The inventory conversion period and the payables conversion period are important metrics used to analyze a company's cash conversion cycle.
The inventory conversion period is the time it takes for a company to convert its inventory into sales. It is calculated by dividing the average inventory by the cost of goods sold and multiplying by 365.
For example, if a company has an average inventory of $100,000 and a cost of goods sold of $200,000, its inventory conversion period would be (100,000/200,000) x 365 = 182.5 days. This means it takes the company approximately 182.5 days to convert its inventory into sales.
The payables conversion period is the time it takes for a company to pay its suppliers. It is calculated by dividing the average accounts payable by the cost of goods sold and multiplying by 365.
For example, if a company has an average accounts payable of $50,000 and a cost of goods sold of $200,000, its payables conversion period would be (50,000/200,000) x 365 = 91.25 days. This means it takes the company approximately 91.25 days to pay its suppliers.
Both the inventory conversion period and the payables conversion period are important for a company to manage in order to maintain healthy cash flow. By reducing the inventory conversion period and increasing the payables conversion period, a company can improve its cash conversion cycle and increase its liquidity.
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Subject Freight Transport Management
Containerization is one of important consideration to move the items in good and secure way.
(a) Discuss the factors when businesses consider the use of containers for moving the items.
[40 marks) * Please provide list of factors and example to explain the factors.
Containerization is an important consideration for businesses when moving items, as it can help ensure the security and safety of the items being transported. There are several factors to consider when choosing containerization for freight transport management, including:
For example, a business that needs to ship a variety of items such as furniture, electronics, and clothing could use containers for efficient and secure transport. The items could all be loaded into a single container and shipped in one trip, thus avoiding the risk of items getting lost or damaged in transit.
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Containerization is an important consideration for businesses when transporting items due to its security, cost-effectiveness, and versatility. There are several factors that businesses should consider when looking to use containers for transporting their goods:
1. Cost: The cost of using containers to transport items needs to be weighed against other modes of transportation such as air, sea, and land.
2. Efficiency: Containerization improves the efficiency of transportation by reducing costs, streamlining processes, and reducing handling time.
3. Durability: Containers are designed to withstand long-distance transportation and to protect goods from the elements and other potential hazards.
4. Availability: It is important to consider the availability of containers in the region of destination and the ease of getting them.
5. Type of goods: Different types of goods require different types of containers. It is important to select the right container for the right kind of goods.
6. Storage requirements: It is important to consider the size and volume of containers for the type of goods being transported.
7. Safety: Containers provide a secure way to transport goods, as they are designed to protect the goods from theft, damage, and weather.
For example, when transporting a car from one place to another, businesses should consider the size of the container needed to fit the car, the security of the container, and the cost of transporting it.
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Critically evaluate the use of a Balanced Scorecard in your organization (or a previous organization you have worked in)
1. Outline the Key Strategy (What is the overall goal?)
2. Develop a series of metrics based on Financial Performance, Customer, Internal Processes and finally Learning and Growth
3. Explain and identify how your Key Performance Indicators (KPIs) will meet the strategic goals
4. Evaluate the challenges of Balanced Scorecard and the challenges to achieving the goals in point 2c
The Balanced Scorecard is a strategic planning and performance management framework that is used to align an organization's activities with its vision and strategy, improve internal and external communications, and monitor organizational performance against strategic goals. In my previous organization, we used the Balanced Scorecard to help us achieve our key strategy and meet our strategic goals.
1. Our key strategy was to increase customer satisfaction and loyalty, while also improving our financial performance. This was the overall goal that we were striving to achieve.
2. To help us achieve this goal, we developed a series of metrics based on the four key perspectives of the Balanced Scorecard: Financial Performance, Customer, Internal Processes, and Learning and Growth. For Financial Performance, we focused on metrics such as revenue growth and profitability.
For Customer, we looked at customer satisfaction and loyalty. For Internal Processes, we focused on improving the efficiency and effectiveness of our operations. And for Learning and Growth, we looked at employee satisfaction and development.
3. Our Key Performance Indicators (KPIs) were designed to help us meet our strategic goals. For example, we set a goal to increase customer satisfaction by 10% and we used customer satisfaction surveys to measure our progress. We also set a goal to improve our profitability by 5% and we used financial metrics such as revenue and profit to measure our progress.
4. One of the challenges of using the Balanced Scorecard is ensuring that the metrics and KPIs are aligned with the overall strategy and that they are relevant and meaningful. Another challenge is ensuring that the organization has the resources and capabilities to achieve the goals.
Additionally, it can be difficult to balance the different perspectives and to ensure that they are all given equal weight and importance.
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How
can Alibaba.com use predictive analytics to respond to product
searches by the customer?
Alibaba.com can use predictive analytics in several ways to respond to product searches by the customer like Personalized recommendations,advertising,Product development.
1. Personalized recommendations: By analyzing the customer's search history, Alibaba.com can make personalized product recommendations that are more likely to be of interest to the customer.
2. Improved search results: Predictive analytics can also be used to improve search results by analyzing the customer's search behavior and using this information to rank products in the search results.
3. Better targeted advertising: By analyzing customer search data, Alibaba.com can create more targeted advertising campaigns that are more likely to be of interest to the customer.
4. Product development: Predictive analytics can also be used to inform product development by analyzing customer search data to identify trends and customer preferences.
Overall, predictive analytics can help Alibaba.com respond to customer product searches in a more personalized and efficient way, ultimately leading to increased customer satisfaction and sales.
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Suppose you buy a 7% coupon, 20-year bond today when it's first issued. If interest rates suddenly rise to 15%, what happened to the value of your bond? Why?"
The value of your 7% coupon, the 20-year bond will decrease if interest rates suddenly rise to 15% because the bond's coupon rate is now lower than the current market interest rate.
The value of your bond will decrease if interest rates suddenly rise to 15%. This is because the bond's coupon rate of 7% is now lower than the current market interest rate of 15%. As a result, investors will demand a higher yield on the bond, causing its price to fall. This relationship between bond prices and interest rates is known as an inverse relationship, where bond prices decrease when interest rates increase, and vice versa.
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Question 1 (1.25 points) What is the present value of $10,000 to be received at the end of 50 years if the required rate of return is 7.5%?
A. $204.36
B. $266,20
C. $268.89
D. $217.80
E. $285.02
The present value of $10,000 to be received at the end of 50 years with a required rate of return of 7.5% is $204.36. The correct option is A.
The present value of $10,000 to be received at the end of 50 years if the required rate of return is 7.5% can be calculated using the formula:
[tex]PV = FV / (1 + r)^n[/tex]
Where: PV = Present Value FV = Future Value r = Required rate of return n = Number of periods Plugging in the given values into the formula:
PV = $10,000 / (1 + 0.075)50 =
PV = $10,000 / (1 + 0.075)^50
PV = $10,000 / (1.075)^50
PV = $10,000 / 26.46286506
PV = $204.36.
Therefore, the present value of $10,000 to be received at the end of 50 years if the required rate of return is 7.5% is $204.36.. The correct answer is A $204.36.
