Because EFT payments require less manpower, they are more accessible than mailed payments.So option d is correct.
What does the term "Electronic Funds Transfer" (EFT) signify in terms of payment?Electronic payments such as wire transfers, ACH transactions, and credit card payments are all referred to as "electronic funds transfers" (EFT). Without the direct involvement of bank workers, electronic cash transfers between bank accounts—whether they be between financial institutions or inside a single institution—are carried out via computer-based methods. The following are a few examples of common electronic money transfer transactions: automatic teller systems (ATM)
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How are california municipal bonds issued? Please go into detail
on how these munis are issued and circulated.
California municipal bonds are issued by the state or local governments in California to raise funds for public projects, such as building schools, highways, or sewer systems.
The process of issuing and circulating these bonds is as follows:
1. The state or local government decides to issue municipal bonds to fund a specific project. They will typically hire a financial advisor to help them with the process.
2. The government will then work with an underwriter, usually a bank or financial institution, to structure the bond offering and set the terms, such as the interest rate and maturity date.
3. Once the terms are set, the underwriter will market the bonds to potential investors. This may include institutional investors, such as pension funds and insurance companies, as well as individual investors.
4. Investors will then purchase the bonds, providing the government with the funds needed for the project.
5. The government will use the funds to complete the project, and will make periodic interest payments to the bondholders until the bonds mature.
6. Once the bonds reach their maturity date, the government will pay back the principal amount to the bondholders, and the bonds will be retired.
Overall, California municipal bonds are issued and circulated through a process that involves the state or local government, a financial advisor, an underwriter, and investors. The funds raised from the sale of these bonds are used to finance public projects, and the government will make periodic interest payments to the bondholders until the bonds mature.
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A single share of stock in a company has a current price of 65. The stock does not pay dividends. Suppose that there are only four possibilities for the stock's price in one year. These possibilities, along with the probability of each occurring, are provided in the table below. 41 57 75 90 P(S1 0.16 0.26 0.37 0.21 Find the stock's annual volatility. 27.70% O 20.14% You Answered 17.63% Correct Answer 25.18% O 22.66% i am confused at the answer. please show menhow it gets to the answer
The correct answer for the stock's annual volatility is 25.18%.
The stock's annual volatility can be found by calculating the standard deviation of the stock's potential price outcomes.
This can be done using the formula:
σ = √(∑(x - µ)^2 * P(x))
Where σ is the standard deviation, x is the potential price outcome, µ is the expected value, and P(x) is the probability of the potential price outcome.
First, we need to calculate the expected value (µ) of the stock's price:
µ = (41 * 0.16) + (57 * 0.26) + (75 * 0.37) + (90 * 0.21) = 66.45
Next, we can plug in the values into the formula and calculate the standard deviation:
σ = √((41 - 66.45)^2 * 0.16) + ((57 - 66.45)^2 * 0.26) + ((75 - 66.45)^2 * 0.37) + ((90 - 66.45)^2 * 0.21)) = 16.23
Finally, we can calculate the annual volatility by dividing the standard deviation by the current price and multiplying by 100:
Annual volatility = (16.23 / 65) * 100 = 24.97%
Therefore, the stock's annual volatility is 24.97%, which is closest to the correct answer of 25.18%.
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Within our forecasting model we do not make "forecasting assumptions", but rather we make "forecasting parameter choices." Briefly, but concisely, describe the difference between "forecasting assumptions" and "forecasting parameter choices."
The difference between "forecasting assumptions" and "forecasting parameter choices" lies in the level of control and certainty that we have over these two aspects of the forecasting model.
Forecasting assumptions are beliefs or ideas that we have about the future that cannot be proven or disproven until the future actually happens. These assumptions are typically based on past experiences, current trends, and expert opinions, and are used to make predictions about what will happen in the future. For example, a company might assume that demand for its products will increase in the future based on past sales trends and current market conditions. On the other hand, forecasting parameter choices are decisions that we make about how to set up and run the forecasting model.
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Khalid invested $10,000 in year 2008. The investment worth 21,000 in 2017. What is the annual interest rate? i ? Answers: 7.70% N=2017-2008 = 9 9.78% 12.22% 8.59%
The annual interest rate of Khalid's investment is 8.4%.
The annual interest rate of Khalid's investment can be found using the formula for compound interest: A = P(1 + r)n[tex]x^{2}[/tex], where A is the final amount, P is the principal, r is the annual interest rate, and n is the number of years.
In this case, A = $21,000, P = $10,000, and n = 2017 - 2008 = 9. We can plug these values into the formula and solve for r:
$21,000 = $10,000(1 + r)9[tex]x^{2}[/tex]
2.1 = (1 + r)9[tex]x^{2}[/tex]
Take the 9th root of both sides:
1.084 = 1 + r
Subtract 1 from both sides:
r = 0.084
Multiply by 100 to convert to a percentage:
r = 8.4%
Therefore, the annual interest rate of Khalid's investment is 8.4%.
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Acquisition costs paid by the lessee to obtain a lease of real property will:
a. Be deducted and written off.
b. Be added to the lessee's basis.
c. Not be deductible.
d. Be charged to the lessor.
e. Be deducted at the expiration of the lease
acquisition costs paid by the lessee to obtain a lease of real property are added to the lessee's basis and are depreciated over the life of the lease. The correct answer is b. Be added to the lessee's basis.
Acquisition costs paid by the lessee to obtain a lease of real property are added to the lessee's basis. This means that these costs are capitalized and are not deducted immediately. Instead, they are added to the cost of the asset (the lease) and are depreciated over the life of the lease. This allows the lessee to spread the cost of the acquisition over the life of the lease, rather than taking a large deduction in the year the acquisition costs were paid.
It is important to note that acquisition costs do not include rent payments, which are deductible as an expense in the year they are paid. Acquisition costs include things like legal fees, commissions, and other costs associated with obtaining the lease.
