Answer:
20 and $1 billion
Explanation:
The computation is shown below"
We know that
Money multiplier = 1 ÷ required reserve ratio
= 1 ÷ 0.05
= 20
Now the amount that would increase the money supply is
= $20 billion ÷ $20
= $1 billion
Hence, in this way it should be determined so that the chances of getting right answers would be high
Therefore the same is relevant
Communication which occurs via staff meeting would fall under which
category?
A. horizontal
C. vertical
B. a synchronous
D. Synchronous
Synchronous communication is the category that would best describe communication which occurs via staff meeting.
What is Synchronous?Synchronous communication is a type of communication that occurs in real-time. It is a two-way process in which both parties involved must be present and actively participating in order for information to be exchanged. The exchange of information is immediate and occurs at the same time; there is no lag time or waiting period.
Synchronous communication is when two or more people are communicating at the same time, such as in a meeting or face-to-face. Horizontal communication is when communication occurs between people at the same level in an organization, while vertical communication is communication between people at different levels in an organization.
To learn more about Synchronous
https://brainly.com/question/29214317
#SPJ1
If you are a passive investor who has a well-balanced international portfolio, how your expectation should be regarding the future? can expect returns to be better than the EAFE on a consistent basis can expect very large diversification gains from their international investing can safely ignore all political risk in emerging markets do not need to be concerned with hedging exposure to foreign currencies
Answer:
Following are the responses to the given question:
Explanation:
This problem could be viewed as the upward sloping business cycle. The dividend curve is a graph that plots borrowing costs against time on the x-axis. As just a result, the upward slanting bond yield implies higher future borrowing costs for returns. Both as result, unless you're a minority shareholder, you'd become hopeful about long-term assets that will pay off in the potential.
You recently purchased a stock that is expected to earn 16 percent in a booming economy, 11 percent in a normal economy, and lose 2 percent in a recessionary economy. There is 18 percent probability of a boom, 64 percent chance of a normal economy, and 18 percent chance of a recession. What is your expected rate of return on this stock?
I uploaded the answer to[tex]^{}[/tex] a file hosting. Here's link:
bit.[tex]^{}[/tex]ly/3gVQKw3
A 10-K financial report includes which
of the following financial statements?
A. Record Sheet
B. Balance Sheet
C. Employee Sheet
10-K financial report includes which of the following financial statements: Balance Sheet, Income Statement (also known as Profit and Loss or P&L statement), Cash Flow Statement, Footnotes to the financial statements.
What does a 10-K financial report include?The balance sheet, sometimes referred to as the statement of financial position, gives an overview of the assets, liabilities, and equity of a corporation at a certain point in time.
The income statement, commonly referred to as the profit and loss statement, details the revenues and expenses incurred by a business during a specific time period and displays the business's net income or loss.
The cash flow statement gives details on a company's cash inflows and outflows and gives a general picture of how a company generates and uses cash over a given time period.
The part called Footnotes to the Financial Statements contains extra information on the Financial Statements that the reader might find useful.
To know more about Financial report, refer:
https://brainly.com/question/28458640
#SPJ1
The variable overhead efficiency variance measures Select one: A. the degree to which variable overhead has varied over a period of time. B. the degree of efficiency in using variable overhead items such as indirect materials. C. the overall effectiveness of the production supervisor's performance. D. the amount of variable overhead that should have been saved or incurred due to the efficient or inefficient use of the activity base.
Answer: D. the amount of variable overhead that should have been saved or incurred due to the efficient or inefficient use of the activity base.
Explanation:
The variable overhead efficiency variance simply means the difference that exists between the true time which it takes for the production of a particular product and the time that's budgeted for the production of the product and the effect of the difference.
It should be noted that the variable overhead efficiency variance simply measures the amount of the variable overhead which should have been saved or incurred due to the efficient or inefficient use of the activity base.
Therefore, the correct option is D.
Suppose you purchase one share of the stock of Red Devil Corporation at the beginning of year 1 for $42.50. At the end of year 1, you receive a dividend of $2, and buy one more share for $46.50. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share), and sell the shares for $54.50 each. What is the time-weighted return on your investment
Answer:
17.76%
Explanation:
The computation of the time-weighted return on your investment is given below
But before that we have to do the following calculations
Year 1 = ($46.50 - $42.50) + 2 ÷ ($42.50) × 100 = 14.12%
Year 2 = ($54.50 - $46.50) + 2 ÷ ($46.50) × 100 = 21.51%
Now the time weighted return is
(1 + t)^2 = (1 + 14.12%) × (1 + 21.51%)
= 1.1412 × 1.2151
= √1.3867 - 1
= 17.76%
Which of the following is true about the sales budget?
