A. In the short term, the rising value of the rupee is more threatening to Banbury's profitability. This is because the company imports cotton, which is priced in US dollars.
As the rupee appreciates, it takes more rupees to buy the same amount of dollars, which means that Banbury has to pay more for its cotton. This can lead to lower margins and even losses.
In the long term, however, cotton prices are more likely to have a bigger impact on Banbury's profitability. This is because the company's costs are largely fixed, so any increase in cotton prices will eat into its margins.
B. Yes, Lapura should hedge his cotton costs with cotton futures. This would allow him to lock in a price for cotton today, which would protect him from any future increases in prices.
C. Lapura should choose to invoice the Turkish sale in US dollars. This is because the Turkish lira is a relatively weak currency, and its value is likely to continue to decline in the long term.
D. It is recommendable for Lapura to use a forward contract to hedge the Turkish sale receipts. In this case, Lapura could enter into a forward contract to sell the Turkish lira at a fixed exchange rate on a future date.
Thus, this would protect him from any future losses due to currency depreciation.
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Distinguish between a primary and a secondary market and discuss
the relationship between the two types of market.
The relationship between the primary and secondary markets is that the primary market creates the securities that are traded in the secondary market
A primary market is a financial market where new securities are issued and sold to the public for the first time. This is where companies, governments, or public sector institutions raise capital through the sale of new securities such as stocks, bonds, or other financial instruments. The primary market is also known as the new issue market or the IPO market.
A secondary market, on the other hand, is where existing securities are traded among investors. This is where securities that have already been issued and sold in the primary market are bought and sold among investors. The secondary market is also known as the aftermarket or the stock market.
The primary market is where companies raise capital through the sale of new securities, while the secondary market is where investors trade those securities. The primary market is important because it provides companies with the capital they need to grow and expand, while the secondary market is important because it provides investors with a way to buy and sell securities and to make a profit from their investments. Both markets are essential components of the financial system and play important roles in the functioning of the economy.
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3. How many days are in the operating cycle if the cash cycle is70 days, inventory period is 72 days, and accounts payable periodis 29 days? round final answer to 2 decimals
There are 99 days in the operating cycle if the cash cycle is 70 days, inventory period is 72 days, and accounts payable period is 29 days.
The operating cycle is the sum of the inventory period and the accounts receivable period. In this case, we are given the cash cycle, inventory period, and accounts payable period. We can use these values to find the accounts receivable period and then calculate the operating cycle.
First, we need to find the accounts receivable period. The cash cycle is equal to the operating cycle minus the accounts payable period. Rearranging this equation gives us:
Operating cycle = Cash cycle + Accounts payable period
Substituting in the given values:
Operating cycle = 70 days + 29 days = 99 days
Now we can find the accounts receivable period by subtracting the inventory period from the operating cycle:
Accounts receivable period = Operating cycle - Inventory period = 99 days - 72 days = 27 days
Finally, we can calculate the operating cycle by adding the inventory period and the accounts receivable period:
Operating cycle = Inventory period + Accounts receivable period = 72 days + 27 days = 99 days
Therefore, the operating cycle is 99 days.
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What is an example how the futures contract you’re following could be used for hedging purposes if I was following TSLA future contract
Call
TSLA221216C00750000
TSLA Dec 2022 750.000 call
PUT
TSLA221216P00800000
TSLA Dec 2022 800.000 put
If you were following a TSLA future contract, one example of how it could be used for hedging purposes would be to buy a call option and a put option at different strike prices.
A futures contract is an agreement between two parties to buy or sell an asset at a predetermined future date and price. One of the main uses of futures contracts is for hedging purposes, which is the practice of reducing risk exposure by taking an offsetting position in a related asset or market.
If you were following a TSLA future contract, one example of how it could be used for hedging purposes would be to buy a call option and a put option at different strike prices. The call option (TSLA221216C00750000) gives you the right to buy TSLA stock at a predetermined price of $750.00 on or before December 16, 2022. The put option (TSLA221216P00800000) gives you the right to sell TSLA stock at a predetermined price of $800.00 on or before December 16, 2022.
By buying both the call and put options, you are hedging against the possibility of the stock price moving significantly in either direction. If the stock price rises above $800.00, you can exercise the call option and buy the stock at a lower price, while if the stock price falls below $750.00, you can exercise the put option and sell the stock at a higher price. This strategy, known as a straddle, allows you to limit your risk exposure and potentially profit from large price movements in either direction.
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Your firm has a project opportunity with the following cash flows: -$1,200,000 in Year 0, $150,000 in Year 1, $295,000 in Year 2, $875,000 in Year 3, and $390,000 in Year 4. Your ACC is 12%. What would be the discounted payback period of this project assuming that cash flows from Years 1 to 4 are received equally throughout the year? A) 2.31 years B) 3.27 years C) 3.84 years D) 4.18 years
The discounted payback period of this project is 3.85 years, which is closest to option B) 3.27 years. The correct answer is B) 3.27 years.
To find the discounted payback period of this project, we need to calculate the present value of the cash flows for each year using the ACC of 12%. Then, we need to find the year in which the cumulative present value of the cash flows becomes positive.
Here are the steps:
1. Calculate the present value of the cash flows for each year:
Year 0: -$1,200,000 / (1 + 0.12)^0 = -$1,200,000
Year 1: $150,000 / (1 + 0.12)^1 = $133,929
Year 2: $295,000 / (1 + 0.12)^2 = $235,223
Year 3: $875,000 / (1 + 0.12)^3 = $619,835
Year 4: $390,000 / (1 + 0.12)^4 = $248,158
2. Find the cumulative present value of the cash flows:
Year 0: -$1,200,000
Year 1: -$1,200,000 + $133,929 = -$1,066,071
Year 2: -$1,066,071 + $235,223 = -$830,848
Year 3: -$830,848 + $619,835 = -$211,013
Year 4: -$211,013 + $248,158 = $37,145
3. Find the year in which the cumulative present value of the cash flows becomes positive:
The cumulative present value of the cash flows becomes positive in Year 4. However, since the cash flows are received equally throughout the year, we need to find the fraction of the year in which the cumulative present value becomes positive.