In summary, acquisition costs paid by the lessee to obtain a lease of real property are added to the lessee's basis and are depreciated over the life of the lease.
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Jill sold her car to Jake who issued a post-dated check in full payment of the
agreed price. Before the check matures, Jake sold the same car to John who
later sold it to Willie. However, when Jill presented the check for payment,
it was dishonored by the drawee bank for the reason that Jake had already
closed his account even before he issued his check.
Jill filed a case to recover the car from Warren claiming that she had been
unlawfully deprived of it by reason of Jake’s deception.
Will the suit prosper? Why or why not? Explain your answer. Please include the applicable articles.
The suit will not prosper and Jill cannot recover the car from Willie.
No, the suit will not prosper. This is because the sale between Jill and Jake was valid and binding. According to Article 1485 of the Civil Code of the Philippines, "The unpaid seller of goods loses the right of lien thereon and of stoppage in transitu and the right of resale as limited by this Title when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the ownership in the goods until their price is paid or tendered."
In this case, Jill delivered the car to Jake without reserving the ownership until the check is paid. Therefore, she lost her right of lien and the right of resale. Jake, as the new owner, had the right to sell the car to John, who then sold it to Willie.
Furthermore, Article 1249 of the Civil Code states that "The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired." This means that the check issued by Jake did not produce the effect of payment until it was cashed. However, Jill cannot recover the car from Willie because she lost her right of lien and the right of resale when she delivered the car to Jake without reserving the ownership until the check is paid.
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LYD Corp. receives an order from a new customer, amounting $55,000. LYD Corp. uses 45-day credit terms as a standard. The Variable Cost Ratio is 75.00% of Sales, Collection Expense Ratio 15.00% of Sales and the Interest Rate is 13.00% (365 days per year).
Instruction: (show your calculations and round to 2 decimal places) Should the order be accepted? Defend your answer.
Yes, the order should be accepted. Here is the calculation to defend this answer:
First, we need to calculate the variable cost, collection expense, and interest expense for the order.
Variable Cost = $55,000 x 75.00% = $41,250
Collection Expense = $55,000 x 15.00% = $8,250
Interest Expense = ($55,000 x 13.00% x 45 days) / 365 days = $816.44
Next, we need to calculate the net profit for the order.
Net Profit = $55,000 - $41,250 - $8,250 - $816.44 = $4,683.56
Since the net profit is positive, the order should be accepted. Even though there are expenses associated with the order, the company will still make a profit. Therefore, it is beneficial for LYD Corp. to accept the order.
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1. a) What are the 2 common functions that a chief/head/manager of finance in an organization? What are the differences?
b) As companies grow in many different industries and have different portfolios of businesses, specialties, and styles of management, finance functions also evolve. Name some finance functions that are not common across all organizations.
The two common functions of a chief/head/manager of finance in an organization are: Financial Planning and Analysis and treasury.
1. Financial Planning and Analysis (FP&A): This function involves forecasting the company's financial performance, creating budgets, and monitoring the actual performance against the budget. It also includes analyzing financial data and making recommendations for improving the company's financial performance.
2. Treasury: This function involves managing the company's cash and investments, including ensuring that the company has enough cash to meet its short-term obligations and investing excess cash to earn a return.
While these two functions are common across most organizations, there are some finance functions that are not common across all organizations. These include:
1. Risk Management: Some companies have a dedicated risk management function that is responsible for identifying and managing risks that could impact the company's financial performance.
2. Investor Relations: Some companies have an investor relations function that is responsible for communicating with investors and analysts about the company's financial performance and strategy.
3. Tax: Some companies have a dedicated tax function that is responsible for managing the company's tax obligations and minimizing its tax liability.
Overall, the specific finance functions within an organization can vary depending on the size and complexity of the company, as well as the industry and business model.
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All options are European and expire in one year, there are no dividends, and the effective annual (simple) interest rate is 25%. The stock price is $62, and here are European call option prices with different strikes.
Strike Call Price
Kodak 60 16
70 ? (Did not trade)
75 5
Proposition 2 shows that the missing call option with a $70 strike price must sell for more than $6. Suppose that you could buy this option for $5.50. How could you create an arbitrage? What would your arbitrage cash flows be if the stock price fell to $60 at expiration, if the stock price rose to $70, or if the stock price rose to $80?
Proposition 3 shows that the missing call option with a $70 strike price must sell for less than $8.67. Suppose that you could sell this option for $9. How could you create an arbitrage? What would your arbitrage cash flows be if the stock price fell to $60 at expiration, if the stock price rose to $70, or if the stock price rose to $80?
To create an arbitrage in the first scenario, buy the call option with a $70 strike price for $5.50 and sell it with a $75 strike price for $5. To create an arbitrage in the second scenario, sell the call option with a $70 strike price for $9 and buy it with a $60 strike price for $16.
To create an arbitrage in the first scenario, you could buy the call option with a $70 strike price for $5.50 and sell the call option with a $75 strike price for $5. This would create a net cash inflow of $0.50. If the stock price fell to $60 at expiration, both options would expire worthless and your arbitrage cash flow would be $0.50.
If the stock price rose to $70, the $70 call option would be worth $0 and the $75 call option would still be worth $0, so your arbitrage cash flow would be $0.50. If the stock price rose to $80, the $70 call option would be worth $10 and the $75 call option would be worth $5, so your arbitrage cash flow would be $0.50 + $10 - $5 = $5.50.
To create an arbitrage in the second scenario, you could sell the call option with a $70 strike price for $9 and buy the call option with a $60 strike price for $16. This would create a net cash inflow of $7. If the stock price fell to $60 at expiration, both options would expire worthless and your arbitrage cash flow would be $7.