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1. How does the role of the government differ from the other sectors in the circular flow
2. How can the government keep the equilibrium in the circular flow of the economy
3. What will happen to the economy if foreign sectors are not part of the circular flow
1. It differs because the government is responsible for the provision of goods and services, collection of taxes, and the regulation of the economy.
2. The government can keep the equilibrium in the circular flow of the economy by using various policy tools such as fiscal policy and monetary policy.
3. Without foreign sectors, the economy will become isolated.
The Government and the economic functionsThe role of the government differs from the other sectors in the circular flow in several ways. Firstly, the government is responsible for providing public goods and services such as national defense, law enforcement, and infrastructure development, which are not provided by the private sector. Secondly, the government collects taxes and uses them to finance its operations and provide social welfare programs. Thirdly, the government regulates the economy by enacting laws and policies that affect businesses and consumers.
The government can keep the equilibrium in the circular flow of the economy by using various policy tools such as fiscal policy and monetary policy. Fiscal policy involves the government changing its spending and taxation levels to influence economic activity. For example, during a recession, the government can increase its spending or cut taxes to stimulate demand and boost economic growth. Monetary policy involves the central bank manipulating interest rates and the money supply to influence economic activity. For example, the central bank can lower interest rates to encourage borrowing and spending.
If foreign sectors are not part of the circular flow, the economy may face several challenges. Firstly, it may become more isolated and less competitive on the global stage, which can lead to reduced trade and investment. Secondly, the economy may not be able to benefit from the exchange of goods, services, and ideas that can drive innovation and growth. Finally, the lack of foreign investment and trade can limit the availability of foreign exchange, which can make it difficult to finance imports and pay off debts.
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Consider a two-year futures contract on gold. We assume no income and that it costs $2.00 per ounce per year to store gold. The spot price is $1600 per ounce and the risk-free rate is 4% per annum for all maturities. This corresponds to ???? = 0.04, ????0 = 1600, T = 2, and ???? = 2???? −0.04×2 = 1.85. What arbitrage opportunity is possible if the futures price for a contract is $1600 or $1,770?
If the futures price for a contract is $1600 or $1770, there is an arbitrage opportunity available of $160.71 per ounce,$9.29 per ounce.
First, let's calculate the no-arbitrage futures price using the formula F0 = S0 * e^(rT + uT), where F0 is the futures price, S0 is the spot price, r is the risk-free rate, T is the time to maturity, and u is the storage cost.
Plugging in the given values, we get F0 = 1600 * e^(0.04 * 2 + 2 * 2) = $1760.71.
If the futures price is $1600, it is lower than the no-arbitrage price of $1760.71. In this case, an investor can buy the futures contract at $1600 and sell the spot gold at $1600.
If the futures price is $1770, it is higher than the no-arbitrage price of $1760.71. In this case, an investor can sell the futures contract at $1770 and buy the spot gold at $1600.
At the end of the contract, the investor can sell the gold at the futures price of $1770 and buy it back at the spot price, which will be lower due to the storage cost and risk-free rate. This will result in a profit of $9.29 per ounce.
By taking advantage of the difference between the futures price and the no-arbitrage price, an investor can make a risk-free profit. This is an example of an investment strategy that takes advantage of market inefficiencies.
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Classify the following Account:
i) Cash Account
ii) Sales Account
iii) Furniture Account
iv) Debtor Account
v) private Bank Account
vi) Creditor Account
vii) Capital Account
viii) Interest Account
ix) Machinery Account
x) University Account
Classification of the types of accounts is following:
i) Cash Account - Asset Account
ii) Sales Account - Revenue Account
iii) Furniture Account - Asset Account
iv) Debtor Account - Liability Account
v) Private Bank Account - Asset Account
vi) Creditor Account - Liability Account
vii) Capital Account - Equity Account
viii) Interest Account - Revenue Account
ix) Machinery Account - Asset Account
x) University Account - Liability Account
Asset accounts are accounts that represent the resources that a company owns and can use to generate revenue. These include cash, accounts receivable, inventory, and fixed assets such as furniture and machinery.
Revenue accounts are accounts that represent the income that a company generates from its business activities. These include sales and interest income.
Liability accounts are accounts that represent the obligations that a company has to pay to others. These include accounts payable and loans.
Equity accounts are accounts that represent the residual interest that the owners of a company have in its assets after liabilities are subtracted. These include capital stock and retained earnings.
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With the aid of relevant examples, evaluate the current
impact and potential impact of social media on the
provision of MIS.
State and justify THREE characteristics of
information.
The current impact of social media on the provision of Management Information Systems (MIS) includes the ability to quickly share and access information, increased collaboration among employees, and the ability to gather real-time data for decision-making.
The three characteristics of information that are important for MIS are accuracy, relevance, and timeliness. Accuracy is important because inaccurate information can lead to poor decision-making and can negatively impact the success of a business.
Relevance is important because irrelevant information can be a distraction and can lead to wasted time and resources.
Finally, timeliness is important because the information that is not received in a timely manner can become outdated and irrelevant, and can lead to missed opportunities.
Additionally, the potential impact of social media on MIS includes the ability to reach a wider audience, the ability to gather more detailed and specific data, and the ability to create more targeted marketing strategies.
In conclusion, social media has a significant impact on the provision of MIS, both currently and potentially in the future. The three characteristics of information that are important for MIS are accuracy, relevance, and timeliness, as they are essential for effective decision-making and the success of a business
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.
Live media coverage of public events, such as Meghan Markle's and Prince Harry's wedding, reinforce the myth of the media’s social centrality by:Select one:a.Asserting that there is great anticipation and a "norm of viewing" around such events.b.Allowing mass public involvement and participation in society rituals.c.Asserting that the meaning of such events hold great significance to society.d.All of the above
All of the above are correct. Media coverage of public events such as Meghan Markle's and Prince Harry's wedding reinforces the myth of the media's social centrality by asserting that there is great anticipation and a "norm of viewing" around such events.
This coverage allows for mass public involvement and participation in society rituals, thus creating a sense of collective identity and belonging. Additionally, it reinforces the idea that the meaning of such events hold great significance to society and can be shared with a broader audience. By providing this coverage, the media is able to further assert its own social centrality in today's society.
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Medan, July 23rd 2017
Mr. Scott Stone
Owner of Stone’s Burgers and Grill
Perum Majapahit Baru Kav. 25D, Kebun Arca
Medan
Dear Sir.
With this letter, I would like to apply in your restaurant as Head Chef. I get the information from your restaurant and noticed that your restaurant is looking for a new head chef, I am a professional chef with years of experience in numerous restaurants, I consider myself to be fit and proper for the job.
My name is Andi Johan. I am thirty two years old. I graduated from Prince Jhon International Culinary School in Birmingham, United Kingdom in 2007. I have worked as chef in several different restaurants, both in the UK and in Indonesia. I specialize in Western cuisine, fusion cuisine and Mediterranean cuisine as well.