To do this, we can use the formula:
Fraction of the year = (Cumulative present value at the beginning of the year) / (Present value of the cash flow for the year)
Fraction of the year = (-$211,013) / ($248,158) = 0.85
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Zane works out in the ocean installing huge wind turbines to provide the coastal communities with clean energy. The Energy cluster pathway that Zane works in is _____.
Answer: energy and power technology.
Explanation: trust me i took the quiz
Zane works out in the ocean installing huge wind turbines to provide the coastal communities with clean energy. The Energy cluster pathway that Zane works in is energy and power technology.
What is energy?The phrase energy means the ability to accomplish work, which is the ability to apply a force that causes an item to move. Potential energy and kinetic energy are the two forms of energy. Each form can be converted or altered to another. Energy is what causes things to alter and move.
Zane is employed by the Energy cluster program, which trains students for employment in energy planning, generation, planning, maintenance, and distribution. Students are prepared for employment in the energy sector, especially those involving renewable energy sources like wind turbines, through the Energy Career Cluster.
As a result, the significance of the Energy cluster pathway that Zane works are the aforementioned.
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You have some extra cash this month and you are considering putting it toward your car loan. Your interest rate is 6.7%, your loan payments are $651 per month, and you have 36 months left on your loan. If you pay an additional $1,000 with your next regular $651 payment (due in one month), how much will it reduce the amount of time left to pay off your loan? (Note: Be careful not to round any intermediate steps less than 6 decimal places.)
An additional $1,000 with your next regular $651 payment, it will reduce the amount of time left to pay off your loan by 3 months.
To find out how much the additional $1,000 payment will reduce the amount of time left to pay off your loan, you need to use the following formula:
P = L[(r(1 + r)^n)/((1 + r)^n - 1)]
Where P is the monthly payment, L is the loan amount, r is the interest rate, and n is the number of months left on the loan.
First, you need to find out what the loan amount is.
L = P[((1 + r)^n - 1)/(r(1 + r)^n)]
L = $651[((1 + 0.067)^36 - 1)/(0.067(1 + 0.067)^36)]
L = $18,965.32
Next, you need to subtract the additional $1,000 payment from the loan amount:
L = $18,965.32 - $1,000
L = $17,965.32
Now you can plug this new loan amount back into the formula and solve for n:
$651 = $17,965.32[(0.067(1 + 0.067)^n)/((1 + 0.067)^n - 1)]
Rearrange the formula to isolate n:
((1 + 0.067)^n - 1)/(0.067(1 + 0.067)^n) = $17,965.32/$651
((1 + 0.067)^n - 1)/(0.067(1 + 0.067)^n) = 27.59
n = 32.85
Round up to the nearest whole number:
n = 33
So if you pay an additional $1,000 with your next regular $651 payment, it will reduce the amount of time left to pay off your loan by 3 months (36 - 33 = 3).
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1a) BP has a bond outstanding with 15 years to maturity, a $1,000 par value, a coupon rate of 6.2%, with coupons paid semiannually, and a price of 85.21 (percent of par).
What is the cost of debt?
1b) BP has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 2% forever. Its stock price is $35.3 and its beta is 0.9. The risk-free rate is 2% and the expected return on the market portfolio is 8%.
What is the best guess for the cost of equity?
1a) To calculate the cost of debt, we need to find the yield to maturity (YTM) of the bond. We can use the formula:
YTM = (C + (F - P)/N)/(F + P)/2
Where:
C = coupon payment = ($1,000 x 6.2%)/2 = $31
F = face value = $1,000
P = price = $852.10 (85.21% of $1,000)
N = number of periods = 15 x 2 = 30
Plugging in the values, we get:
YTM = ($31 + ($1,000 - $852.10)/30)/($1,000 + $852.10)/2
YTM = ($31 + $4.93)/$926.05
YTM = $35.93/$926.05
YTM = 0.0388
Therefore, the cost of debt is 3.88%.
1b) To calculate the cost of equity, we can use the Capital Asset Pricing Model (CAPM) formula:
Cost of equity = Rf + Beta(Rm - Rf)
Where:
Rf = risk-free rate = 2%
Beta = 0.9
Rm = expected return on the market portfolio = 8%
Plugging in the values, we get:
Cost of equity = 2% + 0.9(8% - 2%)
Cost of equity = 2% + 0.9(6%)
Cost of equity = 2% + 5.4%
Cost of equity = 7.4%
Therefore, the best guess for the cost of equity is 7.4%.
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Question 13 The UAE Federal Commercial Companies Law applies to: 1 commercial companies registered in the UAE only. 2 all commercial companies registered in the UAE and foreign companies conducting businesses in the UAE 3 companies wholly owned by the federal government. 4 Free Zone companies conducting their operations onshore (ie, outside their designated free zone). hich of the above statement(s) is correct? 1 only
1 dan 3
3 dan 4
2 only
What is the main difference between a Limited Liability Company (LLC) and a Limited Partnership (LP)? shareholders in an LLC are liable to the extent of their investment, whereas in an LP, lability of all partners is unlimited. a shareholder in an LLC may not be appointed as manager, whereas in a LP, management is restricted to the acting partners an LLC may be held by a single corporate shareholder an LLC offers shares for public subscription
1. The UAE Federal Commercial Companies Law applies to all commercial companies registered in the UAE and foreign companies conducting businesses in the UAE. Therefore, the correct answer is D. 2. The main difference between a Limited Liability Company (LLC) and a Limited Partnership (LP) is that shareholders in an LLC are liable to the extent of their investment, whereas in an LP, the liability of all partners is unlimited. Therefore, the correct answer is A.