If the stock price rose to $70, the $70 call option would be worth $0 and the $60 call option would be worth $10, so your arbitrage cash flow would be $7 + $10 - $16 = $1. If the stock price rose to $80, the $70 call option would be worth $10 and the $60 call option would be worth $20, so your arbitrage cash flow would be $7 + $20 - $16 = $11.
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Franchising in Africa: Potential Abounds but so do challenges U.S. franchises are growing faster abroad than they are in the domestic market. As franchisors have found wringing impressive growth rates from a franchise-saturated domestic market increasingly difficult, they have begun to export their franchises to international markets. Even small franchises, those with fewer than 100 locations, are opening outlets in global markets, including those with developing economies. Indeed, franchising is ideally suited for developing economies because it allows people with limited business experience and financial resources to become part of an established business. China and India, with combined populations of 2.4 billion people with rising incomes, are drawing franchisors from across the globe. Despite the challenges it presents, Africa also is becoming the target of many franchisors because of its size, growing middle class, insatiable appetite for American brands, relative scarcity of franchised outlets, and economic growth. In fact, Africa is home to 6 of the 10 fastest growing economies in the world. Economists forecast that the continent’s economy will grow by 5 percent per year through 2017. Quick-service restaurant franchises in particular are drawn to Africa because the World Bank estimates that food demand across the continent will double between 2012 and 2020. Initially, franchisors focused their development efforts on Africa’s largest economy, South Africa (where franchising accounts for 12 percent of total GDP), but many are now turning their attention to Nigeria, Ghana, Kenya, Egypt, and Tanzania. "Africa is the last continent," says Jeff Spear, vice-president of development for CKE Restaurants, the parent company of Hardee’s and Carl Jr.’s. "If we don’t start today, it will never happen." Franchisors are entering African markets cautiously. McDonald’s has 177 restaurants in South Africa but has not expanded into other African nations. Yum! Brands, owner of KFC, Long John Silver, and Taco Bell, has about 1,000 KFC franchises in Africa. Domino’s Pizza reports that its five outlets in Nigeria are its busiest stores in the entire world by sales volume. The franchisor also has more than two dozen restaurants in Egypt and Morocco and is making plans to enter South Africa and Kenya. Potential franchisees in Africa find that the nation’s banks prefer to make loans for franchised outlets because they perceive the risk to be lower. Franchising in Africa is fraught with challenges, however. "Africa is not for sissies," says Eric Parker, cofounder of Nando’s, a South African chicken franchise. "You’re going to take some hard knocks." One of the biggest challenges is establishing a reliable, consistent supply chain. To open his first four KFC franchises in Ghana, entrepreneur Ashok Mohinani had to import chicken, which increased his food cost significantly, because local farmers could not produce enough chickens and meet the chain’s quality standards. When Gavin Bell, a KFC franchisee in Kenya, opened his first outlets, the government prohibited chicken imports, so Bell invested $500,000 into a local chicken operation, which took 13 months to get its production up to speed. Nigeria also prohibits poultry imports, so the KFC restaurants there have added fish to their menus because local farmers cannot meet all of the restaurants’ demand for chicken. Getting supplies to individual stores can be a challenge because of the distances to refrigerated warehouses and the limited supply of reliable refrigerated trucks required to keep products fresh. Water shortages can be problematic as well. Eric Andre, a Domino’s Pizza franchisee in Nigeria, has had to dig wells and install water treatment plants at a cost of $60,000 each at each one of his five restaurants in Nigeria. Because only two of his employees had ever tasted pizza, Andre sent his managers to the United States to tour pizzerias. "It is important to enter the [African] market with your eyes wide open," says one top government official. All of these challenges produce a significantly higher cost structure, often two to five times higher than franchisees in other parts of the world experience. For example, in the United States, tomatoes cost $3.45 per kilogram, but in Nigeria, the cost is $10.73 per kilogram. Similar cost comparisons exist for cheddar cheese ($4.12 vs. $13.88 per kilogram), ground beef ($4.17 vs. $7.57 per kilogram), iceberg lettuce ($2.16 vs. $10.09 per kilogram), and other commodities. The result, of course, is higher menu prices. Chris Nahman, who left a law practice in California, to open the first Johnny Rockets hamburger franchise in Nigeria, charges $14 for a Rocket Single, compared to the typical $5.50 price in the United States. Nevertheless, Nahman says that his restaurant serves between 300 and 400 customers a day.QuaestionsWhat steps should U.S.-based franchisors take when establishing outlets in foreign countries?
U.S.-based franchisors should take the following steps when establishing outlets in foreign countries like market research, Develop a reliable supply chain, Adapt to local regulations,Train local employees, patient and flexible.
1. Conduct thorough market research: Franchisors should conduct extensive market research to understand the local culture, economy, and consumer preferences. This will help them to tailor their products and services to meet the specific needs of the local market.
2. Develop a reliable supply chain: Franchisors should work to establish a reliable and consistent supply chain to ensure that they have access to the necessary ingredients and supplies. This may involve partnering with local suppliers or investing in local operations.
3. Adapt to local regulations and laws: Franchisors should familiarize themselves with the local regulations and laws and adapt their operations accordingly. This may involve modifying their menus, sourcing ingredients locally, or making other changes to comply with local regulations.
4. Train local employees: Franchisors should invest in training local employees to ensure that they understand the company's products, services, and standards. This may involve sending managers to the United States for training or providing on-site training for local employees.
5. Be prepared for higher costs: Franchisors should be prepared for higher costs associated with operating in foreign countries, including higher costs for ingredients, labor, and other expenses. They should also be prepared to charge higher prices to account for these higher costs.
6. Be patient and flexible: Franchisors should be patient and flexible when entering foreign markets, as there are likely to be challenges and setbacks along the way. They should be prepared to adapt their operations as needed to succeed in the local market.