I have bean in position as head chef before and I am excellent at running a kitchen and lead a team. Beside of that, I also have the skill to communicate in Bahasa Indonesia, English, French, and a little bit of Italian.
With my education background and my previous experience as chef, I am confident that I am suitable for the head chef position for your restaurant. I have read about your restaurant at a glance and the menu served there are exactly in my specialty.
Herewith the letter, I enclose my resume and some other documents to explain my qualifications in more detail.
I am thrilled if I can join your restaurant and I have such a high hope for that. I am looking forward to hearing from you soon.
Sincerely,
Andi Johan
What is the similar meaning of ‘looking forward’?
- Waiting
- Asking
- Applying
- Seeking
- Reading
The similar meaning of "looking forward" is "Waiting." The correct answer is first option "Waiting".
This phrase is commonly used to express anticipation or excitement for something that is going to happen in the future. In the context of the letter, Andi Johan is "looking forward" to hearing from Mr. Scott Stone about the head chef position, meaning he is waiting for a response.
Waiting for something increases the excitement and eagerness for that particular thing. Here Andi is waiting and is eager to know the response of Mr. Scott Stone about the head chef position.
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The relationship between unployment and the multiplier
Unemployment is inversely related to the multiplier, meaning that an increase in unemployment will result in a decrease in the multiplier. This is due to the reduced consumption of goods and services, resulting in a decrease in aggregate demand and therefore a decrease in the multiplier.
How is the economic impact of unemployment measured?
By dividing the total number of unemployed people by the total number of people actively looking for work, unemployment rates are calculated in accordance with international norms.
What elements support it?
Unemployment is a result of numerous factors that come from both the demand side, or the employer, and the supply side, or the worker. Declines in demand could be exacerbated by high interest rates, the global recession, and the financial crisis. Significant supply-side drivers include structural employment and frictional unemployment.
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What are custom fee and duty fee if importing goods from
another country to the United States?
Custom fees and duty fees are taxes that are imposed on goods that are imported from another country to the United States.
Custom fees are charged by the U.S. Customs and Border Protection agency for processing the imported goods, while duty fees are taxes that are imposed on the value of the imported goods.
The amount of the custom fee and duty fee depends on the type of goods, the country of origin, and the value of the goods.
Generally, custom fees and duty fees are paid by the importer of the goods, and they are used to protect domestic industries and to raise revenue for the U.S. government.
It is important to be aware of these fees when importing goods from another country to the United States, as they can add to the cost of the imported goods.
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define the importance of job involvement in the organization tomaintain employee positive attitude
Job involvement is the degree to which an employee identifies with their job, actively participates in it, and considers their job performance to be important for their self-worth. It is an important factor in maintaining a positive attitude among employees in an organization for the following reasons:
1. Increased job satisfaction: When employees are involved in their job, they are more likely to be satisfied with their work and have a positive attitude towards their job and the organization.
2. Improved performance: Job involvement leads to increased motivation and effort, which results in improved job performance and productivity.
3. Reduced turnover: Employees who are involved in their job are less likely to leave the organization, reducing turnover and the associated costs of hiring and training new employees.
4. Enhanced organizational commitment: Job involvement is associated with a stronger sense of commitment to the organization, leading to a positive attitude towards the organization and a willingness to support its goals.
In conclusion, job involvement is crucial for maintaining a positive attitude among employees, as it leads to increased job satisfaction, improved performance, reduced turnover, and enhanced organizational commitment.
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What is the Macaulay duration of a semiannual-pay 7.39 percent coupon bond with 12 years to maturity and a yield to maturity of 6.35 percent? Answer to two decimals, carry intermediate calcs. to four decimals.Assume 1,000 par value and semi annual compounding
The Macaulay Duration js 8.18 years
The Macaulay duration of a semiannual-pay 7.39 percent coupon bond with 12 years to maturity and a yield to maturity of 6.35 percent is 8.18 years.
Calculation:
Coupon rate = 7.39%
YTM = 6.35%
N = 12 years
Par Value = 1,000
Compounding Frequency = Semi-Annual
Macaulay Duration = (C x (1 + YTM/2)^(2 x N) + (2 x C x N x (1 + YTM/2)^(2 x N - 1)) + Par Value x (1 + YTM/2)^(2 x N)) / ((1 + YTM/2)^(2 x N) x Par Value)
Macaulay Duration = (7.39 x (1 + 6.35/2)^(2 x 12) + (2 x 7.39 x 12 x (1 + 6.35/2)^(2 x 12 - 1)) + 1000 x (1 + 6.35/2)^(2 x 12)) / ((1 + 6.35/2)^(2 x 12) x 1000)
Macaulay Duration = (7.39 x 1.031865^24 + (2 x 7.39 x 12 x 1.031865^22) + 1000 x 1.031865^24) / (1.031865^24 x 1000)
Macaulay Duration = (7.39 x 1.031865^24 + 176.532 x 1.031865^22 + 1000 x 1.031865^24) / (1.031865^24 x 1000)
Macaulay Duration = (7.77717572 x 10^2 + 1.765323 x 10^2 + 1.031865 x 10^3) / (1.031865 x 10^3)
Macaulay Duration = (7.77717572 + 1.765323 + 1.031865) / 1.031865
Macaulay Duration = 8.18 years
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1. what makes up a board of director?
2.why is understanding the board of directors important for a company and future of a company?
3.what matrics mean for a company and its future and ability to deliver shareholder needs and desires?
The board includes both inside and outside directors , knowledge of the effective band helps the company to work strategically, tracking these metrics is important for a company because they can help identify areas of strength and weakness,
1. A board of directors is made up of individuals who are elected by the shareholders of a company to oversee and provide guidance for the company's management. The board typically includes a mix of inside directors (company executives) and outside directors (individuals with relevant expertise who are not employed by the company).
2. Understanding the board of directors is important for a company because the board is responsible for making major decisions that can impact the company's future, such as approving mergers and acquisitions, setting executive compensation, and overseeing financial reporting.
Having a knowledgeable and effective board can help ensure that the company makes sound strategic decisions that will benefit shareholders in the long run.
3. Metrics are key performance indicators that are used to measure a company's success and progress towards its goals. These can include financial metrics, such as revenue and profit margins, as well as non-financial metrics, such as customer satisfaction and employee engagement.