1. The UAE Federal Commercial Companies Law is applicable to any economic entity which practice commercial, financial, industrial, agricultural, real estate or other kinds of economic activity on the mainland of the country. It applies to all commercial companies registered in the UAE and foreign companies conducting businesses in the UAE.
2. The main difference between a Limited Liability Company (LLC) and a Limited Partnership (LP) is that shareholders in an LLC are liable to the extent of their investment, whereas in an LP, the liability of all partners is unlimited. Shareholders in an LLC are liable to the extent of their investment, whereas in an LP, the liability of all partners is unlimited.
It is important to note that there are other differences between LLCs and LPs, such as the fact that a shareholder in an LLC may not be appointed as manager, whereas in a LP, management is restricted to the acting partners. Additionally, an LLC may be held by a single corporate shareholder, whereas an LP requires at least two partners. Finally, an LLC offers shares for public subscription, whereas an LP does not. However, the main difference between the two is the extent of liability for shareholders and partners.
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Total Quality Management (TQM) is a management approach to long-term success through customer satisfaction. Quality management is a discipline for ensuring that outputs, benefits, and the processes by which they are delivered, meet stakeholder requirements and are fit for purpose. a) Identify the disadvantages of TQM on employees related to the training duration, the negative effect of cost and the current system. (5 marks) (CLO5:PLO8:C2) b) Identify the main different between Quality Control and Quality Assurances in Quality Management. Give TWO (2) examples each of Quality Control activities and Quality Assurances activities. (5 marks)
a) There are several disadvantages of TQM on employees, like training duration, negative effect on cost, etc. b)Quality Control (QC) and Quality Assurance (QA) are both important aspects of Quality Management, but they are different in several ways.
1. Training Duration: Implementing TQM requires a significant amount of training for employees, which can be time-consuming and disruptive to their regular work schedules.
2. Negative Effect on Cost: While TQM can ultimately lead to cost savings in the long run, the initial implementation and training can be expensive and may negatively affect the company's bottom line in the short term.
3. Current System: TQM requires a significant shift in the way that a company operates, and this can be difficult for employees who are used to the current system. This can lead to resistance and a lack of buy-in from employees, which can hinder the success of TQM.
b) Quality Control (QC) and Quality Assurance (QA) are both important aspects of Quality Management, but they are different in several ways.
Quality Control is focused on identifying and correcting defects in products or services before they are delivered to customers. QC activities include inspecting products, testing samples, and monitoring production processes.
Quality Assurance, on the other hand, is focused on ensuring that the processes used to create products or services are consistent and meet quality standards. QA activities include auditing processes, reviewing documentation, and conducting training.
Examples of Quality Control activities include:
- Inspecting products for defects before they are shipped to customers
- Testing samples of products to ensure they meet quality standards
Examples of Quality Assurance activities include:
- Conducting audits of production processes to ensure they are consistent and meet quality standards
- Reviewing documentation to ensure it is accurate and complete
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eBook Problem Walk-Through Parramore Corp has $14 million of sales, $3 million of inventories, $3 million of receivables, and $1.5 million of payables. Its cost of goods sold is 65% of sales, and it finances working capital with bank loans at an 8% rate. Assume 365 days in year for your calculations.
What is Parramore's cash conversion cycle (CCC)? Do not round intermediate calculations. Round your answer to two decimal places. days
If Parramore could lower its inventories and receivables by 7% each and increase its payables by 7%, all without affecting sales or cost of goods sold, what would be the new CCC? Do not round intermediate calculations. Round your answer to two decimal places. days
How much cash would be freed up, if Parramore could lower its inventories and receivables by 7% each and increase its payables by 7%, all without affecting sales or cost of goods sold? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar. $
By how much would pretax profits change, if Parramore could lower its inventories and receivables by 7% each and increase its payables by 7%, all without affecting sales or cost of goods sold? Write out your answer completely. For Example, 13.2 million should be entered as 13,200,000. Do not round intermediate calculations. Round your answer to the nearest dollar.
Parramore's cash conversion cycle is 118.6 days. Parramore new cash conversion cycle is 104.65 days. The cash that would be freed up is $251,433. The pretax profits would be $1,115.60.
The cash conversion cycle (CCC) is a measure of how quickly a company can convert its inventory into cash. It is calculated as the sum of the days sales outstanding (DSO), days inventory outstanding (DIO), and days payables outstanding (DPO).
To calculate the CCC for Parramore Corp, we first need to calculate the DSO, DIO, and DPO.
DSO = (Receivables / Sales) * 365 = (3 / 14) * 365 = 78.21 days
DIO = (Inventories / Cost of Goods Sold) * 365 = (3 / (0.65 * 14)) * 365 = 80.77 days
DPO = (Payables / Cost of Goods Sold) * 365 = (1.5 / (0.65 * 14)) * 365 = 40.38 days
CCC = DSO + DIO - DPO = 78.21 + 80.77 - 40.38 = 118.6 days
If Parramore could lower its inventories and receivables by 7% each and increase its payables by 7%, the new CCC would be:
New DSO = (0.93 * 3 / 14) * 365 = 72.74 days
New DIO = (0.93 * 3 / (0.65 * 14)) * 365 = 75.12 days
New DPO = (1.07 * 1.5 / (0.65 * 14)) * 365 = 43.21 days
New CCC = 72.74 + 75.12 - 43.21 = 104.65 days
The amount of cash freed up would be the difference between the old and new CCC multiplied by the cost of goods sold:
Cash freed up = (118.6 - 104.65) * (0.65 * 14) = $251,433
The change in pretax profits would be the difference between the old and new CCC multiplied by the bank loan rate:
Change in pretax profits = (118.6 - 104.65) * 0.08 = $1,115.60
Therefore, the new CCC would be 104.65 days, the amount of cash freed up would be $251,433, and the change in pretax profits would be $1,115.60.