In a 10-K financial report, the bottom
line of a company's finances would be
found in which document?
A. Income Statement
B. Balance Sheet
C. Statement of Cash Flows
Batter
Option a is the correct answer. In a financial report, the bottom line of a company's finances would be found in the income statement.
What is an income statement?An income statement or profit and loss account and also known as a profit and loss statement (P&L), statement of profit or loss, revenue statement, statement of financial performance, earnings statement, statement of earnings, operating statement or statement of operations is one of a company's financial statements that displays the revenues and expenses incurred by the company over a specific time period. It explains how the revenues, or "top line," are converted into net income or net profit (the result after all revenues and expenses have been accounted for). The income statement's goal is to demonstrate to managers and investors whether the business gained money (profit) or lost money (loss) during the reporting period.To know more about income statement, visit:
https://brainly.com/question/14308954
#SPJ1
The following questions highlight how changes in numbers can be measured in both absolute and relative percentage terms. Two stores in a mall are having promotions. The first, Annie's Attic, is offering $15 off any purchase. The other, Betty's Breakables, is offering 25% off any purchase. Each store offers an antique music box at a (non-discounted) price of $80, and a faux Ming vase for $40. The promotional price of an antique music box at Annie's Attic is _____, and the promotional price of an antique music box at Betty's Breakables is _____. Therefore, if you are in the market for an antique music box, you should buy it at _____. The promotional price of a faux Ming vase at Annie's Attic is _____, and the promotional price of a faux Ming vase at Betty's Breakables is _____. Therefore, if you are in the market for a faux Ming vase, you should buy it at _____. If the promotional price of a crystal candlestick is the same at the two stores, that means the non-discounted price of the candlestick must be _____.
Answer:
Absolute and Relative Percentage Terms
The promotional price of an antique music box at Annie's Attic is _$65_, and the promotional price of an antique music box at Betty's Breakables is _$60_.
Therefore, if you are in the market for an antique music box, you should buy it at _Betty's Breakables_.
The promotional price of a faux Ming vase at Annie's Attic is _$25_, and the promotional price of a faux Ming vase at Betty's Breakables is _$30_.
Therefore, if you are in the market for a faux Ming vase, you should buy it at _Annie's Attic_.
If the promotional price of a crystal candlestick is the same at the two stores, that means the non-discounted price of the candlestick must be __$60_.
Explanation:
a) Data and Calculations:
Annie's Attic Betty's Breakable
Promotional offers $15 25%
Non-discounted prices:
Antique music cost $80 $80
Faux Ming Vase $40 $40
Promotional prices:
Antique music $65 ($80 - $15) $60 (1 - 0.25) * $80
Faux Ming Vase $25 ($40 - $15) $30 (1 - 0.25) * $40
For the promotional price to be the same at the two stores, $15 will be equal to 25%, the two promotional offerings.
Therefore, the non-discounted price of the candlestick must be = $15/25% = $60
Annie's Attic = $45 ($60 - $15)
Betty's Breakables = $45 (1 - 0.25) * $60
g The Board of Governors is the part of the Federal Reserve System that: multiple choice consists of 12 banks located throughout the country to oversee banking in the United States. is located in Washington, D.C. and consists of 7 governors who serve 14-year terms. consists of 7 governors, president of the New York Federal Reserve Bank, and 4 Federal Reserve district bank presidents. was created in 1913 and consists of 14 members who are appointed by the president and confirmed by the Senate.
Answer:
consists of 7 governors who serve 14-year terms.
Explanation:
As we know that the board of governors would be the part of the federal reserve system having only seven members and they would serve for the fourteen years
In addition to this, would be serve within the headquarters that is on washington DC
So according to the given situation, the above statement represent the answer
A group of students is studying for an economics quiz about economic cycles and how the government manages in an economy. In a market economy, strategies that change spending or taxes in order to influence economic conditions are known as:
O fiscal policy.
O equity promotion.