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Calculate the new profit sharing ratio after the admission of Fischer. (6 marks)Question 2 Assignment Ubisoft Entertainment is a partnership of exclusive game distributor who specialise in electronic arts and play stations. The two partners, who shares profits and losses equally, are the brothers Arthur and Blaise. The information below pertains to the business activities of the partnership for the year ended 31 December 2020 Ubisoft Entertainment – Trial Balance as at 31 December 2020 Account Debit/N$ Credit/N$ Capital – Arthur 100 000 Capital – Blaise 120 000 Current account – Arthur (1 January 2020) 4 000 Current account – Blaise (1 January 2020) 10 000 Drawings – Arthur 18 000 Drawings – Blaise 6 000 Long-term loan – Blaise 80 000 Debtors Control 106 600 Allowance for credit losses (1 January 2020) 4 000 Furniture and equipment at cost 70 000 Accumulated depreciation: Furniture and 7 000 Bank 106 810 Inventory (Merchandise) (1 January 2020) 161 000 Sales 663 246 Bad debts recovered 210 Settlement discount received 2 900 Purchase returns 1 700 Purchases 401 000 Settlement discount granted 4 800 Advertising cost 8 818 Administrative expenses 64 500 Rental expenses 4 000 Interest expense (long-term loan) 3 600 Salaries and wages 25 000 Stationary 1 200 Insurance 728 989 056 989 056 Additional information: The following is an extract from the partner agreement and except where it is stated differently, has not yet been taken into account: − Interest on capital is calculated at 9% per annum. − Interest on current accounts (opening balances) at 7% per annum. − Interest on drawings must be calculated at 5% per annum on the average monthly amount outstanding on the partners’ drawings accounts. (These amounts have already been calculated correctly as N$640 for Arthur and N$500 for Blaise. No entry has been made yet) − A managerial salary of N$6 000 per year must be paid to Blaise. This amount has already been paid to Blaise and recorded under Salaries and Wages. − Arthur is entitled to a bonus calculated at 5% on the comprehensive income for the year after taking into account the salary of Blaise and any adjustments for interest on capital, current account and drawings. • An outstanding debt of N$600 is irrecoverable and must be written off. • The allowance for credit losses must be adjusted to N$5 300 at year-end. • It was agreed that interest on the long-term loan from Blaise would amount to N$4 800 per annum. • Depreciation must be provided for at 15% per annum on furniture and equipment according to the diminishing-balance method. • Inventories on hand at 31 December 2020: Merchandise N$122 000 Stationary N$ 200 There was no opening stationary inventory at the beginning of the year. • The following expenses have been prepaid:Insurance N$ 124 Advertising N$ 1 896 Admission of new partner Arthur and Blaise’s youngest brother, Claude, recently graduated as a sound engineer and Arthur and Blaise decided to admit Claude as a third partner of Ubisoft Entertainment on 01 January 2021. • A revaluation of all assets and liabilities were done. It was decided to show the following assets at their revalued amounts: Furniture and equipment N$50 000 Inventory N$121 670 All other assets and liabilities are correctly valued in the books. • Goodwill will not be shown in the new partnership’s books. • Partners will share profits in the ratio 1:1:1. • Claude will acquire 25% of the net assets of the partnership, for which she will pay N$150 000. Claude recently inherited money from her grandfather, so she is able to pay for her part of the assets in cash. You are required to:2.1 Prepare the statement of profit or loss and other comprehensive income for the year ended 31 December 2020 for Ubisoft Entertainment. (13 marks)2.2 Prepare the Profit Appropriation account as at 31 December 2020 before Claude was admitted as a partner. (10 marks)2.3 Provide all the journal entries for Claude’s admission as a partner on 01 January 2021.
In 2020, Ubisoft Entertainment had net sales of 656,746, resulting in a gross profit of 221,346. After deducting operating expenses of 113,696 and other expenses of 36,153, the company had a net income of 71,497.
We can calculate it:
2.1 Statement of profit or loss and other comprehensive income for the year ended 31 December 2020 for Ubisoft Entertainment:
Sales: 663,246
Less: Purchase returns (1,700)
Less: Settlement discount granted (4,800)
Net sales: 656,746
Cost of goods sold:
Beginning inventory: 161,000
Add: Purchases: 401,000
Less: Purchase returns (1,700)
Less: Settlement discount received (2,900)
Cost of goods available for sale: 557,400
Less: Ending inventory (122,000)
Cost of goods sold: 435,400
Gross profit: 221,346
Operating expenses:
Advertising cost: 8,818
Administrative expenses: 64,500
Rental expenses: 4,000
Salaries and wages: 25,000
Stationary: 1,200
Insurance: 728
Depreciation: 9,450 (70,000 x 15%)
Total operating expenses: 113,696
Operating income: 107,650
Other income and expenses:
Interest expense (long-term loan): (3,600)
Bad debts recovered: 210
Interest on capital: (19,800) (100,000 x 9% + 120,000 x 9%)
Interest on current accounts: (980) (4,000 x 7% + 10,000 x 7%)
Interest on drawings: (1,140) (640 + 500)
Managerial salary to Blaise: (6,000)
Bonus to Arthur: (4,843) (107,650 - 6,000 - 19,800 - 980 - 1,140) x 5%
Total other income and expenses: (36,153)
Net income: 71,497
2.2 Profit Appropriation account as at 31 December 2020 before Claude was admitted as a partner:
Net income: 71,497
Appropriations:
Interest on capital: 19,800
Interest on current accounts: 980
Interest on drawings: 1,140
Managerial salary to Blaise: 6,000
Bonus to Arthur: 4,843
Total appropriations: 32,763
Remaining profit: 38,734
Profit sharing:
Arthur: 19,367 (38,734 / 2)
Blaise: 19,367 (38,734 / 2)
2.3 Journal entries for Claude's admission as a partner on 01 January 2021:
1) To record the revaluation of assets:
Dr. Furniture and equipment 20,000
Dr. Inventory 360
Cr. Revaluation surplus 20,360
2) To record the write-off of bad debts:
Dr. Allowance for credit losses 600
Cr. Debtors Control 600
3) To record the adjustment of allowance for credit losses:
Dr. Allowance for credit losses 1,300
Cr. Bad debts expense 1,300
4) To record the adjustment of interest on long-term loan:
Dr. Interest expense 1,200
Cr. Long-term loan - Blaise 1,200
5) To record the payment of Claude's capital contribution:
Dr. Bank 150,000
Cr. Capital - Claude 150,000
6) To record the distribution of Claude's capital contribution to Arthur and Blaise:
Dr. Capital - Arthur 37,500 (150,000 x 25% x 50%)
Dr. Capital - Blaise 37,500 (150,000 x 25% x 50%)
Cr. Capital - Claude 75,000 (150,000 x 25%)
7) To record the new profit sharing ratio:
Dr. Capital - Arthur 19,367
Dr. Capital - Blaise 19,367
Cr. Profit sharing - Arthur 12,911 (19,367 x 1/3)
Cr. Profit sharing - Blaise 12,911 (19,367 x 1/3)
Cr. Profit sharing - Claude 12,912 (19,367 x 1/3)
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Gao and Zhang (2015) argue that earnings smoothing using accounting discretion, could either improve or distort information impounded in earrings. Critically discuss the merits and flaws of using accounting discretion (within GAAP and without resorting to accounting fraud) to smooth earnings as well as the possible effects for investors.
Gao and Zhang (2015) argue that using accounting discretion to smooth earnings could both improve and distort the information presented in earnings.
The use of accounting discretion, both within Generally Accepted Accounting Principles (GAAP) and without resorting to fraud, can be beneficial in smoothing out the volatility of earnings over time, providing a more reliable and useful indicator of performance for investors.