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If an insurance company is thinking of providing insurance policy to travellers and estimates that 30 million passengers will buy the insurance where they will pay 25 taka for each trip. The company will earn 6% interest for six months by depositing the premium and the underwriting costs will be 2 million taka. If the dead passengers are given 1 million taka each and injured are 1/4 million taka and there are 320 travelers died and 550 injured then how much will be the profit or loss of the insurance company?
If the dead passengers are given 1 million taka each and injured are 1/4 million taka and there are 320 travelers died and 550 injured the insurance company will have a profit of 1.375 million taka.
The insurance company will make a profit or loss can be calculated as follows:
Total costs: 2 million + 320 million + 137.5 million = 459.5 million taka
Profit/Loss: 750 million + 45 million - 459.5 million = 1.375 million taka
Therefore, the insurance company will have a profit of 1.375 million taka
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True/False and Explain:
when a firm takes on greater leverage, its free cash flows will
increase due to greater debt tax shields.
The statement "When a firm takes on greater leverage, its free cash flows will not necessarily increase due to greater debt tax shields" is false.
While it is true that taking on greater leverage can result in greater debt tax shields, it can also lead to increased interest payments, which can decrease free cash flows. Additionally, taking on greater leverage can increase the risk of the firm, potentially leading to higher required rates of return and lower stock prices. Therefore, it is not a guarantee that greater leverage will result in increased free cash flows.
It is important for firms to carefully consider the trade-offs between the potential benefits and costs of taking on greater leverage before making a decision.
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What minimum amount of money earning 2.5% compounded semiannually will sustain withdrawals of $1000 at the end of every month for 12 years?
Do not copy from and give a complete answer with an explanation
The minimum amount of money earning 2.5% compounded semiannually will sustain withdrawals of $1000 at the end of every month for 12 years is $35,038.52.
To find the minimum amount of money earning we need to use the formula for the future value of an annuity:
FV = PMT * [(1 + i)^n - 1] / i
Where FV is the future value, PMT is the payment amount, i is the interest rate per period, and n is the number of periods.
In this case, we need to find the present value (PV) of the annuity, so we will rearrange the formula to solve for PV:
PV = FV / [(1 + i)^n - 1] * i
We are given that PMT = $1000, i = 2.5% / 2 = 0.0125 (since the interest is compounded semiannually), and n = 12 * 12 = 144 (since there are 12 years and 12 months in a year).
Plugging these values into the formula, we get:
PV = $1000 / [(1 + 0.0125)^144 - 1] * 0.0125
PV = $1000 / 3.5587 * 0.0125
PV = $35,038.52
Therefore, the minimum amount of money earning 2.5% compounded semiannually that will sustain withdrawals of $1000 at the end of every month for 12 years is $35,038.52.
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Choose any two social media posts of one business leader from two different industry sectors and describe (in a table), the seven Cs of communication (Completeness, Conciseness, Concreteness, Correctness, Clarity, Courtesy, Consideration) used in each of them. Append a SCREENSHOT of the social media posts of both the leaders. You may choose business leaders from any part of the world including India.
Users of social networking sites can hold conversations, share information, and produce web content. Blogs, micro-blogs, wikis, social networking sites, photo-sharing sites, instant messaging, video-sharing sites, podcasts, widgets, virtual worlds, and other types of social media exist.
Communication C's
Social Media Post #1
Social Media Post #2
Completeness
Post #1 was complete, providing all the relevant information about the event.
Post #2 was complete, providing all the relevant information about the launch.
Conciseness
Post #1 was concise and to the point, providing only the necessary information.
Post #2 was also concise, keeping the description short and to the point.
Concreteness
Post #1 used concrete language and images to demonstrate the event.
Post #2 used concrete language and images to describe the launch.
Correctness
Post #1 was correct, providing accurate information about the event.
Post #2 was correct, providing accurate information about the launch
Clarity
Post #1 was clear and easy to understand.
Post #2 was clear and easy to understand.
Courtesy
Post #1 was polite and respectful.
Post #2 was polite and respectful.
Consideration
Post #1 showed consideration for the reader by providing an appropriate level of detail.
Post #2 also showed consideration for the reader by providing an appropriate level of detail.
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Assume all rates are annualized with semi-annual compounding. Please be explicit about how
you derive your results and round to four decimals after the comma.
The 0.5-year zero rate is 7% and the 1-year zero rate is 9%.
What is the dollar duration of:
i. $1 par of a 0.5-year zero?
ii. $1 par of a 1-year zero?
iii. 100 par of a 1-year 10%-coupon bond?
The dollar durations are -0.2449, -0.4799, and -50.4395 for $1 par of a 0.5-year zero, $1 par of a 1-year zero and 100 par of a 1-year 10%-coupon bond, respectively.
The dollar duration of a bond is a measure of how much the value of the bond will change for a given change in interest rates. It is calculated by taking the derivative of the bond's price with respect to the interest rate and multiplying by the bond's face value.
i. For a $1 par of a 0.5-year zero, the dollar duration is calculated as follows:
Dollar duration = (dP/dy) * F
= (-0.5 * 1) / (1 + 0.07/2)^2 * 1
= -0.2449
ii. For a $1 par of a 1-year zero, the dollar duration is calculated as follows:
Dollar duration = (dP/dy) * F
= (-1 * 1) / (1 + 0.09/2)^2 * 1
= -0.4799
iii. For 100 par of a 1-year 10%-coupon bond, the dollar duration is calculated as follows:
Dollar duration = (dP/dy) * F
= [(-1 * 100) / (1 + 0.09/2)^2] + [(-0.5 * 10) / (1 + 0.09/2)] * 100
= -47.99 + -2.4495
= -50.4395
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You wish to retire in 30 years, so you begin a 401K program that contributes $100 into your account weekly at 8.35% interest. (Assume 401K is compounded weekly, ordinary time) 24. How much will you have when you retire? 25. How much did you pay into the annuity? 26. How much interest did you receive over the thirty years?