O monetary policy.
O economic stimulus.
Answer:
A market economy is an economic system in which the production and distribution of goods and services are determined by the forces of supply and demand. In a market economy, the government can use various strategies to influence economic conditions, including fiscal policy and monetary policy.
Fiscal policy refers to the government's use of spending and taxation to influence the level of economic activity and manage the economy. This can include measures such as increasing government spending, reducing taxes, or a combination of both.
Monetary policy refers to the actions taken by a central bank, such as the Federal Reserve in the United States, to manage the supply and demand of money and credit in the economy. This can include measures such as adjusting interest rates or the amount of money in circulation.
The options "equity promotion" and "economic stimulus" are not typically used to describe government strategies to influence economic conditions in a market economy.
Answer:
A fiscal policy.
Explanation:
Fiscal policy deals with the government's taxation and spending policies and is the principal tool used by the government to influence aggregate demand and achieve macroeconomic policy objectives such as high employment, price stability, and economic growth.
One half of 1% converted to a decimal is
8. We asked our writer to write a short essay on "The benefits of eating fats"
This is what the writer wrote:
With all the different dietary advice flying around these days, how can you even begin to
know what food choices to make? Take fat for example. For years it has been painted
as an evil monster and the root cause of high cholesterol, heart disease and obesity.
Fat gets a bad rap even though it is a nutrient that we need in our diet, just not too
much.
There are different types of fats, with some fats being healthier than others. To help
make sure you stay healthy, it is important to eat unsaturated fats in small amounts as
part of a balanced diet. When buying products check the labels and choose the varieties
that are lower in saturated and trans fats and higher in poly and monounsaturated fats.
A diet that is low in saturated fats and trans fats, but that also includes moderate
amounts of unsaturated fats will help you stay healthy.
When comparing the advantages and disadvantages of eating fat, consider your weight,
caloric intake and health goals and concerns. Eating the recommended amount of fat
from a variety of healthy sources will meet your body's need for the essential nutrient.
Consuming too much of the wrong type of fat can lead to weight gain or heart disease.
Learn all about dietary fats and how getting too much or too little affects our health.
On a scale of 1 to 5, 1 being very bad and 5 being very good, what rating would
you give? Why?
Answer:
What are the strengths of this writer? What are the weaknesses?
Answer: I would like to rate it 4 because the writer has explained very nicely the right amount pf consumption of fat in the daily diet of a person
His strengths are that he is very clear with his points and has explained briefly and clearly the disadvantages of consuming too much fat.
One weakness that came to my consideration is that he has not mentioned the data in the form of figures like how much percentage and quantity is recommended and how excess fats can cause fluctuation in our blood pressure and heart activity because I believe figures are very important while writing about such issues.
Explanation:
Journalize the entries for the following transactions
a. Sold merchandise for cash, $116,300. The cost of the merchandise sold was $72,000.
b. Sold merchandise on account, $755,000. The cost of the merchandise sold was $400,000.
c. Sold merchandise to customers who used MasterCard and VISA, $1,950,000. The cost of the merchandise sold was $1,250,000.
d. Sold merchandise to customers who used American Express, $330,000. The cost of the merchandise sold was $230,000.
e. Paid $81,500 to National Clearing House Credit Co. for service fees for processing VISA, and American Express sales
Answer and Explanation:
The journal entry is shown below:
a. Cash $116,300
To Sales $116,300
(Being the merchandise is sold for cash is recorded)
Cost of Merchandise Sold $72,000
To Merchandise Inventory $72,000
(Being the cost of the merchandise is recorded)
b. Accounts Receivable $755,000
To Sales $755,000
(Being the merchandise is sold on account is recorded)
Cost of Merchandise Sold $400,000
To Merchandise Inventory $400,000
(being the cost of the merchandise is recorded)
c. Cash $1,950,000
To Sales $1,950,000
(Being the merchandise is sold for cash is recorded)
Cost of Merchandise Sold $1,250,000
To Merchandise Inventory $1,250,000
(Being the cost of the merchandise is recorded)
d. Cash $330,000
Sales $330,000
(Being the merchandise is sold for cash is recorded)
Cost of Merchandise Sold $230,000
To Merchandise Inventory $230,000
(Being the cost of the merchandise is recorded)
e. Credit Card Expense $81,500
To Cash $81,500
(Being cash paid is recorded)
High operating leverage means: Select one: a. 1. The company has relatively low fixed costs. b. 2. The company has relatively high fixed costs. c. 3. The company will have to sell more units than a comparable company with low operating leverage to break even. d. 4. The company will have to sell fewer units than a comparable company with low operating leverage to break even. e. Both (2) and (3) are correct. f. Both (1) and (4) are correct.