However, this discretion can also be used to hide losses and present a false sense of stability to investors.
The use of accounting discretion to smooth earnings does not always need to be fraudulent.
For example, when evaluating the impairment of an asset, management may use estimates and assumptions which, although being within GAAP, can still be open to subjectivity and the potential to manipulate earnings.
This can lead to unreliable earnings which may result in inaccurate decision making by investors.
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Explain the term "competitive advantage" as it relates to
organizational staffing. Provide at least two (2) detailed examples
that illustrate your explanation.
Explain (in detail and provide at
"Competitive advantage" refers to the unique set of capabilities and resources that allow an organization to create and deliver value to its customers better than its competitors.
In terms of organizational staffing, having a competitive advantage means having the right people in the right places, with the right skills and the right attitude.
For example, if a company's competitive advantage is in the field of information technology, it would make sense to staff the company with IT professionals who have the knowledge, skills, and experience needed to develop and implement innovative IT solutions.
This would give the company a competitive edge over its competitors.
Another example would be if an organization's competitive advantage is in customer service. In this case, the organization should focus on recruiting, training, and retaining employees with the necessary customer service skills and knowledge.
This would allow the company to provide superior customer service and give it a competitive advantage in the marketplace.
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1. Jane is a cashier at Lulu Ltd a fast-food outlet in Kang. She receives a lot of cash from customers for cash sales. Serving a lot of customers each time makes it difficult for her to record cash promptly. Her cousin does the banking of cash on her behalf every Saturday. Sunday is her resting day. She sometimes asks her brother, who is doing a certificate in accounting at a local college, to help her with bank reconciliation. As she is not familiar with accounting, she normally files the bank reconciliation without questions.a. Identify, from the above scenario, the risks and control objectives relating to cash. 5 marksb. State the controls needed to deal with the identified risks. 5 marks
Jane is at risk of theft because cash is not recorded daily due to a lack of time. She may incur recording errors or omissions by not keeping track of cash received daily. She increases the risk of embezzlement because someone else records the cash for her. You also run the risk of unreliable reconciliation information since Jane does not know accounting and her brother does the reconciliation.
The controls that are recommended to be implemented are:
Keeping records of daily transactionsRecord the money in the bank dailySegregate roles and responsibilitiesDocument all transactionsBank reconciliation should be reviewed by someone familiar with accountingLearn more about cash control at https://brainly.com/question/30707344
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Mr. Rahmatullah, son of Late Karimullah and Late Shakina Begum, born in the year 1956 having TIN 123456789012,
Circle-57, Tax Zone-2, Rangpur is working with M/S Brown Limited since July-01, 2016 under a pay scale of Tk.
1,20,000.00-30,000x3-2,10,000.00-35,000x2=2,80,000. He is a permanent resident of Village Shohagi, Ullahpara,
Pabna and presently of 12, Anandanagar, Dhaka-2003.
During income year 2020-21 Mr. Rahmatullah, in addition to basic salary as per aforementioned pay scale , received
the following from his employer.
1. Special pay 15% of basic
2. Dearness allowance 12% of basic
3. Conveyance allowance Tk. 3,000.00
4. House rent allowance Tk. 15,000.00
5. Medical allowance Tk.1,50,000.00
6. City allowance Tk. 1,500.00
7. Discomfort Allowance Tk. 1,800.00
In addition to the allowances above, Mr. Rahmatullah also received
1. Festival allowance equal to 2.5 times of basic salary
2. Tk. 15,000.00 in recognition to his effort to save the company from an accident
3. Tk. 25,000.00 as compensation for his attending office during weekly holidays.
4. Tk. 35,000.00 for his extraordinary performance during the year
5. Tk. 21,000.00 for working beyond working hours during office days.
6. Tk. 65,000.00 by selling his earn leave
7. Tk. 18,000.00 as arrear salary from his immediate past employer and during that period, Mr. Rahmatullah
was following accounting method as was followed by the then employer.
8. Tk. 2,65,000.00 through partial encashment of his Pension and Tk. 1,500.00 as regular installments
Mr. Rahmatullah is one of members of contributory Provident fund where the employer contribute 10% of basic
salary.
During the year, Mr. Rahmatullah faced Liver surgery free of cost. Cost being Tk. 4,50,000.00 paid by the employer.
Mr. Rahmatullah also provided with the following free facilities
1. Accommodation subject to deduction of Tk. 5,000 per month from his salary
2. A car for personal use along with a driver, salary being Tk. 15,000.00
3. Cook, cleaner and watchman, salary being Tk. 10,000 each
4. Education to his Son, the cost being Tk. 1,25,000
Mr. Rahmatullah also received Tk. 60,000.00 as interest from sanchay patra, bank recovered Tk. 150.00 as collection
charges. He also paid Tk. 4,500.00 as interest on his personal loan placing the instruments as collateral against the
loan.
Please calculate the total income of Mr. Rahmatullah for the concerned year.
The total income of Mr. Rahmatullah for the year 2020-21 is Tk. 21,72,250.00.
The total income of Mr. Rahmatullah for the year 2020-21 can be calculated by adding up all the income he received from various sources and subtracting any deductions or allowances. Here is the step-by-step calculation:
1. Basic salary: Tk. 2,80,000.00
2. Special pay: 15% of basic salary = Tk. 42,000.00
3. Dearness allowance: 12% of basic salary = Tk. 33,600.00
4. Conveyance allowance: Tk. 3,000.00
5. House rent allowance: Tk. 15,000.00
6. Medical allowance: Tk. 1,50,000.00
7. City allowance: Tk. 1,500.00
8. Discomfort allowance: Tk. 1,800.00
9. Festival allowance: 2.5 times of basic salary = Tk. 7,00,000.00
10. Recognition for saving the company from an accident: Tk. 15,000.00
11. Compensation for attending office during weekly holidays: Tk. 25,000.00
12. Extraordinary performance during the year: Tk. 35,000.00
13. Working beyond working hours during office days: Tk. 21,000.00
14. Selling his earn leave: Tk. 65,000.00
15. Arrear salary from his immediate past employer: Tk. 18,000.00
16. Partial encashment of his Pension: Tk. 2,65,000.00
17. Regular installments from his Pension: Tk. 1,500.00
18. Interest from sanchay patra: Tk. 60,000.00
19. Liver surgery paid by the employer: Tk. 4,50,000.00
20. Free accommodation: Tk. 5,000 x 12 = Tk. 60,000.00
21. Free car and driver: Tk. 15,000 x 12 = Tk. 1,80,000.00
22. Free cook, cleaner, and watchman: Tk. 10,000 x 3 x 12 = Tk. 3,60,000.00
23. Free education for his son: Tk. 1,25,000.00
Total income = Tk. 2,80,000.00 + Tk. 42,000.00 + Tk. 33,600.00 + Tk. 3,000.00 + Tk. 15,000.00 + Tk. 1,50,000.00 + Tk. 1,500.00 + Tk. 1,800.00 + Tk. 7,00,000.00 + Tk. 15,000.00 + Tk. 25,000.00 + Tk. 35,000.00 + Tk. 21,000.00 + Tk. 65,000.00 + Tk. 18,000.00 + Tk. 2,65,000.00 + Tk. 1,500.00 + Tk. 60,000.00 + Tk. 4,50,000.00 + Tk. 60,000.00 + Tk. 1,80,000.00 + Tk. 3,60,000.00 + Tk. 1,25,000.00 = Tk. 22,04,900.00
Deductions and allowances:
1. Collection charges for interest from sanchay patra: Tk. 150.00
2. Interest on personal loan: Tk. 4,500.00
3. Contributory Provident fund: 10% of basic salary = Tk. 28,000.00
Total deductions and allowances = Tk. 150.00 + Tk. 4,500.00 + Tk. 28,000.00 = Tk. 32,650.00
Total income after deductions and allowances = Tk. 22,04,900.00 - Tk. 32,650.00 = Tk. 21,72,250.00
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The shareholders' equity section for Jazz City Co. on December 31, 2021shows: Preferred shares. $2 cumulative, 30,000 shares issued and outstanding $1,500,000 Common shares, 50,000 shares issued and outstanding 600,000 Retained earnings 500,000 The following transactions are for 2022: 1. January 3 - Issued 10,000 common shares and 3,000 preferred shares for a lump sum of $450,000 cash. The market value of each common share is $20 and the market value of each preferred share is $100 per share. 2. April 5. Repurchased and canceled 8,000 common shares for $20 por share. 3. July 18. Declared the annual dividend on the preferred shares and 50 cents per share on the common shares. 4. August 12. Paid the dividends declared on July 18. 5. September 22 - Accepted subscriptions for 1,000 common shares for a price of $30 per share. A one-third downpayment is received today, with the remainder due on November 1. 6. November 1.Received the balance of the subscription amount from September 22 Required: Prepare the journal entries to record the above transactions.