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You have a Markov matrix for the three layers of employees as follows (Table 1). Complete the Table 2 (5% of annual growth in staffing needs (demand) is expected). Table 1 Transition matrix (2022) headcount Manager Supervisor Line worker Exit
100 Manager .65 .00 .00 .35 200 Supervisor .15 .70 .05 .10 1000 Line Worker .00 .30 .10 .60
Table 2 Supply and Demand for 2023 Manager Supervisor Line worker 2023 Demand 2023 Internal Supply
2023 External Supply
To complete Table 2, we need to use the Markov matrix from Table 1 to predict the internal supply of employees in 2023. Then we can use the expected 5% growth in staffing needs to calculate the demand for 2023.
Finally, we can calculate the external supply by subtracting the internal supply from the demand.
First, let's calculate the internal supply for 2023:
Manager = (100 * .65) + (200 * .15) + (1000 * .00) = 95
Supervisor = (100 * .00) + (200 * .70) + (1000 * .30) = 370
Line Worker = (100 * .00) + (200 * .05) + (1000 * .10) = 120
Next, let's calculate the demand for 2023 with the 5% annual growth:
Manager = 100 * 1.05 = 105
Supervisor = 200 * 1.05 = 210
Line Worker = 1000 * 1.05 = 1050
Finally, let's calculate the external supply for 2023:
Manager = 105 - 95 = 10
Supervisor = 210 - 370 = -160
Line Worker = 1050 - 120 = 930
So, the completed Table 2 should look like this:
Table 2 Supply and Demand for 2023
Manager Supervisor Line worker
2023 Demand 105 210 1050
2023 Internal Supply 95 370 120
2023 External Supply 10 -160 930
Note that the negative external supply for Supervisors means that there is an excess of internal supply and no need for external hiring.
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pletion Status: Competitive advantage also acompanies distinctive capabilities or excellence in broader business processes. True O False QUESTION 34 When a firm tailors a product to suit an individual
True.Competitive advantage also acompanies distinctive capabilities or excellence in broader business processes.
Competitive advantage is an advantage that a company has over its competitors, such as cost structure, product offering, distribution network, or customer support.
Distinctive capabilities are the unique abilities or resources that a company possesses that set it apart from its competitors. These capabilities may include superior technology, skilled employees, or efficient manufacturing processes. By tailoring a product to suit an individual customer's needs, a company can create a competitive advantage by offering a unique and personalized product or service. This can help the company differentiate itself from its competitors and gain a competitive edge in the marketplace.Thus the statement is true.
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b) Managers need to consider moving towards becoming a learning organisation if they want to improve employee performance. As an HR consultant in this merge, suggest a model that the organisation can implement in moving towards becoming a learning organisation. (10)
A learning organization is one that encourages and promotes learning and development at all levels. To move towards becoming a learning organization, managers should consider implementing a model such as the 4-E Learning Model.
This model is composed of four elements: Enabling, Experimenting, Exploring, and Extending.
Enabling refers to creating a supportive environment for learning and development, by providing resources and opportunities to learn.
Experimenting involves taking risks and challenging assumptions, while
Exploring means uncovering new knowledge and ideas to apply to existing processes.
Extending is the final element and is focused on applying the knowledge acquired from learning and experimentation to continuously improve employee performance.
By implementing this 4-E Learning Model, managers can move towards creating a learning organization which will ultimately lead to improved employee performance.
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You are the CFO of floor Covering America Inc. As part of the planning and budgeting process, each division head from the company's five divisions has submitted their capital request. the following are the facts and figures from each division：
division I II III IV V
capital requested -10,000 -30,000 -30,000 -20,000 -10,000
NPV 5,160 2,010 490 4,870 2,290
IRR 29% 12% 11% 23% 15%
Profitability Index 1.5 1.1 1.0 1.2 1.2
The projects above are "All or Nothing" - meaning for example that division I requires an investment of $10M immediately, and cannot accept partial funding of its project. The Projects are NOT mutually exclusive. The cost of capital for each of the project is 10%.
(a) Suppose the company has unlimited capital and can invest in all of the projects if deemed optimal, which of the projects should be funded? Why?
(b) Because of challenging capital market conditions, the company can only raise $50M for investment in next year's projects. Which of the projects should be funded? why?
(a) If the company has unlimited capital and can invest in all of the projects if deemed optimal, the company should invest in all projects. (b) If the company can only raise $50M for investment in next year's projects, the projects it should fund are Division I, IV, V, and partially fund Division II.
(a) If the company has unlimited capital and can invest in all of the projects if deemed optimal, then all of the projects should be funded. This is because all of the projects have a positive NPV, which means that they are expected to generate a positive return on investment.
Additionally, all of the projects have an IRR that is greater than the cost of capital, which means that they are expected to generate a return that is greater than the required return. Finally, all of the projects have a profitability index that is greater than 1, which means that they are expected to generate a positive return on investment.
(b) If the company can only raise $50M for investment in next year's projects, then it should fund the projects with the highest NPV first. This is because NPV is a measure of the expected return on investment, and by funding the projects with the highest NPV first, the company can maximize its return on investment.
Therefore, the company should fund Division I, Division IV, and Division V, which have the highest NPVs of $5,160, $4,870, and $2,290, respectively. This would require a total investment of $40M, leaving $10M remaining. The company should then fund Division II, which has the next highest NPV of $2,010, and requires an investment of $30M. However, since the company only has $10M remaining, it can only partially fund this project.
Therefore, the company should fund Division I, Division IV, Division V, and partially fund Division II.
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Q22) You purchases a house for $187,226.00 . You made a down payment of 20,000 and the remainder of the purchase price was financed with a mortgage loan. The mortgage loan is a 30 year mortgage with an annual interest rate of 5.52% . Mortgage payments are made monthly. What is the monthly amount of your mortgage payment? (2 points)
The monthly payment amount for your mortgage payment is $949.96.
To calculate the monthly amount of your mortgage payment, you need to use the following formula:
[tex]M = P [ i(1+i)^n ] / [ (1+i)^n - 1][/tex]
Where:
M = monthly mortgage paymentP = the principal amount of the loan (the amount borrowed)i = the monthly interest rate (annual interest rate divided by 12)n = the number of monthly payments (number of years times 12)First, calculate the principal amount of the loan by subtracting the down payment from the purchase price:
P = $187,226 - $20,000 = $167,226
Next, calculate the monthly interest rate:
i = 5.52% / 12 = 0.0052
Finally, calculate the number of monthly payments:
n = 30 * 12 = 360
Now you can plug these values into the formula to find the monthly mortgage payment:
M = $167,226 [ 0.0052(1+0.0052)^360 ] / [ (1+0.0052)^360 - 1]
M = $949.96
Therefore, the monthly amount of your mortgage payment is $949.96.
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Compute the book value of a 30-year, fixed-rate, $200,000 simple interest mortgage loan that has been outstanding for 20-years (10-years of payments remain). Payments are made monthly. The loan's original interest rate was 6% but loans of similar risk and 10-years remaining until maturity have an interest rate of 4%. (Answers are to the nearest dollar).
The book value of of a 30-year, fixed-rate, $200,000 simple interest mortgage loan that has been outstanding for 20-years is $111,804.
The book value of a loan is the amount that is still owed on the loan at a specific point in time. In this case, we need to compute the book value of a 30-year, fixed-rate, $200,000 simple interest mortgage loan that has been outstanding for 20 years.
1. First, we need to determine the monthly payment on the loan. We can use the formula:
P = L[c(1 + c)^n]/[(1 + c)^n - 1]
Where:
P = monthly payment
L = loan amount
c = monthly interest rate
n = number of monthly payments
Plugging in the given values, we get:
P = $200,000[(0.06/12)(1 + 0.06/12)^360]/[(1 + 0.06/12)^360 - 1]
P = $1,199.10
2. Next, we need to determine the remaining balance on the loan after 20 years of payments. We can use the formula:
B = L[(1 + c)^n - (1 + c)^p]/[(1 + c)^n - 1]
Where:
B = remaining balance
L = loan amount
c = monthly interest rate
n = number of monthly payments
p = number of payments made
Plugging in the given values, we get:
B = $200,000[(1 + 0.06/12)^360 - (1 + 0.06/12)^240]/[(1 + 0.06/12)^360 - 1]
B = $126,039
3. Finally, we need to adjust the book value for the difference in interest rates between the original loan and loans of similar risk with 10 years remaining until maturity. We can use the formula:
BV = B - (B - P)[(r - r')/r']
Where:
BV = book value
B = remaining balance
P = monthly payment
r = original interest rate
r' = current interest rate
Plugging in the given values, we get:
BV = $126,039 - ($126,039 - $1,199.10)[(0.06 - 0.04)/0.04]
BV = $111,804
Therefore, the book value of the loan is $111,804.
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Will the BSC program at FRCA provide Board members with the information they need to fulfill their governance responsibilities? Does a board really need information beyond the results reported in a company’s monthly, quarterly and annual financial reports?
Yes, the Balanced Scorecard (BSC) program at FRCA will provide Board members with the information they need to fulfill their governance responsibilities. Yes, board really need information beyond the results reported in a company’s monthly, quarterly and annual financial reports.
The BSC program goes beyond traditional financial reporting by incorporating non-financial measures, such as customer satisfaction, employee engagement, and operational efficiency. This allows Board members to gain a more holistic view of the company's performance and make more informed decisions.
Additionally, it is important for Board members to have information beyond the results reported in a company's monthly, quarterly, and annual financial reports. Financial reports only provide a snapshot of a company's performance at a given point in time and do not always reflect the underlying drivers of that performance.
By using the BSC program, Board members can gain a deeper understanding of the factors that are driving the company's success or failure and make more informed decisions about the company's future direction.
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value migration is the flow of economic and shareholder value away from an increasingly outmoded business design toward others that are better equipped to create utility for customers and profit for the company. Describe the value migration in the company 'John Deere" in not less than 1000 words.
John Deere has undergone a process of value migration as the company has evolved and adapted to the changing needs of customers and shareholders. The company has been able to remain competitive and continue to create value for both customers and shareholders by embracing a strategy of innovation and technology-driven transformation.
John Deere has embraced digital technology to expand its capabilities and reach new customers. By developing products and services that use technology such as advanced analytics and artificial intelligence, the company has been able to create more efficient and productive solutions for customers. Additionally, John Deere has also invested in digital technologies to develop new products that customers need, such as connected vehicles, which has allowed the company to remain at the forefront of the agricultural industry.
John Deere has also utilized data-driven insights to inform its business decisions, allowing it to remain competitive and more accurately predict customer needs. By utilizing technology to gain insights into customer behavior, John Deere has been able to better tailor its offerings and remain a leader in the agricultural equipment industry.furthermore, John Deere has invested in the development of its financial infrastructure, allowing the company to become more efficient and better able to manage its finances and maintain profitability. This has enabled the company to remain competitive and remain an attractive option for investors.
Overall, John Deere has successfully embraced value migration by utilizing technology, data-driven insights, and financial infrastructure. Through these efforts, the company has been able to remain competitive and maintain value for both customers and shareholders.
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This case presents an opportunity for us to calculate beta using the "bottoms-up" approach described by Professor Damodaran, as a reality check on the "top-down" regression betas provided in the case. We will also revisit some of the other issues that confound practitioners when they set out to estimate a company cost of capital. After watching the recorded presentation and the Excel demonstration, you should be ready to tackle this assignment. STUDY QUESTIONS FOR THIS ASSIGNMENT
1. (5.0 points) Why is it important to use the market value of equity rather than the book value in calculating the component weights on the sources of capital?
2. (5.0 points) Identify which regression beta is more relevant (and why):
a. The popular estimate based on monthly price data over the previous 5 years, described on p. 192, paragraph 2, or
b. Sheppard's own calculation of beta, based on daily price data for the last year, described in footnote 5 on p. 192.
3. (5.0 points) Justify which Treasury yield is the best estimate of the risk-free rate in a cost of capital calculation.
4. (5.0 points) Why is there so much difference of opinion regarding the estimate of the average Market Risk Premium?
5. (5.0 points) Determine the most appropriate bond yield to use for the cost of debt and justify your choice.
6. (5.0 points) Why do we calculate an after-tax cost of debt for the WACC?
7. (20.0 points) Complete the template. Discuss the conditions under which a larger sample (the three comparable firms) might provide better information than the firm's own calculated WACC.
1. The market value more accurately reflects the true value of the company,
2. The regression beta based on monthly price data over the previous 5 years is more relevant.
3. Treasury yield, as it reflects the current long-term interest rate in the economy
4. It is a subjective measure.
5. The current yield on high-grade corporate bonds with a maturity closest to the maturity of the company's debt.
6. Tax cost of debt for the WACC because interest payments are tax-deductible
7. It provides better information.
1. It is important to use the market value of equity rather than the book value in calculating the component weights on the sources of capital because the market value more accurately reflects the true value of the company, which will more accurately reflect the cost of capital.
2. The regression beta based on monthly price data over the previous 5 years is more relevant, because it provides a larger sample size and a longer period of time to capture more accurate market fluctuations, thus providing a more accurate estimate of the beta.
3. The most appropriate Treasury yield to use for the cost of capital calculation is the 10-year US Treasury yield, as it reflects the current long-term interest rate in the economy, and is most consistent with the duration of the debt that a company typically takes on.
4. There is so much difference of opinion regarding the estimate of the average Market Risk Premium because it is a subjective measure, as it is difficult to estimate the difference between the expected return of an investment in the stock market and the risk-free rate.
5. The most appropriate bond yield to use for the cost of debt is the current yield on high-grade corporate bonds with a maturity closest to the maturity of the company's debt. This provides an accurate estimate of the cost of debt as it reflects the current cost of borrowing for a similar company.
6. We calculate an after-tax cost of debt for the WACC because interest payments are tax-deductible and so the effective cost of borrowing to the company is lower than the pre-tax cost of borrowing.
7. The larger sample (the three comparable firms) may provide better information than the firm's own calculated WACC if the three companies are more similar to each other than they are to the company in question, as the WACC of the comparable companies can more accurately reflect the cost of capital of the company in question.
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Compute the present value of the following cash flow stream. The discount rate is 0.05.
Time 0: $7000
Time 1: $1700
Time 2: $6500
Time 3: $6800
Time 4: $10000
Round your answer, don't use decimals, $ sign, or a thousands separator.
The present value of the given cash flow stream is $28626.
The present value of a cash flow stream can be calculated by discounting each cash flow by the discount rate for the time period in which it occurs. The formula for calculating the present value of a cash flow at time t is:
PV = CFt / (1 + r)^t
Where PV is the present value, CFt is the cash flow at time t, r is the discount rate, and t is the time period.
Using this formula, we can calculate the present value of each cash flow in the given cash flow stream:
PV0 = $7000 / (1 + 0.05)^0 = $7000
PV1 = $1700 / (1 + 0.05)^1 = $1619
PV2 = $6500 / (1 + 0.05)^2 = $5894
PV3 = $6800 / (1 + 0.05)^3 = $5886
PV4 = $10000 / (1 + 0.05)^4 = $8227
The present value of the cash flow stream is the sum of the present values of each cash flow:
PV = PV0 + PV1 + PV2 + PV3 + PV4
PV = $7000 + $1619 + $5894 + $5886 + $8227
PV = $28626
As a result, the stated cash flow stream's current value is $28626.
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The notion of liquidity in finance is defined by an asset price response to traded quantities. More specifically, a liquid asset price exhibits minor changes as a result of major traded quantities, whereas an illiquid asset price exhibits major changes to minor-moderate trade quantities. Consider estimating the elasticity of demand for a particular publicly traded asset A denoted by q = 00 +01pi + ui where pi = In Pi, Pis the actual price, and qe = In Q? with Qdenoting the quantity of shares demanded by investors, and that each i = 1,..., N represents a quantity-price pair (94, Pi). Note that the quantities demanded characterise willingness to purchase, given all possible prices pi, which is not directly observable in financial market datasets. The term u; represents other factors besides price that affect demand, such as investors wealth, personal valuation, etc. The market's existing outstanding supply of shares equation is in the same form, and is given by 4 = Bo + BiPi + 0; where the term vi represents the factors that affect supply, such as underlying company's performance, sales, access to financing, union status, etc. Assume first, that the two error terms are uncorrelated, and second that the equilibrium condition 9H = q* = 4: holds indicating that observed quantities collect both demand and supply sides characteristics, then: (3.1) Derive the the reduce form system in terms of pi and qi. This indicates setting a = 4= qi and solving the demand and supply equations for pair (qi,pi) explicitly as functions of all other parameters included in the two equations (00, 01, Bo, B1, ui, vi). (3.2) In relation to explicit expressions obtained in (3.1) for Pi and qi, what are the terms var(pi), var(qi) and cov(pi.qi) — simplify as much as possible. (3.3) Show that the ordinary least squares estimator resulting from the regression of qi on piis biased for both structural parameters a, and B.
The notion of liquidity in finance is defined by an asset price response to traded quantities. More specifically, a liquid asset price exhibits minor changes as a result of major traded quantities, whereas an illiquid asset price exhibits major changes to minor-moderate trade quantities.
In relation to estimating the elasticity of demand for a particular publicly traded asset A denoted by qi = α0 + α1pi + ui where pi = In Pi, Pi is the actual price, and qe = In Q? with Q denoting the quantity of shares demanded by investors, and that each i = 1,..., N represents a quantity-price pair (qi, pi):
(3.1) The reduced form system in terms of pi and qi can be derived by setting a = qi and solving the demand and supply equations for pair (qi,pi) explicitly as functions of all other parameters included in the two equations (α0, α1, β0, β1, ui, vi).
(3.2) In relation to the explicit expressions obtained in (3.1) for pi and qi, the terms var(pi), var(qi) and cov(pi, qi) are given by: var(pi) = (α1 + β1)2var(qi) + σu2, var(qi) = σv2 and cov(pi, qi) = (α1 + β1)σuσv.
(3.3) The ordinary least squares estimator resulting from the regression of qi on pi is biased for both structural parameters a, and B. This is because the estimator does not take into account the effects of the other factors that influence the demand and supply equations,
Such as investors wealth, personal valuation, underlying company's performance, sales, access to financing, union status, etc. Thus, it is not possible to accurately estimate the structural parameters a, and B, solely by the use of the ordinary least squares estimator.
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Exercise 5/4 points) You plan to buy the sailing boat of your dreams in 5 years. It is expected to cost a total of $20 000 at that time. You have deposited $8 000 in a Certificate of Deposit paying 4% interest annually, maturing 5 years from now. Your parents have agreed to pay for all remaining expenses. If you are going to put your parents' gift in an investment earning 7% over the next 5 years, how much must they deposit today, so you buy your boat 5 years from today? Exercice 6 (4 points) A project requires an initial investment of EUR 10 000 and has a discount rate of 11%. It generates cash flows of EUR 5 000 one year from now, EUR 5 500 two years from now, and EUR 7 000 three years from now. What is the NPV of the project?| Exercise 7 (4 points) A project requires an investment outlay of EUR 20 000 and generates cash flows of EUR 7 000 in years 1 and 2, and then EUR 5 000 in years 3 and 4. What is the IRR of the project?
Exercise 5. Your parents must deposit $7,177.57 today in order to have $10,255.68 in 5 years.
Exercise6. The NPV of the project is $4,000.64.
Exercise 7. The IRR of the project is 15.87%.
Exercise 5:
To find out how much your parents must deposit today, you need to use the formula for the future value of an annuity:
FV = PV × (1 + r)^n
Where FV is the future value, PV is the present value, r is the interest rate, and n is the number of years.
First, calculate the future value of the Certificate of Deposit:
FV = $8,000 × (1 + 0.04)^5 = $9,744.32
Next, subtract the future value of the Certificate of Deposit from the total cost of the sailing boat to find out how much your parents need to contribute:
$20,000 - $9,744.32 = $10,255.68
Finally, use the formula to find out how much your parents must deposit today:
$10,255.68 = PV × (1 + 0.07)^5
PV = $10,255.68 / (1 + 0.07)^5 = $7,177.57
So your parents must deposit $7,177.57 today in order to have $10,255.68 in 5 years.
Exercise 6:
To find the NPV of the project, you need to use the formula:
NPV = ∑(CFt / (1 + r)^t) - I
Where CFt is the cash flow in year t, r is the discount rate, and I is the initial investment.
NPV = ($5,000 / (1 + 0.11)^1) + ($5,500 / (1 + 0.11)^2) + ($7,000 / (1 + 0.11)^3) - $10,000
NPV = $4,504.50 + $4,467.98 + $5,028.16 - $10,000
NPV = $4,000.64
So the NPV of the project is $4,000.64.
Exercise 7:
To find the IRR of the project, you need to use the formula:
0 = ∑(CFt / (1 + IRR)^t) - I
Where CFt is the cash flow in year t, IRR is the internal rate of return, and I is the initial investment.
0 = ($7,000 / (1 + IRR)^1) + ($7,000 / (1 + IRR)^2) + ($5,000 / (1 + IRR)^3) + ($5,000 / (1 + IRR)^4) - $20,000
This equation cannot be solved algebraically, so you need to use trial and error or a financial calculator to find the IRR. The IRR is the value of IRR that makes the equation equal to zero. Using a financial calculator, the IRR is found to be 15.87%.
So the IRR of the project is 15.87%.
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Sofia wants to buy a car when she graduates high school in 4 years’ time. She will need to have saved $5000 to do this. She has found a savings account with an interest rate of 3.5%. What is the present value of her saving target?
The present value of her saving target is $4,426.17.
Sofia needs to save $5,000 in 4 years in order to purchase a car. The interest rate of the savings account she found is 3.5%. To calculate the present value of her saving target, we use the formula:
Present Value = Future Value / (1+r)n
Where r is the interest rate, and n is the number of years.
Therefore, the present value of Sofia's saving target is:
$5,000 / (1 + 0.035)4 = $4,426.17
An interest rate defined as the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed. The total interest on an amount lent or borrowed is generally depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed.
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Which of the following would increase a company's purchasing power?
An increase in labor costs
A decrease in prices of raw materials
A decrease in production efficiency
An increase in interest rates
The statement would increase a company's purchasing power is: B. A decrease in prices of raw materials .
Which would increase a company's purchasing power?When the prices of raw materials decrease, a company can purchase more raw materials with the same amount of financial resources, which increases its purchasing power.
The other options listed would have the opposite effect on a company's purchasing power:
An increase in labor costs would decrease a company's purchasing power, as it would have to spend more money on labor, leaving less available to purchase goods and services.A decrease in production efficiency would decrease a company's purchasing power, as it would take more resources to produce the same amount of goods and services, leaving less available to purchase additional goods and services.An increase in interest rates would decrease a company's purchasing power, as it would increase the cost of borrowing money, making it more difficult to finance purchases.Therefore the correct option is B.
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Select a publicly traded company and access its most recent financial statements, form 10-K, from its website. Include the name of the company in your subject line, and do not choose a company about which one of your classmates has already posted. Navigate to the notes to the financial statements and locate the company’s note on revenue recognition. Does the company follow the five-step revenue recognition model? How can you tell? In your own words, summarize how the company is applying the five-step revenue recognition model.
Participate in follow-up discussions by comparing your company’s five-step process to the company they chose. Specifically address, how the companies are similar or different and how the industry in which the company does business influences the application of the five-step model.
The company I selected is Apple Inc. According to their 10-K, Apple Inc follows the five-step revenue recognition model.
This is evident in their note on revenue recognition, which states that they recognize revenue when the customer obtains control of the promised goods or services, in an amount that reflects the consideration that is expected to be received in exchange for the goods or services.
Additionally, it states that their recognition of revenue includes all five steps of the revenue recognition process, including identification of the contract, identification of performance obligations, determination of transaction price, allocation of the transaction price to performance obligations, and recognition of revenue.
Apple Inc's five-step revenue recognition process is similar to the company chosen by my classmate. Both companies follow the five-step model, however the industry in which the company does business influences the application of the model.
For example, Apple Inc's primary revenue comes from the sale of their products and services, while the other company may focus on sales of services. This difference may lead to different methods of applying the five-step revenue recognition model, as certain industries may require certain performance obligations or methods of recognizing revenue.
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how is simple interest different from compound interest?
A. compound interest is not paid on the principal, or initial deposit.
B. simple interest is paid on the original deposit plus any interest earned.
C. compound interest is only paid on the principal, or initial deposit.
D. Simple interest is only paid on the principal, or initial deposit.
Simple interest is frequently a fixed proportion of the outstanding sum financed or lent or given away over a defined time period. When present value builds up and is then added to the accumulated interest from earlier periods, borrowers are forced to pay duty on principal in addition to principal.
Why is compound interest different from simple interest?On the principal, or original loan amount, of a loan, simple interest is calculated. Since compound interest is computed using that both original and the interest paid from previous periods, it is regularly alluded to as "credit on interest".
How does simple interest differ from compound interest?What separates compound interest from simple interest? Simple interest just takes into account the principal for computing interest charges, but compound interest considers both the outstanding amount and all prior interest charged.
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Analysis of Internal Environment (Nissin Company in Hong Kong)
1.1 Core competence
1.1.1 Brand Management
An analysis of the internal environment of Nissin Company in Hong Kong reveals that one of its core competencies is brand management. This means that Nissin has the ability to effectively create, develop a strong brand image and reputation in the market.
Through strategic marketing and advertising efforts, Nissin has been able to establish itself as a leading producer of instant noodles in Hong Kong. Overall, brand management is a key component of Nissin's internal environment and has played a crucial role in the company's success.
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the yield to maturity is the discount rate at whicha bondspromised payments equal its
The yield to maturity (YTM) is the discount rate at which a bond's promised payments equal its current market price.
It is a measure of the bond's return on investment and is used by investors to compare the profitability of different bonds. The YTM takes into account the bond's current market price, its face value, the coupon rate, and the time until maturity. By calculating the YTM, investors can determine the bond's true yield and make informed investment decisions. It is important to note that the YTM is an estimate and may not accurately reflect the bond's actual return, especially if the bond is called or sold before it reaches maturity.
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How do you develop and implement contingency plans for the operational plan? Give 4 examples of contingency planning options and describe how to manage risks, use risk assessment matrixes and develop some strategies you can put into place to reduce the risk.
To develop and implement contingency plans for the operational plan, it is important to first identify potential risks or disruptions that could affect the business. Once these risks have been identified, a risk assessment matrix can be used to evaluate the likelihood and impact of each risk. Based on this assessment, strategies can be developed to reduce or mitigate the risk. These strategies may include backup plans, alternative suppliers, or additional resources.
Four examples of contingency planning options are:
1. Backup plans: Having a backup plan in place can help ensure that business operations can continue even if a risk or disruption occurs. This may include having backup systems or processes in place, or having alternative suppliers or resources available.
2. Alternative suppliers: If a key supplier is unable to provide the necessary goods or services, it is important to have alternative suppliers identified and available to step in if needed.
3. Additional resources: In the event of a disruption or risk, having additional resources available, such as extra staff or equipment, can help minimize the impact on the business.
4. Insurance: Insurance can help protect the business from financial losses in the event of a risk or disruption.
To manage risks, it is important to regularly monitor and assess potential risks, and to update contingency plans as needed. This may include conducting regular risk assessments, reviewing and updating contingency plans, and ensuring that all staff are aware of and trained on contingency plans. By implementing contingency plans and regularly monitoring and assessing risks, businesses can help reduce the likelihood and impact of potential disruptions.
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Discuss the following topic(s)
In your opinion, what are the roles of capital market in
providing opportunities for companies (i.e. public listed
companies). Discuss.
The capital market provides a range of opportunities for companies, especially public listed companies, to raise funds and gain access to additional capital.
It is a financial intermediary that links investors with businesses looking for investment. Companies can raise funds through the sale of equity or debt instruments. Through the sale of equity instruments, companies can raise money to fund operations, invest in new projects, or expand their businesses.
Through the sale of debt instruments, companies can obtain funds for a specified period at a pre-determined rate of interest.
Additionally, the capital market allows companies to access capital from both domestic and international sources, providing them with a wider range of options for raising funds. It also serves as a platform for companies to issue corporate bonds and other debt instruments, as well as to manage their investments. All in all, the capital market provides a great opportunity for companies to gain access to additional capital for their operations.
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