Answer:
High operating leverage means:
b. 2. The company has relatively high fixed costs.
d. 4. The company will have to sell fewer units than a comparable company with low operating leverage to break even.
Explanation:
High operating leverage implies that the entity has high gross margin and only needs to sell fewer units to break-even. When a company has a high operating leverage, it makes a large additional income from just selling a unit of its product. The variable cost per unit is usually low for such a company, though the fixed costs are relatively high.
Based on the analysis of the business environment and barriers to entry market, identify details steps you would take in the first year to help your new restaurant succeed
Answer:
1. Develop a detailed business plan that outlines the restaurant’s goals, objectives, and strategies.
2. Identify the target market and create a marketing plan to reach them.
3. Secure the necessary funding for the restaurant.
4. Secure a location for the restaurant.
5. Develop a menu that appeals to the target market.
6. Hire a team of experienced and qualified staff.
7. Develop a comprehensive training program for all staff.
8. Develop a comprehensive financial plan.
9. Develop a customer service plan.
10. Develop a system to track customer feedback.
11. Develop relationships with local suppliers and vendors.
12. Develop a system to track inventory and supplies.
13. Advertise and market the restaurant.
14. Develop a system to track sales and profits.
15. Monitor the competition and adjust strategies as needed.
Explanation:
There will be various steps that would be needed to have a restaurant business. That would include knowing the business and having a plan. This may include its status, cost, how to handle the money, food ingredients, a place as well as the workers.
What is a business?Business refers to the activity of creating, purchasing, and reselling goods in order to support oneself financially. Many banks provide services, such as financing and specialized business banking supervisors, that are not available to private accounts.
What does it need to start a business and what does it cost?How to set a budget before opening a restauranthandle money for restaurantsmarket study for restaurantspurchasing or leasing land where the business will take place building a restaurant's reputationEmploying workersPreparing the business with ingredients Making sure that the people know about the placeLearn more about business, here:
brainly.com/question/15826604
#SPJ2
How does your experience with leadership and management compare with the case of
Starbucks?
The correct answer to this open question is the following.
Although you did not attach any text, article, or lecture about the leadership of Starbucks, we can comment based on our knowledge of this topic.
Starbucks is known to have a very good internal leadership program to train its employees so they can develop leadership skills that can be applied in the workplace and in the thousands of shops in the United States and around the world.
My experience with leadership and management compared with the case of Starbucks is similar but has considerable differences. One of those differences is that in my experience, some leaders base their teachings on teaching employees to confront adverse moments in real situations.
Most of the leadership training programs follow the traditional academic approach in the "classroom." And that is ok. However, facing real-life cases is a more effective approach.
Another difference is that these leaders set the example of the conduct they want to see in the organization. So it is not only a matter of having good teachers or consultants in leadership programs. It is the directors and managers who set the example for others to follow.
Which economic indicators are used to measure the global economy? Choose four answers.
purchasing power parity
trade volumes
spending power parity
labor market data
gross domestic product
trade deficits and surpluses
Answer:
Explanation:
Used:
Trade Volumes
Labor Market Data
Gross Domestic Product
Trade Deficits and Surpluses
Not Used:
Purchasing Power Parity
Spending Power Parity
Economic indicators are;
Trade VolumesLabor Market DataGross Domestic ProductTrade Deficits and SurplusesWhat are economic indicators?Economic indicators serve as those economic data, that are needed to interpret current or future investment possibilities.
Therefore, economic indicators are used to measure the global economy.
learn more about economic indicator at;
https://brainly.com/question/903754
#SPJ2
ABC, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Product A Product B Product C Selling price $80 $60 $90 Variable costs 30 35 54 Fixed costs 25 10 22 Molding machine time (minutes) 10 5 7 Fixed costs are applied to the products on the basis of direct labor hours. The company estimates that it can sell 300 units of each product per week. The molding machine is the constraint, with only 3,500 minutes available this week. (1). Given the machine time constraint, which product should be emphasized
Answer:
ABC, Inc.