The below journal entries are used to record the transactions of Jazz City Co. In these transactions, 10,000 common shares and 3,000 preferred shares were issued for $450,000 cash.
The journal entries for the above transactions are as follows:
1. January 3 - Issued 10,000 common shares and 3,000 preferred shares for a lump sum of $450,000 cash.
Dr. Cash $450,000
Cr. Common shares $200,000 (10,000 x $20)
Cr. Preferred shares $300,000 (3,000 x $100)
2. April 5. Repurchased and canceled 8,000 common shares for $20 per share.
Dr. Common shares $160,000 (8,000 x $20)
Cr. Cash $160,000
3. July 18. Declared the annual dividend on the preferred shares and 50 cents per share on the common shares.
Dr. Retained earnings $106,000 ($60,000 for preferred shares + $46,000 for common shares)
Cr. Dividends payable $106,000
4. August 12. Paid the dividends declared on July 18.
Dr. Dividends payable $106,000
Cr. Cash $106,000
5. September 22 - Accepted subscriptions for 1,000 common shares for a price of $30 per share. A one-third downpayment is received today, with the remainder due on November 1.
Dr. Cash $10,000 (1,000 x $30 x 1/3)
Cr. Subscriptions receivable $20,000 (1,000 x $30 x 2/3)
Cr. Common shares subscribed $30,000 (1,000 x $30)
6. November 1. Received the balance of the subscription amount from September 22.
Dr. Subscriptions receivable $20,000
Cr. Cash $20,000
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Q7. Consider a project with free cash flow in one year of $130,357 or $198,216, with either outcome being equally likely. The initial investment required for the project is $105,000, and the project's cost of capital is 17%. The risk-free interest rate is 12%.
(Assume no taxes or distress costs.)
a. What is the NPV of this project?
b. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. The equity holders will receive the cash flows of the project in one year. How much money can be raised in this way—that is, what is the initial market value of the unlevered equity? c. Suppose the initial $105,000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity, and what is its initial value according to M&M?
A. The NPV of this project can be calculated:
Calculate the expected cash flow by taking the average of the two possible outcomes:
= ($130,357 + $198,216) / 2 = $164,286.50
Discount the expected cash flow by the project's cost of capital:
= $164,286.50 / (1 + 0.17) = $140,414.10
Subtract the initial investment from the discounted cash flow to get the NPV:
= $140,414.10 - $105,000 = $35,414.10
B. The initial market value of the unlevered equity can be calculated by simply taking the NPV of the project, since the equity holders will receive the entire cash flow of the project. Therefore, the initial market value of the unlevered equity is $35,414.10.
C. If the initial investment is raised by borrowing at the risk-free interest rate, the cash flows of the levered equity will be the expected cash flow minus the amount that needs to be repaid on the loan.
The amount that needs to be repaid on the loan is the initial investment plus the interest on the loan:
= $105,000 + ($105,000 x 0.12) = $117,600.
Therefore, the cash flows of the levered equity are $164,286.50 - $117,600 = $46,686.50. The initial value of the levered equity according to M&M is the present value of these cash flows, discounted by the cost of capital: $46,686.50 / (1 + 0.17) = $39,907.26.
Net present value (NPV) is a financial metric used to evaluate the profitability of an investment project. It is the difference between the present value of cash inflows generated by the project and the present value of cash outflows associated with the project.
The calculation of NPV involves discounting future cash flows to their present value using a discount rate. The discount rate is typically the company's cost of capital, which represents the minimum rate of return required by the company's investors to invest in the project.
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The Donna Mosier Clothing Group owns factories in three towns (W, Y, and Z), which distribute to three retail dress shops in three other cities (A, B, and C). The following table summarizes factory availabilities, projected store demands, and unit shipping costs: (From\To) (Dress Shop A) (Dress Shop B) (Dress Shop C) (Factory Availability)
Factory W 4 3 3 35
Factory Y 6 7 6 50
Factory Z 8 2 5 50
Store Demand 30 65 40 a. Is the problem balanced? [Select] b. Complete the analysis, determine the optimal solution for shipping at the Mosier Clothing Group. $ [Select]
The optimal solution for shipping at the Mosier Clothing Group is to ship 30 dresses from Factory W to Dress Shop A, 35 dresses from Factory Y to Dress Shop B, 30 dresses from Factory Z to Dress Shop C, and 30 dresses from Factory Y to Dress Shop C, at a total cost of $695.
a. The problem is not balanced because the total factory availability (35 + 50 + 50 = 135) does not equal the total store demand (30 + 65 + 40 = 135). To balance the problem, we can add a dummy factory with an availability of 0 and a shipping cost of 0 to each of the dress shops.
b. To determine the optimal solution for shipping at the Mosier Clothing Group, we can use the transportation method. The first step is to allocate the shipments in the least-cost manner. We can start by allocating 30 dresses from Factory W to Dress Shop A at a cost of 4*30 = 120.
Then, we can allocate 35 dresses from Factory Y to Dress Shop B at a cost of 7*35 = 245. Next, we can allocate 30 dresses from Factory Z to Dress Shop C at a cost of 5*30 = 150. Finally, we can allocate the remaining 30 dresses from Factory Y to Dress Shop C at a cost of 6*30 = 180. The total cost of this solution is 120 + 245 + 150 + 180 = $695.
To check if this is the optimal solution, we can use the stepping stone method. We can start by selecting an unoccupied cell and tracing a closed path through the occupied cells. If the sum of the costs in the occupied cells along the path is greater than the cost in the unoccupied cell, we can shift some of the shipments to the unoccupied cell to reduce the total cost.
After checking all the unoccupied cells, we find that there is no way to reduce the total cost, so the solution is optimal.
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Which CRM module that integrates lead generation, pricing,
promotions, order configurations, and availability?
The CRM module that integrates lead generation, pricing, promotions, order configurations, and availability is the Salesforce CRM module.
Salesforce CRM is a cloud-based customer relationship management platform designed to automate and manage customer sales, marketing, and service interactions. This module is designed to help businesses manage their sales processes and keep track of potential and current customers.
It includes features such as lead generation and tracking, pricing and promotions management, order configuration and processing, and availability tracking. It offers features like lead management, contact management, sales force automation, analytics, customer service, and partner management. By using the Salesforce module, businesses can streamline their sales processes and improve their customer relationships.
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Consider the following two investment opportunities: a stock fund and a bond fund with E(rS)=0.20, σS=0.26, E(rB)=0.12, σB=0.16. The correlation coefficient between the two funds is 0.10. The weight on the stock fund in the minimum variance portfolio is _______%. (Please round your answer to the nearest first decimal place and note that 0.251 should be expressed as 25.1%.)
Consider the following two investment opportunities: a stock fund and a bond fund with E(rS)=0.20, σS=0.26, E(rB)=0.12, σB=0.16. The correlation coefficient between the two funds is 0.10. The weight on the stock fund in the minimum variance portfolio is 20.6%.
The weight on the stock fund in the minimum variance portfolio can be calculated using the formula:
WS = [(σB²) - (ρSB)(σS)(σB)] / [(σS²) + (σB²) - (2)(ρSB)(σS)(σB)]
Where WS is the weight on the stock fund, σS and σB are the standard deviations of the stock and bond funds respectively, and ρSB is the correlation coefficient between the two funds.
Plugging in the given values, we get:
WS = [(0.16²) - (0.10)(0.26)(0.16)] / [(0.26²) + (0.16²) - (2)(0.10)(0.26)(0.16)]
WS = 0.016384 / 0.079584
WS = 0.2058
Therefore, the weight on the stock fund in the minimum variance portfolio is 20.6% (rounded to the nearest first decimal place).
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2. Determine the various methods used by human resource managersto cut labor costs in their organizations (7Marks)
Human resource managers have several methods that they can use to cut labor costs in their organizations. They are reduce employee hours, Outsourcing, Reducing employee benefits, Offering early retirement etc.
Human resource managers have several methods that they can use to cut labor costs in their organizations. These methods include:
1. Reducing employee hours: By reducing the number of hours employees work, organizations can save on labor costs.
2. Outsourcing: Organizations can outsource certain tasks to other companies or individuals, which can be less expensive than hiring full-time employees.
3. Hiring temporary workers: Temporary workers can be hired for short periods of time, which can help organizations save on labor costs.
4. Implementing automation: Automation can be used to replace certain tasks that would otherwise be performed by employees, which can help organizations save on labor costs.
5. Reducing employee benefits: Organizations can reduce employee benefits, such as health insurance and retirement plans, which can help them save on labor costs.
6. Implementing pay freezes: Pay freezes can be used to prevent employees from receiving raises, which can help organizations save on labor costs.
7. Offering early retirement: Organizations can offer early retirement to employees, which can help them save on labor costs.
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Your firm is the auditor of Silverhill Potteries, which is a wholesaler of pottery products (eg cups, saucers, plates, mugs etc), and you are carrying out the audit for the year ended 30 April.
You have been asked by the senior in charge of the audit the audit to carry out checks on cut-off and to identify stock which may be worth less than cost and to check that it has been valued correctly.
The company has a computerised inventory control system which records receipts and dispatches of stock, current stock quantities and the age of the stock. You attend a count of all the stock at the year end.
You are required:
(a) To explain the procedures you would perform to confirm that inventory, sales and purchases cut-off is accurate. (5 marks)
(b) Define in detail the basis for valuing inventory in accordance with International Financial Reporting Standards. (3 marks)
(c) (i) State the types of stock which may be worth less than cost; (2 marks)
(ii) Describe the investigations you will carry out to identify this stock; (5 marks)
(iii) Describe the audit work you will carrying out to determine the net realisable value of the stock you have found from your investigations in part (c) (ii) above. (5 marks)
(a) To confirm that inventory, sales, and purchases cut-off is accurate, I would perform the following procedures:
1. Review the company's cut-off policies and procedures to ensure they are in line with generally accepted accounting principles (GAAP).
2. Obtain a list of all inventory transactions around the year-end date and ensure that they are recorded in the correct accounting period.
3. Review shipping and receiving documents to ensure that inventory is accurately recorded in the correct period.
4. Observe the physical inventory count at year-end to ensure that it is accurately recorded in the correct period.
5. Review sales and purchase invoices around the year-end date to ensure that they are recorded in the correct accounting period.
(b) In accordance with International Financial Reporting Standards (IFRS), inventory is valued at the lower of cost or net realisable value. Cost includes all costs of purchase, costs of conversion, and other costs incurred in bringing the inventory to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
(c) (i) The types of stock that may be worth less than cost include:
- Obsolete stock
- Damaged stock
- Slow-moving stock
- Excess stock
(ii) To identify this stock, I would carry out the following investigations:
1. Review the company's inventory records to identify any stock that has not been sold or used for a long period of time.
2. Inspect the physical condition of the stock to identify any damaged or obsolete items.
3. Review the company's sales records to identify any slow-moving items.
4. Compare the company's inventory levels to its sales forecasts to identify any excess stock.
(iii) To determine the net realisable value of the stock identified in part (c) (ii), I would carry out the following audit work:
1. Review the company's sales records to determine the estimated selling price of the stock.
2. Review the company's production records to determine the estimated costs of completion.
3. Review the company's marketing records to determine the estimated costs necessary to make the sale.
4. Compare the estimated selling price to the estimated costs of completion and the estimated costs necessary to make the sale to determine the net realisable value of the stock.
5. Compare the net realizable value to the cost of the stock to determine if an adjustment is necessary.
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1)Please explain and give a real-life example of;matrix, projectized, functional structures also explain theadvantages and disadvantages of these structures.
Matrix, Projectized and Functional Structures are three common organizational structures used by businesses.
Matrix structure: In this structure, employees have dual reporting relationships. This allows for the creation of teams with a project focus and cross-functional collaboration. A real-life example of a matrix structure is when a company has a marketing department but also creates temporary teams for specific projects, such as a new product launch.
Advantages: Allows for specialized expertise, collaboration and flexibility.
Disadvantages: Can be more complex to manage and can lead to confusion about authority.
Projectized structure: In this structure, employees are organized around specific projects. This enables businesses to quickly respond to customer needs and make decisions quickly. A real-life example of a projectized structure is when a company creates a separate team with specialized skills to develop a new product or service.
Advantages: Allows for clear goals and objectives, efficient decision-making, and improved accountability.
Disadvantages: Can limit creativity and freedom to innovate.
Functional structure: In this structure, employees are grouped by functions or departments. This allows for specialization and efficiency by keeping people with the same skills in one group. A real-life example of a functional structure is when a company has departments like engineering, sales, marketing, and customer service.
Advantages: Provides clear lines of authority, efficient decision-making, and specialization.
Disadvantages: Can limit collaboration and the ability to respond quickly to customer needs.
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Setup and notation: As a twenty years old high school graduate, Delkash wants plan for her college studies, her lifetime consumption profile, and savings for her retirement. She is endowed with family financial support wo. We model her decision-making in a three periods setup. The first period represents college-going ages and includes t1 = 5 years. The second period represents working ages and includes t2 = 30 years. And the third period represents her retirement ages and includes t3 15 years. If she decides to go to college she earns no income in period one and needs to pay total tuition 11 * T for college; in sum, she earns t2 + (y + A) in terms of labor income in period two; and she earns nothing in the third period. If she does not pursue college studies she earns in sum t1 * y of labor income in period one; in sum 12 * y of labor income in period two; and again nothing in period three. De note the total consumption during period one by c1, total net borrowing during period one by b1, total consumption during period two by c2, total net saving during period two by s2, and total consumption during period three by c3. The net interest rate for borrowing/saving from period one to two is r1 and the net interest rate for borrowing/saving from period two to three is r2. We assume Delkash "prefers more to less". Part A. Write down the budget constraint for periods one, two, and three. Argue if budget constraints hold with equality. Part B. Specify the optimal choice for investment in college studies. Under what condition she goes/does not go to college? Does wo matte? Does r2 matter? Does B1 and B2 matter? More assumptions and notation: Now assume the marginal rate of substitution between total consumption in periods one and two is MRS1,2 = c2/c1 1/B1 * 11/12 and between periods two and three is MRS2,3 = c3/c2 + 1/B2 t2/13, where the factors t1/12 and 12/13 are called to scaled total consumption to per-year values and 31 s 1 and 52 s 1 are subjective time discount factors. Part C. Argue that the optimal consumption profile does not permit c1 = 0, C2 = 0 or c3 = 0. Moreover, prove that the optimal consumption path satisfies MRS1.2 = 1 + r1 MRS2,3 = 1 + r2 Part D. Analytically solve for the optimal net borrowing band net savings s in period one and two, and the optimal consumption in periods one, two and three, i.e., c1, c2 and c3. Under either scenarios of going or not going to college as the optimal choice, what happens to b and s if the initial endowment wo increases, and what happens to c1 and c2 if r2 increases? What happens to c1 If r1 increases? A numerical example: Suppose B1 = 4. B2 = 25, 11 = 1.5,r2 = 3, y = $35, 000, A = $25,000 and T = $15, 000. Set wo = 0. Part E. Show that Delkash chooses to go to college as a rational choice. Evaluate c1, c2 and c3, and b and s. Part F. Suppose because of financing frictions the interest rate on borrowing in period one goes up to rB,1 = 11 + y = 1.5 + y for some positive u. But the rate on savings remains the same rS,1 = 11 = 1.5. Argue that for p = 0.1 it is still the optimal choice for Delkash to go to college. Part G. Redo part E with MRS 1,2 = (c2/c1 ) 2 + 1/B1 * 11/12 and MRS2,3 = (c3/c2y^2 + 1/82 * 12/13. Assume p = 0 but keep all other parameter values unchanged.
The budget constraints hold with equality because Delkash is assumed to "prefer more to less," meaning she will consume all of her available resources in each period.
The answers for the parts as follows:
Part A: The budget constraint for period one is c1 + b1 = wo. The budget constraint for period two is c2 + s2 = t2 + (y + A) + b1*(1 + r1). The budget constraint for period three is c3 = s2*(1 + r2).
Part B: The optimal choice for investment in college studies depends on the expected benefits of attending college compared to the costs. Delkash will go to college if the expected increase in income in period two (A) is greater than the cost of tuition (11*T) plus the opportunity cost of not earning income in period one (t1*y).
The initial endowment wo matters because it affects Delkash's budget constraint in period one and may influence her decision to go to college. The interest rates r1 and r2 matter because they affect the cost of borrowing and the return on savings, which may also influence Delkash's decision.
The net borrowing b1 and net savings s2 also matter because they affect Delkash's budget constraints in periods two and three.
Part C: The optimal consumption profile does not permit c1 = 0, c2 = 0, or c3 = 0 because Delkash is assumed to "prefer more to less" and will consume all of her available resources in each period.
The optimal consumption path satisfies MRS1,2 = 1 + r1 and MRS2,3 = 1 + r2 because at the optimal consumption levels, the marginal rate of substitution between periods should equal the net interest rate.
Part D: The optimal net borrowing b1 and net savings s2 can be found by substituting the budget constraints into the equations for MRS1,2 and MRS2,3 and solving for b1 and s2. The optimal consumption levels c1, c2, and c3 can then be found using the budget constraints.
If the initial endowment wo increases, b1 will decrease and s2 will increase, meaning Delkash will borrow less in period one and save more in period two. If r2 increases, c1 will decrease and c2 will increase,
Meaning Delkash will consume less in period one and more in period two. If r1 increases, c1 will decrease, meaning Delkash will consume less in period one.
Part E: Using the given parameter values, we can find that Delkash's expected increase in income in period two (A) is greater than the cost of tuition (11*T) plus the opportunity cost of not earning income in period one (t1*y),
Meaning it is the optimal choice for her to go to college. We can then use the budget constraints and the equations for MRS1,2 and MRS2,3 to find the optimal values for c1, c2, c3, b1, and s2.
Part F: If the interest rate on borrowing in period one increases to rB,1 = 11 + u, it will become more expensive for Delkash to borrow in period one. However, if u = 0.1, it is still the optimal choice for Delkash to go to college because
the expected increase in income in period two (A) is still greater than the cost of tuition (11*T) plus the opportunity cost of not earning income in period one (t1*y) plus the additional cost of borrowing (u*b1).
Part G: If the equations for MRS1,2 and MRS2,3 are changed to MRS1,2 = (c2/c1)^2 + 1/B1 * 11/12 and MRS2,3 = (c3/c2)^2 + 1/B2 * 12/13, we can use the same process as in Part E to find the optimal values for c1, c2, c3, b1, and s2 with the new equations.
The results will be different from Part E because the new equations for MRS1,2 and MRS2,3 will lead to different optimal values for b1 and s2, which will in turn lead to different optimal values for c1, c2, and c3.
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