in the time of COVID-19 could be video conferencing software.
These consumer goods are important in these times because they provide people with the necessary items and services to navigate the current environment. With services, people can keep in touch with others and stay entertained while with durables and non-durables, people can purchase the items they need to sustain their lives.
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You have a loan outstanding. It requires making nine annual payments of $4,000 each at the end of the next nine years. Your bank has offered to allow you to skip making the next eight payments in lieu of making one large payment at the end of theloan's term in nine years. If the interest rate on the loan is 5% , what final payment will the bank require you to make so that it is indifferent to the two forms of payment?
the final payment that the bank will require you to make so that it is indifferent to the two forms of payment is $25,840.
The formula for the present value of an annuity, PV = PMT × [(1 - (1 + r)^(-n))/r]
Where:
PV = present value
PMT = payment amount
r = interest rate
n = number of payments
Plugging in the given values:
PV = $4,000 × [(1 - (1 + 0.05)^(-9))/0.05]
PV = $4,000 × [(1 - 0.677)/0.05]
PV = $4,000 × [0.323/0.05]
PV = $4,000 × 6.46
PV = $25,840
Therefore, the final payment that the bank will require you to make so that it is indifferent to the two forms of payment is $25,840.
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First select a brand you love. Because your all assignments will be about this brand. So choose it wisely. In this assignment, you will use the brand you have chosen to work fully on segmentation of the brand’s target. The key question you will need to answer is: Who is the core consumer segment my brand is positioned for? If you are a true lover of this brand, chances are YOU will be a core consumer of this brand, which is the reason why you should select your FIRST choice in any given category. Also, if it is a CPG (Consumer Packaged Goods) brand, then for a brand you buy regularly. If you have chosen a brand that you buy multiple products from, please choose the category you buy from most often. For example, if you have chosen a big brand like Nike, choose the one item that you engage with most often and that you buy most frequently. In order to complete your assignment, you will have to address the following questions:· Behaviour, Psychographics (Values, Attitudes and Lifestyles-VALS), Demographics, Needs and Motivations
Consider selecting a brand that you personally use and are familiar with, so that you can be a true consumer of the brand. Additionally, if the brand is a CPG (Consumer Packaged Goods) brand, select the category that you buy from most often.
For example, if you have chosen a big brand like Nike, select the item that you engage with most often and that you buy most frequently.
Once you have selected a brand, you will need to answer the following questions in order to complete the assignment:
- Behaviour
- Psychographics (Values, Attitudes and Lifestyles-VALS)
- Demographics
- Needs and Motivations
In order to answer these questions, you may need to conduct research on the brand and its customers. You may also consider asking yourself questions such as "Why do I use this brand?", "What values do I associate with this brand?" and "What do I think makes this brand special?". This will help you better understand your chosen brand and the core consumer segment it is targeting.
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Consider the following payoff table. States of Nature Alternatives A B
Alternative 1 100 150
Alternative 2 200 100
Probability 0.4 0.6 How much should be paid for a perfect forecast of the state of nature? Select one: a. 10 b. 100 c. 170 d. 30 e. 40
The expected value for a perfect forecast of the state of nature would be 170 (C).
Expected value is a statistical concept that represents the average value of a random variable over an infinite number of trials. It is calculated by multiplying each possible value of the random variable by its corresponding probability and then summing all the values. To calculate this, we need to multiply the payoff from each alternative by the probability of its occurrence. For Alternative 1, we have 100*0.4 = 40. For Alternative 2, we have 200*0.6 = 120. Adding the two together, we have 40 + 120 = 170 (C).
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briefly explain why company valuation is influenced by capital
structure decisions.
Company valuation is influenced by capital structure decisions because the composition of a company's debt and equity directly affects its risk profile and the cost of capital.
A company's debt-to-equity ratio affects its credit rating, which in turn affects the cost of borrowing and the amount of interest paid on debt. Furthermore, the more debt a company has, the more risk it has in the eyes of investors, which affects its overall valuation.
Ultimately, a company's capital structure decision can have a significant impact on its valuation; if the company chooses to finance operations with more debt, its cost of capital will be lower but the company will carry more risk and its valuation will be lower. Thus, it is important for a company to consider its capital structure decisions carefully in order to maximize its valuation.
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