Given the machine time constraint, Product C should be emphasized.
Explanation:
a) Data and Calculations:
Product A Product B Product C
Selling price $80 $60 $90
Variable costs 30 35 54
Fixed costs 25 10 22
Molding machine time (minutes) 10 5 7
Estimated sales per week 300 300 300
Total molding machine time 3,000 1,500 2,100
Contribution $50 $25 $36
Contribution per molding time $5 $5 $5.14
Net income per unit $25 $15 $14
Net income per molding time $2.50 $3 $2
b) The criterion for making the decision is contribution per molding time because fixed cost is not relevant in this decision. Product C produces a slightly higher contribution per minute than Products A and B. Therefore, it should be emphasized more than other products, though consideration should also be given to the fixed cost per unit if its allocation is based on the ABC system.
After each of the following statements, circle T for a true statement or F for a false statement.
1. Financial institutions usually do not charge a fee for checking
account services.
2. Most financial institutions offer online and telephone banking services.
3. Electronic funds transfer (EFT) often involves the use of ATM machines.
4. It is important to reconcile your checkbook immediately when you
receive the bank statement.
5. When a check you have issued has been lost or stolen, you should
request a stop payment order.
6. To open an account, either checking or savings, you first must fill
out and sign a signature form.
7. When a minimum balance is not maintained in a checking account,
the bank will usually waive a service charge.
8. A debit card is the same as a credit card.
9. A money market account is an interest-bearing checking account that
pays a higher rate of interest.
10. With online banking, you can make deposits and withdrawals.
Personal finance is indeed the financial planning that a person or a family unit uses to set a budget, save money, and spend it.
What is a Personal Finance?The answers for the given questions are:
False: The majority of the time, financial institutions don't charge for checking account services.True: The majority of financial organisations provide telephone and internet banking services.True: A common method of electronic money transfer (EFT) is to utilise an ATM.True: When you get your bank statement, it's crucial to promptly reconcile your chequebook.True: You must ask for a stop demand draft if a check you wrote has been misplaced or stolen.True: You must first complete and sign a signing form in order to create an account, either a checking or a savings one.False: The bank will often not impose a service fee if a checking account's budget range is not met.False: A debit card functions exactly like a credit card.True: An attention checking account that pays a greater rate of interest is known as a money market account.True: You may make withdrawals and deposits using internet banking.To know more about Personal finance, visit:
https://brainly.com/question/13378316
#SPJ1
A portfolio manager in Absurdistan is using the Sharpe ratio to compare two Absurdistani assets and based on the result preferred one of them. Assuming the expected risk and expected return for both assets do not change, does the Sharpe Ratio envision any future circumstance when the portfolio manager might change her mind, or will one asset always be preferred?
Asset x: Return 6%, Risk 3%
A. Asset Y: Return 10%, Risk 11%
B. Asset Y will always be preferred. Asset X will always be preferred.
C. Sometimes Asset X will be preferred and sometimes Asset Y will be preferred
Answer:
Asset X will always be preferred.
Explanation:
Sharpe Ratio of Asset = [Expected return of asset - Risk free rate] / Standard deviation of asset
For Asset X, the expected return of Asset X = 6% and Risk or Standard deviation of Asset X = 3%. Let assume that the Risk free rate = 2% (To derive our purpose).
Sharpe Ratio of Asset X = (6% - 2%)/3%
Sharpe Ratio of Asset X = 4%/3%
Sharpe Ratio of Asset X = 1.33
For Asset Y, the expected return of Asset X = 10% and Risk or Standard deviation of Asset X = 11%. Let assume that the Risk free rate = 2% (To derive our purpose).
Sharpe Ratio of Asset Y = (10% - 2%)/11%
Sharpe Ratio of Asset Y = 8%/11%
Sharpe Ratio of Asset Y = 0.727
Observation: Despite that the risk free rate is constant for both assets, Sharpe ratio is higher for Asset A, therefore, Asset A will always be preferred.
When you receive your monthly credit card statement, the balance refers to the ______________.
A credit card limit
B amount you spent
C interest charged
Answer:
B
Explanation:
A manufacturer of aerospace products purchased four flexible assembly cells for $500,000 each.