24. The future value of the 401K account when you retire can be calculated using the formula:
FV = P * [(1 + r/n)^(n*t) - 1] / (r/n), where P is the weekly payment, r is the annual interest rate, n is the number of compounding periods per year, and t is the number of years.
Plugging in the given values, we get:
FV = 100 * [(1 + 0.0835/52)^(52*30) - 1] / (0.0835/52)
FV = 100 * [(1.0016038)^1560 - 1] / 0.0016038
FV = 100 * 10.6433 / 0.0016038
FV = $666,198.51
So, you will have $666,198.51 when you retire.
25. The amount you paid into the annuity is simply the weekly payment multiplied by the number of weeks in 30 years:
P = 100 * 52 * 30
P = $156,000
So, you paid $156,000 into the annuity
26. The amount of interest you received over the thirty years is the difference between the future value and the amount you paid into the annuity:
I = FV - P
I = $666,198.51 - $156,000
I = $510,198.51
So, you received $510,198.51 in interest over the thirty years.
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Mary is unmarried with no dependents. She had 2021 taxable income of $45,000 which included $16,000 of 0%/15%/20% net long-term capital gain. What is her tax on taxable income using the alternative tax on net long-term capital gain method?
Mary's tax on taxable income using the alternative tax on net long-term capital gain method is $7,593.50.
Mary's tax on taxable income using the alternative tax on net long-term capital gain method can be calculated as follows:
1. First, we need to calculate her tax on ordinary income. Since she had a taxable income of $45,000, her tax on ordinary income will be:
$987.50 + (0.12 × ($45,000 - $9,950)) = $987.50 + (0.12 × $35,050) = $987.50 + $4,206 = $5,193.50
2. Next, we need to calculate her tax on net long-term capital gain. Since she had a net long-term capital gain of $16,000, her tax on net long-term capital gain will be:
$0 + (0.15 × ($16,000 - $0)) = $0 + (0.15 × $16,000) = $0 + $2,400 = $2,400
3. Finally, we need to add her tax on ordinary income and her tax on net long-term capital gain to get her total tax on taxable income:
$5,193.50 + $2,400 = $7,593.50
Therefore, Mary's tax on taxable income using the alternative tax on net long-term capital gain method is $7,593.50.
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An impairment of an identifiable intangible asset
arises when its carrying amount
exceeds the:
Expected future net cash
flows.
Present value of the
expected future net cash flows.
Asset's fair value.
An impairment of an identifiable intangible asset arises when its carrying amount exceeds the asset's fair value. This means that the value of the asset on the company's balance sheet is greater than the amount that the company could reasonably expect to receive if it were to sell the asset.
In order to determine whether an intangible asset is impaired, a company must compare the carrying amount of the asset to its fair value. If the carrying amount is greater than the fair value, then the asset is considered to be impaired and the company must record an impairment loss.
The impairment loss is calculated as the difference between the carrying amount and the fair value of the asset. This loss is recorded on the company's income statement and reduces the value of the asset on the balance sheet.
It is important to note that an impairment loss is only recognized when the carrying amount of the asset exceeds its fair value. If the carrying amount is less than the fair value, then there is no impairment and no loss is recorded.
In conclusion, an impairment of an identifiable intangible asset arises when its carrying amount exceeds the asset's fair value. This requires the company to record an impairment loss, which reduces the value of the asset on the balance sheet and is recognized as an expense on the income statement.
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Question 7 (1.5 points) Over the past five years Elliot Ine's camings per share grew at 10%. If this growth rate were maintained in the forsccable futuro, how many years would it take for Elliot's EPS to triple?
cannot compute as all information is not available
A. 9.32
B. 11.53
C. 1.72
D. 14.77
E. 7.27
Elliot's EPS would triple in around 9.32 years if the 10% rate of growth was kept up. The correct answer is A. 9.32.
To find the number of years it would take for Elliot's EPS to triple, we can use the Rule of 72. This rule states that if you divide 72 by the annual growth rate, you can estimate the number of years it will take for an investment to double.
In this case, we want to find out how long it will take for Elliot's EPS to triple, so we need to adjust the Rule of 72 to account for this. We can do this by dividing 72 by the natural logarithm of 3, which is approximately 1.1.
So, the formula we will use is:
Years to triple = (72 / 1.1) / Annual growth rate
Plugging in the given annual growth rate of 10%, we get:
Years to triple = (72 / 1.1) / 10%
Years to triple = 9.32
Therefore, it would take approximately 9.32 years for Elliot's EPS to triple if the 10% growth rate were maintained.
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If a
zero-coupon bond does not pay interest (coupon) each year, why do
investors buy it? Also, describe with examples, the major risks
Bonds are exposed to.
Zero-coupon bonds are attractive to investors because they are generally sold at a deep discount from their face value. This means that investors receive more money than they put in when the bond matures. Investors also benefit from the potential to defer taxation of any interest earned until the bond matures.
Examples of risks that bonds are exposed to include default risk, interest rate risk, and liquidity risk.
A zero-coupon bond does not pay interest each year, but instead, it is sold at a discount from its face value and pays the full face value at maturity. Investors buy zero-coupon bonds because they can be purchased at a lower price and have the potential for higher returns.
For example, a zero-coupon bond with a face value of $1,000 may be sold for $800. The investor will receive the full $1,000 at maturity, resulting in a $200 profit.
The major risks that bonds are exposed to include:
- Interest rate risk: When interest rates rise, the value of a bond decreases. This is because investors can get a higher return from new bonds with higher interest rates, making the existing bond less attractive.
- Credit risk: This is the risk that the issuer of the bond will default on their payments, resulting in a loss for the investor.
- Inflation risk: If inflation increases, the purchasing power of the bond's interest payments and principal will decrease, resulting in a lower return for the investor.
- Liquidity risk: This is the risk that the investor will not be able to sell the bond easily or at a fair price.
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A company's MARR is
6%
per year. Two mutually exclusive alternatives are being considered. Compare the two alternatives utilizing:
a. The repeatability assumption with a 10 year study period.
b. A 5 year study period
(MV5of Alt. 1 is $45,000).
The Minimum Attractive Rate of Return (MARR) is the lowest rate of return that a company is willing to accept on an investment project. In this case, the company's MARR is 6% per year. The two mutually exclusive alternatives being considered are compared using the repeatability assumption with a 10 year study period and a 5 year study period with a market value (MV) of $45,000 for Alternative 1.
a. The repeatability assumption with a 10 year study period: This assumption states that the project can be repeated over and over again for the same return. In this case, the 10 year study period would be used to compare the two alternatives.
The net present value (NPV) of each alternative would be calculated using the MARR of 6% and the cash flows for each year of the 10 year study period. The alternative with the higher NPV would be the preferred alternative.
b. A 5 year study period with a market value (MV) of $45,000 for Alternative 1: In this case, the 5 year study period would be used to compare the two alternatives. The net present value (NPV) of each alternative would be calculated using the MARR of 6% and the cash flows for each year of the 5 year study period.
The market value of Alternative 1 at the end of the 5 year study period would also be included in the NPV calculation. The alternative with the higher NPV would be the preferred alternative.
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A detailed work would really help.
Part 1: Opportunities & Risks: what opportunities and risks the company is facing/will face the CVS Health Corp. in the near future.
Part 2: Environmental, Social, and Governance (ESG) Factors
Discuss whether and how the CVS Health Corp incorporates ESG factors in its operations. ESG factors cover a wide range of topics from carbon footprint to companies being indicted in an accounting scandal. We can talk about the stuff they are doing in terms of its EGS initiatives and the negative things (if any) the company has been involved in such as an accounting scandal, corruption scandal, and significant environmental damage.
Part 3: Macroeconomic Environment
Evaluate the overall macroeconomic environment for the U.S. and the global economy and provide arguments (for or against) investing in CVS Health Corp in the current economic environment. discuss the current state of the economy, the challenges, and the opportunities for the US economy. Most importantly, how does the current macroeconomic environment affect CVS Health Corp. and its potential as an investment opportunity for a Student Managed Investment Fund (SMIF)?
The CVS Health Corp. is facing a variety of opportunities and risks in the near future.
In terms of opportunities, the company has been investing heavily in technological advances and in leveraging its position as a health care provider, to expand its services and products. It has also invested in research and development and its pharmacy benefit management business has been growing.
The CVS Health Corp. has taken a number of steps to incorporate Environmental, Social, and Governance (ESG) factors into its operations. The company has committed to carbon neutrality by 2050, increased transparency in supply chain operations, and made commitments to reducing plastic waste.
The macroeconomic environment in the United States and the global economy is currently facing several challenges, such as low interest rates, slow economic growth, and rising debt levels.
These factors may have an impact on the CVS Health Corp. and its potential as an investment opportunity for a Student Managed Investment Fund (SMIF).
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Illustration: Crivitz TV Company purchases three identical 50inch TVs on different dates at costs of $700, $750, and $800. During the year Crivitz sold two sets at $1,200 each. These facts are summarized below.
purchases
February 3 1TV at 700
March 5 1TV at 750
may 22 1TV at 800
sales
June 1 2Tv for 2400(1200×2)
calculate COGS and GOEI under specific identification method .
explain your answer.
Under the specific identification method, the cost of goods sold (COGS) and gross profit (GOEI) are calculated based on the specific cost of the items sold. In this case, Crivitz TV Company sold two sets at $1,200 each, for a total of $2,400 in sales. To calculate COGS and GOEI, we need to know the specific cost of the two sets that were sold.
If we assume that the sets sold were the ones purchased on February 3 and March 5, then the COGS would be $700 + $750 = $1,450. The GOEI would be the difference between the sales and the COGS, or $2,400 - $1,450 = $950.
Alternatively, if we assume that the sets sold were the ones purchased on March 5 and May 22, then the COGS would be $750 + $800 = $1,550. The GOEI would be the difference between the sales and the COGS, or $2,400 - $1,550 = $850.
In conclusion, the COGS and GOEI under the specific identification method will depend on the specific cost of the items sold. In this case, the COGS could be either $1,450 or $1,550, and the GOEI could be either $950 or $850, depending on which sets were sold.
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A bond with a remaining maturity of 5 years pays a coupon of 8%.
If the face (par) value of the bond is £1000 and the yield on
similar bonds is 10%, what is the duration for this bond?？
The duration of a bond is a measure of the bond's sensitivity to changes in interest rates. The duration for this bond 4.37 years.
To calculate the duration of this bond, we need to calculate the present value of each cash flow and then calculate the weighted average of the time to receive them. The formula for the present value of a cash flow is:
PV = C / (1 + r) ^ t
Where C is the cash flow, r is the yield, and t is the time to receive the cash flow.
The bond pays a coupon of 8% on a face value of £1000, which is £80 per year. The bond has a remaining maturity of 5 years, so the cash flows are:
Year 1: £80
Year 2: £80
Year 3: £80
Year 4: £80
Year 5: £1080 (the final coupon payment plus the face value)
The yield on similar bonds is 10%, so we can use this as the discount rate to calculate the present values of the cash flows:
PV1 = 80 / (1 + 0.10) ^ 1 = 72.73
PV2 = 80 / (1 + 0.10) ^ 2 = 66.12
PV3 = 80 / (1 + 0.10) ^ 3 = 60.11
PV4 = 80 / (1 + 0.10) ^ 4 = 54.64
PV5 = 1080 / (1 + 0.10) ^ 5 = 666.34
The total present value of the bond is the sum of the present values of the cash flows:
PV = 72.73 + 66.12 + 60.11 + 54.64 + 666.34 = 919.94
The duration of the bond is the weighted average of the time to receive the cash flows, where the weights are the present values of the cash flows:
Duration = (1 * 72.73 + 2 * 66.12 + 3 * 60.11 + 4 * 54.64 + 5 * 666.34) / 919.94 = 4.37
Therefore, the duration of this bond is 4.37 years.
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If the Market return is 8% with standard deviation 10%, and the
risk-free rate is 4%, then borrowing 50% to create a leveraged
investment in the Market results in return ___ and risk (standard
deviati
If the Market return is 8% with standard deviation 10%, and the risk-free rate is 4%, then borrowing 50% to create a leveraged investment in the Market results in return 12% and risk (standard deviation) 15%.
Here's how to calculate it:
1. The leveraged return is calculated as follows:
Leveraged return = Market return + (Market return - Risk-free rate) * Leverage ratio
In this case, the leverage ratio is 50%, or 0.5, so the leveraged return is:
Leveraged return = 8% + (8% - 4%) * 0.5 = 12%
2. The leveraged risk (standard deviation) is calculated as follows:
Leveraged risk = Market risk * (1 + Leverage ratio)
In this case, the market risk is 10%, and the leverage ratio is 0.5, so the leveraged risk is:
Leveraged risk = 10% * (1 + 0.5) = 15%
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Select an e-retailer (non-store retailer) and answer the following questions:1. How would you position the retailer on the Wheel of Retailing? Support your response with evidence.2. Critically evaluate the retailer's consumer communication strategy.3. Recommend an innovative strategy to promote the retailer’s products.
1. The e-retailer can be positioned on the Wheel of Retailing as an Everyday Low Price (EDLP) retailer.
2. The consumer communication strategy of the e-retailer should be evaluated for effectiveness.
3. An innovative strategy to promote the retailer's products could include utilizing influencers to increase visibility of the brand and its products.
This means that they focus on providing customers with consistently low prices across all products, instead of offering discounts or sales on some items. Evidence to support this could include the retailer's online pricing strategy, which should remain consistent and not fluctuate greatly.
This can include measuring the number of customers reached, engagement rates, and customer feedback. Additionally, the types of communication tools used (e.g. emails, social media, etc.) should be assessed to ensure that the most effective channels are being utilized.
This can be done by partnering with popular influencers and leveraging their large following to drive more customers to the retailer's online store. Additionally, utilizing user-generated content on social media can also help to drive sales and increase engagement.
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Determine each scenario's business model (Amortized Cost, FVOCI, or FVPL), and why is it.
1st Scenario:
An entity acquires debt securities which the entity will hold until maturity to collect cash flows in the form of principals and interests.
However, in accordance with the entity's credit risk management, the entity will sell any investment in which the credit risk becomes high in order to minimize losses.
2nd Scenario:
An entity acquires debt securities which the entity will hold until maturity to collect cash flows in the form of principal and interests.
However, the entity will sell these investments when a 'stress case' or a 'worst case' scenario occurs (e.g., a run on the bank's deposits).
3rd Scenario:
An entity holds financial assets to meet its everyday liquidity needs and to settle maturing accounts payable and other accrued liabilities.
The entity actively manages its liquidity and therefore actively manages the return on the portfolio.
Accordingly, the entity holds financial assets to collect cash flows and sell financial assets to reinvest in higher-yielding financial assets. Also, the entity makes frequent buying and selling of financial assets to better match the duration of its liabilities.
4th Scenario:
An entity holds financial assets with the purpose of selling them to realize fair value gains.
1st Scenario: The business model of this scenario is Amortized Cost. This is because the entity's objective is to hold the debt securities until maturity in order to collect cash flows in the form of principals and interests. However, the entity may sell the investment if the credit risk becomes high in order to minimize losses. This is consistent with the Amortized Cost model, which allows for the sale of financial assets in response to an increase in credit risk.
2nd Scenario: The business model of this scenario is also Amortized Cost. Similar to the first scenario, the entity's objective is to hold the debt securities until maturity in order to collect cash flows in the form of principal and interests. However, the entity may sell the investments in response to a 'stress case' or a 'worst case' scenario. This is also consistent with the Amortized Cost model, which allows for the sale of financial assets in response to an increase in credit risk.
3rd Scenario: The business model of this scenario is FVPL (Fair Value through Profit or Loss). This is because the entity actively manages its liquidity and therefore actively manages the return on the portfolio. The entity holds financial assets to collect cash flows and sell financial assets to reinvest in higher-yielding financial assets. Additionally, the entity makes frequent buying and selling of financial assets to better match the duration of its liabilities. This is consistent with the FVPL model, which requires the recognition of changes in fair value in profit or loss.
4th Scenario: The business model of this scenario is also FVPL. This is because the entity's objective is to hold financial assets with the purpose of selling them to realize fair value gains. This is consistent with the FVPL model, which requires the recognition of changes in fair value in profit or loss.
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Question (35 points): Subprime mortgage market crisis (maximum 500 words)
Discuss the adverse selection and moral hazard problems using the U.S. subprime mortgage market crisis as an example.
Question (35 points): Banking (maximum 500 words)
According to modern banking theory, banking functions can be classified in four main categories:
Liquidity and money services
Asset transformation
Managing risk
Processing information and monitoring borrowers.
In your own words, using the material and concepts covered in this class, explain how banks perform each one of these functions. Hint: start by defining each function.
Answer:
Question 1: Subprime mortgage market crisis
The subprime mortgage market crisis in the United States was a financial catastrophe that led to a global recession. The crisis involved the collapse of the housing market and the rising default rates in the subprime mortgage sector. The root causes of the crisis can be attributed to adverse selection and moral hazard problems.
Adverse selection occurs when one party in a transaction has more information than the other party. In the context of subprime mortgage lending, banks were providing loans to borrowers with poor credit histories, limited incomes, and low credit scores. These borrowers were considered high-risk borrowers, and the banks were willing to lend to them because they believed they could make a profit. However, the banks did not have complete information about the borrowers' ability to repay the loan. The borrowers, on the other hand, knew that they were not financially stable and could default on the loan. Therefore, the banks were selecting the borrowers who were more likely to default, and this led to a higher default rate.
Moral hazard occurs when one party in a transaction takes risks that the other party did not intend or agree to. In the subprime mortgage market, banks created incentives for the borrowers to default on their loans. The banks sold these subprime mortgages to other financial institutions, and the borrowers were not held accountable for the default. This led to a moral hazard problem whereby the borrowers were taking advantage of the system and not being penalized for their actions.
Question 2: Banking
Liquidity and money services: Banks perform the function of liquidity and money services by providing deposit accounts, ATMs, and wire transfers. These services provide customers with access to their money and increase the liquidity of the bank. The bank can use the deposits to make loans and other investments, which generate income for the bank.
Asset transformation: Banks take in deposits from customers, pay them interest, and then use the funds to make loans to borrowers. This process is known as asset transformation. By transforming their liability (deposits) into assets (loans), banks can earn a profit. Banks also engage in asset transformation by buying and selling securities to manage their portfolio's risk.
Managing risk: Banks manage risks associated with loans, investments, and other activities. Banks assess credit risk by evaluating the borrower's financial history, income, and collateral. Banks also face market risk and interest rate risk, and they use derivatives and other financial products to manage these risks.
Processing information and monitoring borrowers: Banks process information about their customers, including their credit history and financial statements. Banks also monitor their borrowers to ensure that they are making timely payments and that they are complying with the loan agreements. Banks use this information to manage their risks and to make informed decisions about lending and other activities.
Question 1: The subprime mortgage market crisis was a result of adverse selection and moral hazard problems. Adverse selection occurs when one party has more information than the other and uses it to their advantage.
In the case of the subprime mortgage market, lenders had more information about the risks of the loans they were giving out and used this information to their advantage by giving out loans to people who were unlikely to be able to pay them back. This led to a large number of defaults and ultimately contributed to the crisis.
Moral hazard occurs when one party takes on more risk because they know that they will not bear the full cost of that risk. In the case of the subprime mortgage market, borrowers took on more risk because they knew that if they were unable to pay back the loans, the lenders would bear the cost. This also contributed to the crisis.
Question 2: Banks perform four main functions: liquidity and money services, asset transformation, managing risk, and processing information and monitoring borrowers. Liquidity and money services involve providing customers with access to their money and facilitating transactions.
Asset transformation involves taking in deposits and using them to make loans, thereby transforming short-term liabilities into long-term assets. Managing risk involves assessing the risks associated with different types of loans and investments and taking steps to mitigate those risks.
Processing information and monitoring borrowers involves gathering information about borrowers and using that information to make lending decisions and monitor the performance of loans. Banks perform these functions in order to provide financial services to their customers and to make a profit.
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Describe the similarities and differences between Total Quality Management (TQM) and Six Sigma quality-management techniques. Please provide a reference.
The key similarities between TQM (Total Quality Management) and Six Sigma include focus on continuous improvement and use of data and statistical analysis. The key differences are in the focus and methodology used in both the approaches.
Total Quality Management (TQM) and Six Sigma are both quality-management techniques that aim to improve organizational performance and customer satisfaction.
Similarities between TQM and Six Sigma include:
1. Both focus on continuous improvement and the elimination of defects and error.
2. Both involve the use of data and statistical analysis to identify areas for improvement.
3. Both emphasize the importance of employee involvement and training.
Differences between TQM and Six Sigma include:
1. TQM is a more holistic approach that focuses on improving all aspects of an organization, while Six Sigma is more focused on specific processes and reducing variability
2. TQM typically involves a wider range of tools and techniques, while Six Sigma relies heavily on statistical analysis
3. Six Sigma uses a structured methodology known as DMAIC (Define, Measure, Analyze, Improve, Control) to guide improvement efforts, while TQM does not have a specific methodology
Reference:
Evans, J. R., & Lindsay, W. M. (2017). Managing for Quality and Performance Excellence (10th ed.). Boston, MA: Cengage Learning.
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2. Why are top-level managers important to large corporations?
Answer:
Top-level managers are crucial to the success of large corporations
Explanation:
because they are responsible for making strategic decisions that shape the direction and operations of the entire organization. Here are some reasons why top-level managers are important to large corporations:
1. They set the overall direction: Top-level managers set the vision and mission of the company, which helps to guide the decision-making process at all levels of the organization. They are responsible for setting strategic goals and developing plans to achieve them.
2. They allocate resources: Top-level managers are responsible for allocating resources such as funds, personnel, and technology to various departments and projects within the organization. They must balance the needs of different departments and ensure that resources are being used effectively.
3. They make key decisions: Top-level managers make key decisions that affect the entire organization. These decisions can include things like mergers and acquisitions, major investments, and changes in company structure or strategy.
4. They manage risk: Top-level managers are responsible for identifying and managing risks that could impact the organization. They must be able to evaluate risks and make decisions that minimize potential negative impacts.
5. They provide leadership: Top-level managers are leaders within the organization and are responsible for inspiring and motivating employees to achieve the company's goals. They must be able to communicate effectively and build strong relationships with employees at all levels of the organization.
Overall, top-level managers play a critical role in the success of large corporations. They are responsible for setting the direction of the organization, allocating resources, making key decisions, managing risk, and providing leadership. Without effective top-level management, large corporations can struggle to achieve their goals and remain competitive in their respective industries.