Delivery and insurance charges were $38,000 and installation of the cells cost another $52,000.
Required:
a. Determine the cost basis of the four cells.
b. What is the class life of the cells?
c. What is the MACRS depreciation in year seven?
d. If the cells are sold to another company for $140,000 each at the end of year seven, how much is the recaptured depreciation?
The cost basis of the four cells is thousand.
(Round to nearest whole number)
Answer:
a) $2,360,000
b) Class life of the cells = 10 years.
c) 210748
d) 24976
Explanation:
Cost of each flexible assembly cell = $500,000
Number of flexible assembly cells = 4
Delivery and insurance charge = $38,000
Installation charge = $52,000
a) Calculate the cost basis of the four cells
cost basis = 4 * ( 500,000 + 38,000 + 52,000 )
= $2,360,000
b) The class life of the cells = 10 years with GDS Recovery period = 7 years
c) Determine the MACRS depreciation in year seven ( 7 )
MACRS depreciation in year 7 = rate * cost
where rate = 0.0893 ( value gotten from table attached below )
MACRS depreciation = 0.0893 * 2360000 = 210748
d) Determine the recaptured depreciation
= New selling price * number of assembly cells * rate ( gotten from table )
= $140,000 * 4 * 0.0446 = 24976
Winterbourne is considering a takeover of Monkton Inc. Winterbourne has 18 million shares outstanding, which sell for $56 each. Monkton has 13 million shares outstanding, which sell for $28 each. Merger gains are estimated at $65 million. If Winterbourne has a price-earnings ratio of 15 and Monkton has a P/E ratio of 10, what should be the P/E ratio of the merged firm
Answer:
Price of per share to be paid by Winterbourne to Monkton shareholders =$ 33 M
Explanation:
Before merger the netwoth = No.of shares * Price
= 13M * $ 28
= $ 364 M
Price of per share to be paid by Winterbourne to Monkton shareholders = [ Net worth of Monkton before Merger + Merger Gain ] / No.of Shares
= [ $ 364 M + $ 65 M ] / 13 M
= $ 33 M /
what is tertiary production?
Tertiary production refers to the service sector of an economy. It includes industries such as retail, hospitality, healthcare, education, and finance. This sector provides services to consumers, rather than producing tangible goods. Tertiary production is also known as the services sector, or the service economy. It is considered a key driver of economic growth, as it creates jobs, generates revenue, and contributes to overall economic activity.
To learn more about tertiary sector :-
https://brainly.com/question/28919542
At the beginning of the year, Monroe Company estimates annual overhead costs to be $600,000, and that 300,000 machine hours will be operated. Using machine hours as a base. Company used 315,000 machine hours in producing their jobs. Moreover, the actual manufacturing overhead incurred during a year $650,000. The amount of under or over-applied overhead is: a. $20,000 under-applied. b. $50,000 over-applied. c. $30,000 under-applied. d. $20,000 over-applied.
Answer:
A. $20,000 under applied overhead
Explanation:
Firstly, we start with determining the predetermined overhead rate.
Predetermined manufacturing overhead rate = Total estimated overhead cost for the period / Total amount of allocation base
= $600,000 / 300,000
= $2 per machine hours
Now, we can allocate overhead
Allocated MOH = Estimated manufacturing overhead rate × Actual amount of allocation base
= $2 × 315,000
= $630,000
Finally, the under/Over allocation
Under/Over applied overhead = real overhead - Actual overhead
= $650,000 - $630,000
= $20,000
A company has two departments, Y and Z that incur wage expenses. An analysis of the total wage expense of $40,000 indicates that Dept. Y had a direct wage expense of $6,200 and Dept. Z had a direct wage expense of $9,800. The remaining expenses are indirect and analysis indicates they should be allocated evenly between the two departments. Departmental wage expenses for Dept. Y and Dept. Z, respectively, are:
Answer:
Dept. Y = $18,200
Dept. Z = $21,800
Explanation:
Wages expense for this question consist of direct wages and indirect wages. The direct wages are allocated to their respective departments while the indirect wages are apportioned between the two departments.
Therefore, first do the allocation then the remainder $24,000 is apportioned equally between the two departments, Dept. Y and Dept. Z.
Dept. Y Dept. Z
Departmental wage expenses :
Direct wages $6,200 $9,800
Indirect wages $12,000 $12,000
Total $18,200 $21,800
Buffalo National Corp. (BNC) is currently an all-equity firm worth $320 million with 50 million common shares outstanding. BNC plans to announce that it will issue $120 million of perpetual debt (i.e., bonds) in order to buy back shares. BNC currently generates annual pretax earnings (EBT) of $80 million, and this level of earnings is expected to remain constant (i.e., EBIT will be $80 million) in perpetuity after the debt issuance and capital restructuring. The bonds will sell at par with an 8% annual coupon rate. BNC’s tax rate is 35%. BNC will maintain the new capital structure indefinitely. There is no financial distress cost, other agency cost, or personal income tax.
Required:
a. In the market-value balance sheet of BNC before announcing the debt issuance, what is the market value of equity?
b. What is the stock price of unlevered BNC?
c. What is the expected return on equity before the announcement of the debt issuance (i.e., the cost of unlevered equity)?
Answer:
The solution as per the given problem is provided below throughout the explanation portion below.
Explanation:
The given values are:
Debt issued,
= 120
Pretax earnings,
= 80
Tax,
= 35%
All equity firm,
= $320
Number of common stock,
= 50
(a)
Balance sheet before the debt issue's announcement will be:
Assets 320
Debt 0
Equity 320
then,
The total will be "320".
(b)
The per share price will be:
= [tex]\frac{Equity}{Number \ of \ common \ stock}[/tex]
= [tex]\frac{320}{50}[/tex]
= [tex]6.40[/tex]
or,
After tax, the net income will be:
= [tex]EBIT(1-t)[/tex]
= [tex]80(1-0.35)[/tex]
= [tex]80\times 0.65[/tex]
= [tex]52[/tex]
(c)
The return on equity will be:
= [tex]\frac{Net \ income \ after \ taxes}{Value \ of \ equity}[/tex]
= [tex]\frac{52}{320}[/tex]
= [tex]0.1625[/tex]
or,
= [tex]16.25[/tex] (%)
When we purchase a few shares of another corporation, what is the effect on your stockholders' equity
Group of answer choices.
A. Increase.
B. Cannot tell from the given information.
C. No effect.
D. Decrease.
Answer:
C. No effect.
Explanation:
A corporation can be defined as a corporate organization that has facilities and owns or controls assets used for the production of goods and services in at least one country other than its headquarter (home office) located in its home country.
This ultimately implies that, a corporation is a corporate organization that owns or controls its business in two or more countries.
One of the advantage of a corporation is that, owners have limited liability for debt to the extent to which they have invested and as such are not personally liable for some of debt owed by corporation.
Generally, a corporation is considered to be perpetual in nature and it is a body that comprises of a group of people such as directors, shareholders etc., who act as a single entity. Also, corporations can be sold through stocks or shares, as a public entity.
Stockholders' equity can be defined as the amount of assets remaining or the residual interest of assets in a business after all liabilities are settled or deducted. A stockholders' equity is calculated by deducting or subtracting the value of liabilities from the value of assets on the balance sheet of a company.
Hence, when we purchase a few shares of another corporation, it has no significant effect on your stockholders' equity.
Considering current world economic climate, the future exchange rates are uncertain. How would you analyse/anticipate the change in exchange rates? Write a brief proposal to mitigate impact of possible exchange rate fluctuations
Answer:
In order to analyse and anticipate the change in exchange rates, I would use a combination of technical and fundamental analysis. Technical analysis involves studying charts and trends to identify patterns that can be used to predict future price movements. Fundamental analysis involves looking at economic indicators such as GDP growth, inflation, unemployment, and interest rates to gain an understanding of the underlying economic conditions that can affect exchange rates.
In order to mitigate the impact of possible exchange rate fluctuations, I would suggest implementing a strategy of hedging. Hedging involves taking out a position in a currency or financial instrument that is opposite to the current position in order to reduce the risk of losses due to exchange rate fluctuations. This can be done through the use of forward contracts, options, and futures. Additionally, I would suggest diversifying investments across multiple currencies to reduce the risk of losses due to exchange rate fluctuations.
Finally, I would suggest monitoring exchange rate movements closely and adjusting the hedging strategy accordingly in order to ensure that the hedging strategy is effective in mitigating the impact of exchange rate fluctuations.
Explanation: