The sensitivity of the operating cash flow to a $1 change in the per unit sales price is $12,455.66, which is closest to the option $12,455.
To calculate the sensitivity of the operating cash flow to a $1 change in the per unit sales price, we need to determine the change in operating cash flow resulting from the change in sales price.
Given:
Project duration: 9 years
Annual sales: 9,500 units
Original price per unit: $82
Variable cost per unit: $53
Equipment cost: $365,000
Depreciation: Straight-line basis over 9 years
Fixed costs: $220,000 per year
Tax rate: 21%
First, let's calculate the original operating cash flow:
Revenue per year = Annual sales * Price per unit
Revenue per year = 9,500 * $82 = $779,000
Variable costs per year = Annual sales * Variable cost per unit
Variable costs per year = 9,500 * $53 = $503,500
Operating income before depreciation and taxes = Revenue per year - Variable costs per year - Fixed costs per year
Operating income before depreciation and taxes = $779,000 - $503,500 - $220,000 = $55,500
Depreciation expense per year = Equipment cost / Project duration
Depreciation expense per year = $365,000 / 9 = $40,555.56
Taxable income = Operating income before depreciation and taxes - Depreciation expense per year
Taxable income = $55,500 - $40,555.56 = $14,944.44
Taxes = Taxable income * Tax rate
Taxes = $14,944.44 * 0.21 = $3,138.67
Operating cash flow = Operating income before depreciation and taxes - Taxes + Depreciation expense per year
Operating cash flow = $55,500 - $3,138.67 + $40,555.56 = $93,917.89
Now, let's calculate the new operating cash flow with a $1 decrease in the per unit sales price:
New revenue per year = Annual sales * (Price per unit - $1)
New revenue per year = 9,500 * ($82 - $1) = $764,500
New operating income before depreciation and taxes = New revenue per year - Variable costs per year - Fixed costs per year
New operating income before depreciation and taxes = $764,500 - $503,500 - $220,000 = $41,000
New taxable income = New operating income before depreciation and taxes - Depreciation expense per year
New taxable income = $41,000 - $40,555.56 = $444.44
New taxes = New taxable income * Tax rate
New taxes = $444.44 * 0.21 = $93.33
New operating cash flow = New operating income before depreciation and taxes - New taxes + Depreciation expense per year
New operating cash flow = $41,000 - $93.33 + $40,555.56 = $81,462.23
Sensitivity of operating cash flow = Original operating cash flow - New operating cash flow
Sensitivity of operating cash flow = $93,917.89 - $81,462.23 = $12,455.66
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If MPC =3/4, actual GDP = $10,000 and potential GDP = $10,600, there is a __________ (recessionary / inflationary) gap of $_____ and a _________ (decrease / increase) in government spending of $______ would eliminate the gap.
If MPC (Marginal Propensity to Consume) is 3/4, actual GDP is $10,000, and potential GDP is $10,600, there is a recessionary gap of $600 and an increase in government spending of $800 would eliminate the gap.
To determine the recessionary or inflationary gap, we compare actual GDP with potential GDP. In this case, the potential GDP is $10,600, which represents the level of output the economy can achieve without generating inflationary pressures. The actual GDP is $10,000, indicating that the economy is currently producing below its potential.
To calculate the size of the recessionary gap, we subtract the actual GDP from the potential GDP:
Recessionary gap = Potential GDP - Actual GDP
Recessionary gap = $10,600 - $10,000
Recessionary gap = $600
Therefore, there is a recessionary gap of $600, indicating that the economy is operating below its full potential.
To eliminate the recessionary gap, the government can use expansionary fiscal policy, specifically by increasing government spending. The increase in government spending would stimulate economic activity and contribute to closing the output gap.
The amount of government spending needed to close the gap can be calculated by using the spending multiplier, which is the inverse of the marginal propensity to consume (MPC). In this case, the MPC is 3/4, so the spending multiplier is 1 / (1 - MPC) = 1 / (1 - 3/4) = 1 / (1/4) = 4.
To calculate the increase in government spending required to close the gap, we multiply the size of the gap by the spending multiplier:
Increase in government spending = Recessionary gap * Spending multiplier
Increase in government spending = $600 * 4
Increase in government spending = $2,400
However, the question does not provide an option for an increase in government spending of $2,400. Therefore, without additional information or alternative options, we cannot determine the exact amount of government spending needed to eliminate the gap.
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A bond: a. Is a liability for the bond issuer. b. Must be held until its maturity date. c. Is always worth its face value. d. None of the above.
A bond is not a liability for the issuer, can be sold before maturity, and may not always be worth its face value. So the Answer is d. None of the above.
* A bond is a debt instrument that represents a loan made by an investor to a borrower (issuer). It is not a liability for the issuer, but rather a source of financing.
* While a bond can be held until its maturity date, it is not a requirement. Bonds can be bought and sold in the secondary market before maturity.
* A bond's worth can fluctuate based on various factors such as changes in interest rates, credit ratings, and market conditions. Therefore, it may not always be worth its face value. the correct option is D.
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Kiss the Sky Enterprises has bonds on the market making semiannual payments, with 24 years to maturity, and selling for $1,013. At this price, the bonds yield 8.1 percent. What must the coupon rate be on the bonds? Enter the answer with 4 decimals (e.g. 0.0123)
The coupon rate on the bonds must be 8.08% to satisfy the given conditions. The coupon rate is the interest rate paid on a bond by its issuer to the bondholders. A bond's coupon rate is determined based on the issuer's creditworthiness, prevailing interest rates, and other factors.
A bond's coupon rate is the interest rate paid on a bond by its issuer to the bondholders. A bond's coupon rate is determined based on the issuer's creditworthiness, prevailing interest rates, and other factors. For a bond to sell at par, its coupon rate must be equal to the required rate of return demanded by investors.
In this case, the bonds are selling for more than par, indicating that investors are willing to accept a lower yield. The bond's present value can be calculated using the formula: PV = (C/r)[1 - 1/(1 + r)^n] + FV/(1 + r)^n Where PV is the present value, C is the semiannual coupon payment, r is the semiannual discount rate, n is the number of semiannual periods, and FV is the face value of the bond.
Substituting the given values: PV = 1013C = ?r = 0.0405 (8.1% / 2)FV = 1000n = 24 x 2 = 48Using a financial calculator or spreadsheet software, the coupon rate on the bonds is 8.08%.Thus, the coupon rate on the bonds must be 8.08% to satisfy the given conditions.
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You want to save up enough money to purchase a new computer, which costs $4,500. You currently have $4,000 in your bank account. If you can earn 8% per year by investing this money, how long will it take before you have enough money in your bank account to buy the new computer? years (keep at least two decimal places) ABC common stock is expected to have extraordinary growth in earnings and dividends of 22% per year for 2 years, after which the growth rate will settle into a constant 5%. If the discount rate is 16% and the most recent dividend was $1, what should be the approximate current share price (in $ dollars)? $_
It will take approximately 2.17 years to save enough money to buy a new computer by earning 8% interest per year. The approximate current share price for ABC common stock would be around $10.00.
To calculate the time needed to save enough money, we can use the compound interest formula. Given that the initial amount is $4,000, the target amount is $4,500, and the interest rate is 8%, we can determine the time required. Using the formula A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the interest rate, n is the number of times the interest is compounded per year, and t is the time in years, we rearrange the formula to solve for t.
Plugging in the values, we have 4,500 = 4,000(1 + 0.08/1)^(1*t). Solving for t gives us approximately 2.17 years. Therefore, it will take around 2.17 years to accumulate enough money to purchase the new computer.
Regarding the second part of your question, to calculate the approximate current share price, we can use the dividend discount model. The formula is P = D/(r - g), where P is the share price, D is the most recent dividend, r is the discount rate, and g is the growth rate.
Plugging in the values, we have P = 1/(0.16 - 0.05), which simplifies to P ≈ $10.00. Therefore, the approximate current share price for ABC common stock would be around $10.00.
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Based on arguments made by Friedman and Fama, which of the following requirements must be fulfilled for noise traders to affect markets in equilibrium? Select all that apply. A. Noise traders must be able to survive economically for a significant period of time B. Technical trading must be profitable at least some of the time C. Noise trader behavior must be systematic D. All traders must be risk averse
According to arguments made by Friedman and Fama, the following requirements must be fulfilled for noise trader to affect markets in equilibrium:
B) Technical trading must be profitable at least some of the time and
C) Noise trader behavior must be systematic.
Friedman and Fama, two prominent economists, have discussed the impact of noise traders on market equilibrium. Noise trader refer to individuals who make trades based on non-fundamental factors, such as emotions or incomplete information. According to their arguments, two requirements must be met for noise traders to influence markets in equilibrium.
Firstly, technical trading, which involves using historical price patterns or other technical indicators to make investment decisions, must be profitable at least some of the time. If noise traders consistently generate profits through technical trading strategies, it can disrupt market efficiency and influence prices.
Secondly, noise trader behavior must exhibit systematic patterns. This means that noise traders' actions and decisions should not be random or unpredictable. If there are identifiable patterns in the behavior of noise traders, it can lead to price distortions and deviations from fundamental values.
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What are the two money flows in the 2 sector circular flow model?
The two money flows in the 2-sector circular flow model are:
1) Households to Businesses 2) Businesses to Households .
Households to Businesses: This flow represents the expenditure by households on goods and services produced by businesses. It is the primary source of revenue for businesses and includes payments made by households for consumption purposes, such as buying groceries, clothing, and paying for services like healthcare and education.
Businesses to Households: This flow represents the income earned by households from businesses. It includes wages, salaries, and other forms of compensation paid by businesses to individuals for their labor and services. This income allows households to meet their consumption needs and save for the future.
In the 2-sector circular flow model, the total flow of money from households to businesses equals the total flow of money from businesses to households. This is based on the assumption that all the income earned by households is spent on goods and services produced by businesses.
For example, let's assume that the total income earned by households in an economy is $10,000. If households spend all of this income on goods and services produced by businesses, then the total expenditure by households on businesses would also be $10,000. Therefore, the flow of money from households to businesses is $10,000.
Similarly, if businesses pay out all their revenue as wages, salaries, and other forms of compensation to households, then the total income earned by households from businesses would also be $10,000. Therefore, the flow of money from businesses to households is $10,000.
In the 2-sector circular flow model, the two money flows, namely from households to businesses and from businesses to households, are interdependent. Households provide revenue to businesses through their expenditure on goods and services, while businesses provide income to households through wages and salaries.
This continuous flow of money between households and businesses forms the basis of economic activity in the model. It highlights the importance of consumer spending as a driving force for business revenue and the role of businesses in providing income and employment opportunities to households.
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You run a nail salon. Fixed monthly cost is $5,302.00 for rent and utilities, $6,317.00 is spent in salaries and $1,255.00 in insurance. Also every customer requires approximately $5.00 in supplies. You charge $103.00 on average for each service.
You are considering moving the salon to an upscale neighborhood where the rent and utilities will increase to $10,192.00, salaries to $6,907.00 and insurance to $2,114.00 per month. Cost of supplies will increase to $7.00 per service. However you can now charge $166.00 per bervice. What is the PROFIT or Loss at the crossover point? If a loss include the -.
The loss at the crossover point is -$5,720.00.
To calculate the profit or loss at the crossover point, we need to compare the total revenue with the total costs at the current and new locations.
At the current location:
Total monthly cost: $5,302.00 (rent and utilities) + $6,317.00 (salaries) + $1,255.00 (insurance) = $12,874.00
Cost of supplies per customer: $5.00
Average revenue per service: $103.00
Now, let's calculate the number of customers needed to cover the costs:
Break-even point = Total monthly cost / (Revenue per service - Cost of supplies per customer)
Break-even point = $12,874.00 / ($103.00 - $5.00) = 130.74
Since we can't have a fraction of a customer we need at least 131 customers to break even at the current location.
At the new location:
Total monthly cost: $10,192.00 (rent and utilities) + $6,907.00 (salaries) + $2,114.00 (insurance) = $19,213.00
Cost of supplies per customer: $7.00
Average revenue per service: $166.00
Break-even point = $19,213.00 / ($166.00 - $7.00) = 122.47
Again, we can't have a fraction of a customer, so we need at least 123 customers to break even at the new location.
Since the number of customers required to break even is lower at the new location, it implies that the profit or loss at the crossover point is negative (a loss).
To calculate the profit or loss, we need to find the difference between the total revenue and the total cost at the crossover point.
At the crossover point:
Total revenue at the current location: 131 customers * $103.00 per service = $13,493.00
Total cost at the new location: $19,213.00
Loss = Total revenue at the current location - Total cost at the new location
Loss = $13,493.00 - $19,213.00 = -$5,720.00
Therefore, the loss at the crossover point is -$5,720.00.
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The Expected Constant-Growth Rate Of Dividends........% for a stock currently priced at $76, The expected constant-growth rate of dividends is that just paid a dividend of $1, and has a required return of 15%? Jefferson's recently paid an annual dividend of $3 per share. The dividend is expected to decrease by 2% each year. How much should you pay for this stock today if your required return is 11% (in $ dollars)? $_
1. The Expected Constant-Growth Rate Of Dividends is 19.87% for a stock currently priced at $76, The expected constant-growth rate of dividends is that just paid a dividend of $1, and has a required return of 15%.
2. Jefferson's recently paid an annual dividend of $3 per share. The dividend is expected to decrease by 2% each year. How much should you pay for this stock today if your required return is 11% (in $ dollars)? $23.08.
1. The Expected Constant-Growth Rate Of Dividends is 19.87% for a stock currently priced at $76, The expected constant-growth rate of dividends is that just paid a dividend of $1, and has a required return of 15%.
The expected constant-growth rate of dividends for a stock currently priced at $76 with a required return of 15% is 19.87%.
To calculate the expected constant-growth rate of dividends (g), we will use the Gordon growth model. The Gordon growth model is a widely used method for valuing the stock of a company that pays dividends and has a constant growth rate.
Here's the formula for the Gordon growth model:
P0 = D1 / (k - g)
Where:
P0 = current stock price
D1 = next year's expected dividend
k = required rate of return
g = expected constant-growth rate of dividends
Given: P0 = $76D1 = $1k = 15%
Substituting the values into the formula, we get:
76 = 1 / (0.15 - g)
76(0.15 - g)
g = 1-11.4g
g = 1 - 76(0.15)
g = 19.87%
Therefore, the expected constant-growth rate of dividends for a stock currently priced at $76 with a required return of 15% is 19.87%.
2. Jefferson's recently paid an annual dividend of $3 per share. The dividend is expected to decrease by 2% each year. How much should you pay for this stock today if your required return is 11% (in $ dollars)? $23.08.
To calculate the price of a stock, we will use the constant growth model.
The formula for the constant growth model is as follows:
P = D / (k - g)
Where:
P = price of stock
D = expected dividend one year from now
k = required rate of return
g = expected constant-growth rate of dividends
Given:
D = $3k = 11%g = -2%
Substituting the values into the formula, we get:
P = 3 / (0.11 - (-0.02))
P = 3 / 0.13P
P = 23.08
Therefore, the amount you should pay for this stock today if your required return is 11% is $23.08.
In summary, we use the Gordon growth model to calculate the expected constant-growth rate of dividends. The formula for the Gordon growth model is P0 = D1 / (k - g), where P0 is the current stock price, D1 is the next year's expected dividend, k is the required rate of return, and g is the expected constant-growth rate of dividends.
On the other hand, we use the constant growth model to calculate the price of a stock. The formula for the constant growth model is P = D / (k - g), where P is the price of a stock, D is the expected dividend one year from now, k is the required rate of return, and g is the expected constant-growth rate of dividends.
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A Highway Bypass Will Completely Circle The City. (A) Name At Least Three Benefits And Three Costs Associated With The Bypass. (B) What Stakeholder Viewpoints Will Need To Be Considered? (C) Discusss Potential Data Sources And Methods For Estimating Each Of The Benefits And Costs.
(A) Benefits: Traffic congestion reduction, improved safety, and economic development; (B) Stakeholder viewpoints: Local residents, business owners, environmental groups, etc. (C) Data sources and methods: Traffic data, accident records, economic models, etc.
(A) Benefits of the Highway Bypass:
1. Traffic congestion reduction: The bypass can alleviate traffic congestion within the city by diverting through-traffic around it, improving overall traffic flow and reducing travel times.
2. Improved safety: By redirecting traffic away from the city center, the bypass can reduce the number of vehicles and pedestrians in high-density areas, potentially lowering the risk of accidents and improving safety for both motorists and pedestrians.
3. Economic development: The bypass can stimulate economic growth by improving access to the city for businesses and industries. It can attract new investments, facilitate freight movement, and enhance transportation connections, potentially leading to job creation and increased commerce.
Costs of the Highway Bypass:
1. Environmental impact: The construction of the bypass may require land acquisition, potentially resulting in the displacement of wildlife habitats and disruption to ecosystems. Additionally, increased traffic volume on the bypass could contribute to air and noise pollution, impacting the environment and nearby communities.
2. Disruption to local communities: The bypass may pass through or near existing residential areas, resulting in noise pollution, visual intrusion, and potential reduction in property values. It could also disrupt existing road networks, affecting access to local businesses and services.
3. Cost and funding: The construction and maintenance of the bypass can be a significant financial burden. Costs include land acquisition, engineering, construction, ongoing maintenance, and potential upgrades. Funding sources need to be identified, and there could be competing demands for those resources from other infrastructure projects.
(B) Stakeholder viewpoints to consider:
1. Local residents: Consider the perspectives of individuals and communities directly affected by the bypass, including those living near the route or potentially experiencing changes in traffic patterns, noise, and visual impact.
2. Business owners: Understand the opinions of local businesses, as the bypass may impact their accessibility, customer traffic, and economic viability.
3. Environmental groups: Take into account the concerns and priorities of environmental organizations focused on protecting natural habitats, wildlife, and reducing pollution.
4. Transportation authorities: Consider the viewpoint of transportation agencies responsible for managing and improving the road network, ensuring efficient traffic flow, and meeting regional transportation goals.
5. Government officials: Engage with elected officials and policymakers who will make decisions regarding the bypass, taking into account broader city planning, economic development, and community well-being.
6. Advocacy groups and public opinion: Consider the perspectives of organizations and individuals advocating for specific interests, such as sustainable transportation, social equity, or alternative modes of transportation.
(C) Potential data sources and methods for estimating benefits and costs:
1. Traffic flow and congestion: Analyze historical traffic data and conduct traffic studies to estimate the potential reduction in congestion, travel times, and vehicle operating costs. Traffic count data, travel surveys, and traffic simulation models can provide insights.
2. Safety analysis: Examine historical accident data to establish baseline safety conditions and assess the potential impact of the bypass on accident rates. Consider factors such as speed limits, road design, and access points. Conduct safety audits and modeling to estimate the expected safety improvements.
3. Economic impact assessment: Utilize economic models, business surveys, and data on current employment, investment, and business activity to estimate the potential economic benefits in terms of job creation, increased tax revenues, and business development.
4. Environmental impact assessment: Conduct environmental studies to assess the potential impact on air quality, noise levels, and ecological systems. Measure current pollution levels, model emissions from traffic, and analyze the potential displacement of wildlife habitats.
5. Community surveys and interviews: Engage with local residents, business owners, and affected communities through surveys, focus groups, and interviews to understand their perspectives on the potential benefits and costs of the bypass.
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Increasing to a $15 minimum wage in Ontario Canada Recall from class and our discussion of supply and demand (see the notes on Schoology), that the supply and demand of labor should be kept in balance for a healthy economy: the demand for labor coming from companies and the supply coming from the employable people seeking work in society. Recently, Ontario Premier Kathleen Wynne announced that her government would see to a $15 minimum wage by 2019, up from its current $11.40. Research this plan and write Please use Schoology for this same assignment and you will submit it there by saving your work as a Word file and sending it in as an attachment when you reply. Put your name and student number on your work. Answer the questions below by researching online: 1. List what the plan is, some details and the timeline 2. Do you agree with the plan for this wage increase? Why or why not? 3. What good things can we expect to come out of this? 4. What challenges for our economy can we expect to come out of this? 5. Explain who will get the most and the least benefit when this plan goes into effect 6. If you could set the minimum wage, what things would you consider for how high or low it should be? 7. a. Is this an example of price control? Is it a price ceiling or price floor? b. What does classical economics suggest will happen based on you answer in (a)?
YourWork should be at least 2 to 3 pages double spaced, font 12, and all sources of your material you used for information must be provided at the end
any information you take off the internet or from books, you must provide the source!
The plan to grow the minimum salary to $15 in Ontario, Canada, through 2019 has each ability advantages and challenges. While its objectives are to cope with income inequality and offer better wages for low-income workers, the impact on the economic system may include activity losses and accelerated charges for organizations.
I can provide you with a brief response primarily based on widespread knowledge.
The plan is to increase the minimum salary in Ontario, Canada to $15 by means of 2019, up from the cutting-edge charge of $11.40. The timeline shows that the growth could be implemented within a specific length.Whether one concurs with the plan for this salary growth relies upon on their perspective. Some may also help it as a method to enhance the standard of living for low-salary employees, lessen income inequality, and stimulate customer spending. Others may additionally oppose it, citing potentially terrible impacts on companies, which include job losses or decreased work hours.Potential blessings of the salary increase include elevated profits for low-wage workers, doubtlessly lowering poverty, and improving their quality of life. It may additionally raise consumer shopping electricity, leading to multiplied monetary hobby and demand for goods and services.Challenges for the economy should stand up from improved hard work charges for corporations, which may additionally bring about higher prices for items and offerings. This should potentially affect the competitiveness of businesses, especially small companies, and result in task losses or reduced hiring.When the plan goes into effect, low-wage workers will in all likelihood gain the maximum as their wages grow, doubtlessly improving their economic situation. Conversely, groups, particularly those operating on thin profit margins, may face the maximum enormous challenges in adjusting to the higher minimum salary.Setting the minimal salary entails considering different factors together with the price of dwelling, inflation, productiveness stages, and the impact on corporations and employment. It is vital to strike a balance that ensures truthful reimbursement for workers whilst not excessively burdening corporations or hindering process creation.A. The increase in the minimum wage may be taken into consideration as an instance of rate control, especially a fee ground because it sets a minimum price for labor.B. Based on classical economics, an increase in the minimum wage may also result in unintended outcomes along with a reduced call for exertions, potential job losses, or groups adjusting by way of reducing charges or growing charges.Please word that for a complete and correct evaluation of the particular Ontario minimum salary increase plan, it's far vital to seek advice from dependable and up-to-date assets or seek advice from educational studies on the topic.
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5. Explain how this statement can be true: "A long call position offers potentially ited gains if the underlying asset's price rises but a fixed, maximum loss if the bo ing asset's price drops to zero
The statement is true because a long call position gives the holder the right, but not the obligation, to buy the underlying asset at a predetermined price (strike price) within a specific time period (expiration date).
When the price of the underlying asset rises, the long call position allows the holder to benefit from the price increase. The potential gains are unlimited because the underlying asset's price can continue to rise, and the holder can exercise the call option to buy the asset at the lower strike price and then sell it at the higher market price.
On the other hand, the maximum loss for a long call position is limited to the premium paid for the option. If the price of the underlying asset drops to zero or remains below the strike price at expiration, the holder can simply choose not to exercise the option, allowing it to expire worthless. In this case, the loss is limited to the premium paid for the call option.
Therefore, a long call position offers potentially unlimited gains if the underlying asset's price rises, but a fixed, maximum loss if the underlying asset's price drops to zero.
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You're a junior investment banker, chatting to a client of yours, the CEO of a major import/export business. She informs you that she was recently approached by a major competitor of her company, asking her if she'd be interested in buying the company for a price of $30bn. The CEO proceeds to ask you if that's a fair price. Please assume: The competitor company has a 20% tax rate, a 20% EBIT Margin, and a discount rate of 12%. Please answer: What do you tell the CEO - is the price fair? What would the competitor's financial performance have to be in order to justify the price? Please elaborate on the way you derived your answer (show/explain calculations) and explain which numbers you took into consideration. Note: Please make necessary (simplifying) assumptions yourself and report all financials that can be calculated based on the given information.
The competitor's financial performance would need to be higher in order to justify that price as the price of $30bn does not appear to be fair.
Based on the given information, let's analyze whether the price of $30bn is fair for the CEO's company to pay for the competitor.
To determine the fair price, we can use the discounted cash flow (DCF) analysis. This involves calculating the present value of the competitor's future cash flows.
First, we need to calculate the competitor's EBIT (earnings before interest and taxes). Since the competitor's EBIT margin is 20% and the tax rate is 20%, we can calculate the EBIT as follows:
EBIT = EBIT Margin * (1 - Tax Rate) = 20% * (1 - 20%) = 16%.
Next, we need to calculate the competitor's free cash flow (FCF). FCF is the cash generated by the business that is available to the investors. We can calculate it using the formula:
FCF = EBIT * (1 - Tax Rate) = 16% * (1 - 20%) = 12.8%.
To determine the present value of these cash flows, we need to discount them using the competitor's discount rate of 12%. The formula for calculating present value is:
Present Value = FCF / (1 + Discount Rate)^n,
where 'n' represents the number of years into the future.
Assuming a perpetual growth rate of 0%, we can use a simplified formula to calculate the present value:
Present Value = FCF / Discount Rate.
Using this formula, the present value of the competitor's cash flows is:
Present Value = 12.8% / 12% = 1.0667.
To justify the price of $30bn, the present value of the competitor's cash flows should equal or exceed that amount. Therefore, we need to calculate the expected cash flows the competitor would need to generate to justify the price.
Expected Cash Flows = Present Value * Discount Rate = 1.0667 * 12% = 0.1280.
To calculate the EBIT that would generate these cash flows, we can rearrange the formula:
EBIT = FCF / (1 - Tax Rate) = 0.1280 / (1 - 20%) = 0.1600.
Therefore, in order to justify the price of $30bn, the competitor would need to generate an EBIT of 16%.
Based on these calculations, the price of $30bn does not appear to be fair, as the competitor's financial performance would need to be higher in order to justify that price.
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In December 2018, General Electric (GE) had a book value of equity of $52.9 billion, 8.8 billion shares outstanding, and a market price of $8.01 per share. GE also had cash of $69.6 billion, and total debt of $112.1 billion. a. What was GE's market capitalization? What was GE's market-to-book ratio? b. What was GE's book debt-equity ratio? What was GE's market debt-equity ratio? c. What was GE's enterprise value? a. What was GE's market capitalization? GE's market capitalization was $ billion. (Round to one decimal place.) What was GE's market-to-book ratio? GE's market-to-book ratio was (Round to two decimal places.) b. What was GE's book debt-equity ratio? GE's book debt-equity ratio was (Round to two decimal places.)
A. GE's market capitalization was $70.5 billion with a market-to-book ratio of approximately 1.33. B. GE's book debt-equity ratio was approximately 2.11, while the market debt-equity ratio was approximately 1.59. C. GE's enterprise value was $113.0 billion.
a. To calculate GE's market capitalization, we multiply the market price per share by the number of shares outstanding:
Market capitalization = Market price per share × Number of shares outstanding
Market capitalization = $8.01 × 8.8 billion
Market capitalization = $70.488 billion
Therefore, GE's market capitalization was $70.5 billion.
To calculate GE's market-to-book ratio, we divide the market capitalization by the book value of equity:
Market-to-book ratio = Market capitalization / Book value of equity
Market-to-book ratio = $70.5 billion / $52.9 billion
Market-to-book ratio ≈ 1.33
Therefore, GE's market-to-book ratio was approximately 1.33.
b. To calculate GE's book debt-equity ratio, we divide the total debt by the book value of equity:
Book debt-equity ratio = Total debt / Book value of equity
Book debt-equity ratio = $112.1 billion / $52.9 billion
Book debt-equity ratio ≈ 2.11
Therefore, GE's book debt-equity ratio was approximately 2.11.
To calculate GE's market debt-equity ratio, we divide the total debt by the market capitalization:
Market debt-equity ratio = Total debt / Market capitalization
Market debt-equity ratio = $112.1 billion / $70.5 billion
Market debt-equity ratio ≈ 1.59
Therefore, GE's market debt-equity ratio was approximately 1.59.
c. To calculate GE's enterprise value, we sum the market capitalization, and total debt, and subtract the cash:
Enterprise value = Market capitalization + Total debt - Cash
Enterprise value = $70.5 billion + $112.1 billion - $69.6 billion
Enterprise value = $113.0 billion
Therefore, GE's enterprise value was $113.0 billion.
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____ are used for recovery from disasters that threaten on-site backups.
a. data archives
b. electronic vaulting sites
c. data backups
d. cloud storage sites
d. cloud storage sites. Cloud storage sites are used for recovery from disasters that threaten on-site backups.
storage involves storing data on remote servers that can be accessed over the internet. In the event of a disaster or disruption at the location where on-site backups are stored, cloud storage provides a secure and off-site location for data recovery. Cloud storage offers benefits such as data redundancy, scalability, and remote accessibility, making it a popular choice for disaster recovery solutions. By utilizing cloud storage sites, organizations can ensure that their data remains accessible and protected even in the face of unforeseen events or disasters.
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Only answer if you are an economist and can explain with your own words, need a lengthy answer. Economies of scale are important determinants of trade patterns because they form a separate basis for trade that is in addition to comparative advantage-based trade. Explain the meaning and importance of economies of scale for promoting trade and helping countries obtain a comparative advantage. Now, in the case of Bahrain, explain the opportunities and challenges facing the country in promoting trade via economies of scale.
Economies of scale are important for trade patterns as they provide an additional basis for trade beyond comparative advantage. For Bahrain, leveraging economies of scale presents opportunities to specialize in specific sectors, develop industry clusters, and invest in infrastructure.
Economies of scale refer to the cost advantages that a firm or a country can achieve by increasing its level of production. It means that as production increases, the average cost per unit of output decreases. This cost reduction occurs due to various factors such as spreading fixed costs over a larger production volume, efficient utilization of resources, specialization, and improved productivity.
Economies of scale play a crucial role in trade patterns because they provide an additional basis for trade alongside comparative advantage. Comparative advantage is based on a country's ability to produce a particular good or service at a lower opportunity cost compared to other countries. However, economies of scale allow countries to specialize in the production of specific goods or services in which they have a cost advantage, even if they do not have a comparative advantage initially.
The importance of economies of scale for promoting trade lies in their ability to enhance competitiveness and efficiency. By producing at a larger scale, countries can reduce their costs, leading to lower prices for consumers and improved competitiveness in international markets. This can increase export opportunities and attract foreign investment, ultimately promoting economic growth and development.
In the case of Bahrain, promoting trade through economies of scale presents both opportunities and challenges. Bahrain is a small island nation with limited resources and a relatively small domestic market. However, it can leverage economies of scale to overcome these limitations.
Opportunities:
1. Specialization: Bahrain can focus on specific industries or sectors where it can achieve economies of scale, such as financial services, logistics, or information technology. By specializing and becoming a regional hub in these areas, Bahrain can attract foreign investment and promote trade.
2. Cluster development: By fostering the growth of industry clusters, where related firms and industries locate in close proximity, Bahrain can benefit from knowledge spillovers, shared infrastructure, and collaborative networks. This can lead to economies of scale and improved competitiveness.
3. Infrastructure investment: Developing efficient infrastructure, such as transportation networks, logistics hubs, and digital connectivity, can enhance Bahrain's connectivity to global markets. This can facilitate trade and support economies of scale by reducing transaction costs and improving supply chain efficiency.
Challenges:
1. Market size: Bahrain's small domestic market may limit the scale of production and the potential economies of scale that can be achieved. To overcome this challenge, Bahrain can focus on exporting its goods and services to larger regional or global markets, taking advantage of trade agreements and economic integration initiatives.
2. Skills and human capital: Developing a skilled workforce and promoting continuous learning and innovation are essential for capturing economies of scale. Bahrain needs to invest in education and training programs to ensure a capable workforce that can support industries with high-value production and technology-intensive processes.
3. Global competition: Bahrain faces competition from neighboring countries and other global players in attracting investment and promoting trade. To remain competitive, Bahrain needs to continuously improve its business environment, streamline regulations, and offer competitive incentives to attract both domestic and foreign investors.
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Company x has monthly fixed costs of $100,000 and a unit variable cost of $50. how many units do they have to sell at $100 to break even?
Company X needs to atlest sell 2,000 units at fixed cost of $100 per unit to break even.
To calculate the break-even point, we need to determine the number of units the company needs to sell in order to cover its fixed costs.
Let's denote the number of units to be sold as 'x'. The total cost for the company can be expressed as:
Total Cost = Fixed Costs + (Variable Cost per Unit * Number of Units)
In this case, the fixed costs are $100,000, and the variable cost per unit is $50. The revenue earned from selling 'x' units at $100 per unit can be expressed as:
Revenue = Price per Unit * Number of Units
To break even, the total cost should equal the revenue:
Fixed Costs + (Variable Cost per Unit * Number of Units) = Price per Unit * Number of Units
$100,000 + ($50 * x) = $100 * x
Now, we can solve this equation to find the value of 'x':
$100,000 + $50x = $100x
$100x - $50x = $100,000
$50x = $100,000
x = $100,000 / $50
x = 2,000
Therefore, Company X needs to sell 2,000 units at $100 per unit to break even.
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39. Which one of the following statements on the causes of the energy efficiency gap is
correct?
a. The likelihood of buying an energy-efficient refrigerator is higher if a consumer
perceives a discount rate that is much higher than the market discount rate.
b. Bounded rationality implies that consumers make decisions by comparing benefits
and costs.
c. The principal/agent issue points out the possibility that a tenant is likely to use more
energy if the utilities are covered in the rent.
d. If energy markets are not competitive there will be an energy-efficient gap.
40. Which one of the following statements on the rebound effect is correct?
a. It is only due to an increase in income.
b. It is the reduction in energy savings due to the implicit energy price decrease that
occurs with an increase in energy efficiency.
c. It has no effect on energy use.
d. It increases savings in energy
41. Firms that benefit from economies of scale:
a. Performs more efficiently when output is small.
b. Would not be considered natural monopolies because MC = MR
c. Prefer to operate under marginal cost pricing.
d. Face declining marginal cost.
Explanations for the energy efficiency gap's reasons include the following: Consumer decision-making is based on benefit-cost comparisons, according to the theory of bounded rationality.
Because of our cognitive limitations, the knowledge that is available to us, and the passage of time, bounded rationality depicts how human decision-making deviates from perfect economic rationality. We frequently make decisions that are satisfactory rather than the 'optimal' decisions.
American political scientist Herbert A. Simon put out the idea of bounded rationality in his 1957 book "Models of Man." It claims that because of their limited knowledge and cognitive abilities, people make decisions.
As an illustration, people tend to take more risks when they are joyful and less risks when they are afraid. People tend to base decisions on emotion rather than information and reasoning, which might result in less than ideal choices.
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onsider the following returns for two investments, A and B, over the past four years:
Investment 1: 3% 11% –6% 11%
Investment 2: 8% 19% –10% 13% a-1.
a1. Calculate the mean for each investment. (Round your answers to 2 decimal places.)
Mean: Investment 1 percent
Investment 2 percent
a-2. Which investment provides the higher return?
Investment 1
Investment 2
b-1. Calculate the standard deviation for each investment. (Round your answers to 2 decimal places.)
Standard Deviation Investment 1 Investment 2 b-2. Which investment provides less risk?
Investment 1
Investment 2
c-1. Given a risk-free rate of 1.2%, calculate the Sharpe ratio for each investment. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Sharpe Ratio Investment 1 Investment 2
c-2. Which investment has performed better? Investment 1 Investment 2
a-1. The mean return for Investment 1 is 4.75% and for Investment 2 is 7.50%.
a-2. Investment 2 has a higher mean return compared to Investment 1.
b-1. The standard deviation for Investment 1 is approximately 3.72% and for Investment 2 is around 7.22%.
b-2. Investment 1 has lower risk compared to Investment 2 based on the standard deviation.
c-1. The Sharpe ratio for Investment 1 is approximately 1.01 and for Investment 2 is about 0.71.
c-2. Investment 1 outperforms Investment 2 in terms of risk-adjusted performance based on the Sharpe ratio.
To calculate the mean for each investment, we sum up the returns and divide by the number of periods:
a-1. Mean:
Investment 1: (3% + 11% - 6% + 11%) / 4 = 4.75%
Investment 2: (8% + 19% - 10% + 13%) / 4 = 7.50%
a-2. Investment 2 provides the higher return with a mean of 7.50%.
To calculate the standard deviation for each investment, we need to find the deviation of each return from the mean, square it, sum the squared deviations, divide by the number of periods, and take the square root:
b-1. Standard Deviation:
Investment 1:
Deviation from mean: (3% - 4.75%)² + (11% - 4.75%)² + (-6% - 4.75%)² + (11% - 4.75%)²
Sum of squared deviations: 55.25
Variance: 55.25 / 4 = 13.81
Standard deviation: √13.81 ≈ 3.72%
Investment 2:
Deviation from mean: (8% - 7.50%)² + (19% - 7.50%)² + (-10% - 7.50%)² + (13% - 7.50%)²
Sum of squared deviations: 208.50
Variance: 208.50 / 4 = 52.13
Standard deviation: √52.13 ≈ 7.22%
b-2. Investment 1 has less risk with a standard deviation of 3.72%.
To calculate the Sharpe ratio for each investment, we subtract the risk-free rate from the mean return and divide it by the standard deviation:
c-1. Sharpe Ratio:
Investment 1: (4.75% - 1.2%) / 3.72% ≈ 1.01
Investment 2: (7.50% - 1.2%) / 7.22% ≈ 0.71
c-2. Investment 1 has a higher Sharpe ratio, indicating better performance when considering the risk-free rate.
In summary, Investment 2 provides a higher return in terms of mean, but Investment 1 has less risk according to the standard deviation. However, when considering risk-adjusted performance using the Sharpe ratio, Investment 1 performs better than Investment 2.
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A business that is owned by a parent company located in a foreign country is referred to as a foreign:
a. franchisee.
b. host company.
c. subsidiary.
d. licensee.
The correct answer is c. subsidiary. A business that is owned by a parent company located in a foreign country is referred to as a foreign subsidiary.
A business that is owned by a parent company located in a foreign country is commonly known as a foreign subsidiary. In this arrangement, the parent company has control and ownership over the subsidiary, which operates as a separate entity in the foreign country. The subsidiary follows the directives and strategies set by the parent company while adapting to the local market and legal requirements. This structure allows the parent company to expand its operations internationally and establish a presence in foreign markets.
The subsidiary benefits from the parent company's resources, expertise, and support, while contributing to the parent company's overall growth and global reach. The relationship between the parent company and the foreign subsidiary is characterized by ownership and control, with the subsidiary serving as an extension of the parent company's business activities in the foreign market.
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What is an appropriate approach to testing for ‘ARCH effects’? (a) Run a regression, collect the residuals, regress the squared residuals on their lags and conduct a hypothesis test to check whether the coefficients of the lagged squared residuals are equal to zero (b) Run a regression, collect the fitted values, regress the fitted values on their squared lags and conduct a hypothesis test to check whether the coefficients of the lagged squared fitted values are equal to zero (c) Employ White’s test (d) All of the above.
The appropriate approach to testing for 'ARCH effects' is (d) All of the above, which includes running regressions, collecting residuals or fitted values, and conducting hypothesis tests or employing White's test.
All of the mentioned approaches are appropriate for testing for 'ARCH effects.' The ARCH (Autoregressive Conditional Heteroscedasticity) model is commonly used to identify the presence of conditional heteroscedasticity in a time series data. It is important to test for ARCH effects as they indicate the presence of volatility clustering, where periods of high volatility tend to be followed by periods of high volatility, and vice versa.
In the first approach, we run a regression and collect the residuals. Then, we regress the squared residuals on their lags and conduct a hypothesis test to check whether the coefficients of the lagged squared residuals are equal to zero. This approach examines the relationship between the squared residuals and their lagged values, which helps identify the presence of ARCH effects.
In the second approach, we run a regression and collect the fitted values. Then, we regress the fitted values on their squared lags and conduct a hypothesis test to check whether the coefficients of the lagged squared fitted values are equal to zero. This approach examines the relationship between the squared fitted values and their lagged values, providing insights into the presence of ARCH effects.
Lastly, employing White's test is another appropriate approach. White's test is a robust test for heteroscedasticity, including ARCH effects. It tests for the presence of ARCH effects by examining the residuals from a regression model.
By considering all of the mentioned approaches, we can thoroughly assess the presence of ARCH effects and ensure a comprehensive analysis of conditional heteroscedasticity in the data.
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If the price of lamb goes up by 20% and the demand goes down by 5%. The price elasticity of demand is
The negative sign indicates that the demand is elastic, meaning that the change in price has a relatively larger effect on the quantity demanded.
The price elasticity of demand can be calculated using the formula:
Price elasticity of demand = (% change in quantity demanded) / (% change in price)
In this case, the price of lamb has increased by 20% and the demand has decreased by 5%.
Therefore, the % change in quantity demanded is -5% and the % change in price is +20%.
Substituting these values into the formula, we get:
Price elasticity of demand = (-5%) / (+20%)
Simplifying, we find that the price elasticity of demand is -0.25.
The negative sign indicates that the demand is elastic, meaning that the change in price has a relatively larger effect on the quantity demanded.
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1.How will you cater to sponsors who are interested in using the event as a market research opportunity?
2.How will you engage employees of your sponsor who are going to be involved in the event, and in what capacity?
3.Which worthwhile causes would attract the involvement of sponsors to your event, and do you know why?
Sponsors interested in using the event as a market research opportunity can be catered to in several ways.
What are the ways?First, surveys and questionnaires can be given out to event attendees to gather valuable data on consumer preferences and behaviors.
Second, interactive booths or exhibits can be set up where attendees can participate in product demonstrations or provide feedback on new products or services.
Third, social media can be utilized to gather real-time feedback and engage with attendees during the event.
2. To engage employees of the sponsor who are involved in the event, it is important to provide them with meaningful roles and responsibilities.
This can include tasks such as managing registration, assisting with event setup and teardown, or leading informational sessions.
Providing clear communication and training opportunities for these employees can also help them feel more invested in the event and more prepared to interact with attendees.
3. Causes that would attract the involvement of sponsors to an event include those that align with their corporate social responsibility goals.
Examples may include supporting local charities, promoting environmental sustainability, or advocating for social justice.
By highlighting these causes and demonstrating how the event supports them, sponsors are more likely to feel invested in the event and willing to contribute financially or through other means.
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Compare the techniques for tracking progress in waterfall ( earned value) to tracking progress in agile. For use with Teams, discuss this comparison in terms of ease of use, usefulness and the ability to communicate within the team and with stakeholders. Would you consider using a burn-down tool in waterfall, or an EVM calculation in Agile? IF so, how would you do it?
Tracking progress in waterfall methodology involves using earned value management (EVM) techniques while tracking progress in agile methodology relies on tools like burn-down charts. Agile methods are often considered more flexible and collaborative.
Waterfall methodology traditionally relies on earned value management (EVM) techniques to track progress. EVM involves measuring project performance by comparing planned and actual progress in terms of schedule and cost. It provides metrics such as planned value (PV), earned value (EV), and actual cost (AC), which help assess project health and performance. While EVM can provide detailed insights into project progress and performance, it requires meticulous planning and documentation, making it more rigid and less adaptable to changes.
On the other hand, agile methodology emphasizes iterative and incremental development, focusing on delivering value in short cycles. Agile teams often use burn-down charts to track progress. These charts visually represent the work remaining versus time, allowing teams to monitor their velocity and adapt their plans accordingly. Burn-down charts provide a clear and transparent view of progress, making it easier for teams to communicate with each other and stakeholders.
While the techniques used in waterfall and agile differ, there may be situations where integrating elements of one methodology into the other can be beneficial. For example, in agile projects with fixed budgets and specific deliverables, incorporating EVM calculations can provide valuable insights into cost performance. Similarly, using burn-down charts in waterfall projects can enhance transparency and provide a visual representation of progress.
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Your paper submission should follow the below stated composition and formatting guidelines; and be composed unto a "Word Document." - Title page with a "Running head:" page number (top right), your name, course, date, and an appropriate title. - Use double space, Times New Roman, and 12pt font. - These APA additions are NOT a part of the word count range of 1500-1800 words for the paper. CASE STUDY Farmers Restaurant Sarah Lubbers and Chris Rusche, Grand Valley State University better way for her to order products. Kristin telis him how the ordering system works, shows him the ordering form, and relates the given information. Suppose you have been asked to work with Kristin to improve inventory ordering. Deliverables: 1. Describe the importance of inventory management as it relates to the Farmers Restaurant. 2. What ordering system would be best for this situation? Explain. Submit your paper to the Professor via the Assignment Manager link.
Importance of Inventory Management and ordering system
Inventory Management for Farmers Restaurant
Page number: 1
Sarah Lubbers and Chris Rusche
Grand Valley State University
Course: [Course Name]
Date: [Date]
Title: Inventory Management for Farmers Restaurant
Introduction:
Inventory management plays a crucial role in the smooth functioning of any restaurant, including Farmers Restaurant. Efficient inventory management ensures that the restaurant has the necessary ingredients and supplies to meet customer demand while minimizing waste and costs. In this case study, we will examine the importance of inventory management for Farmers Restaurant and propose the most suitable ordering system to improve their inventory management processes.
Importance of Inventory Management for Farmers Restaurant:
Farmers Restaurant, like any other restaurant, heavily relies on inventory management to ensure the availability of ingredients and supplies. Efficient inventory management brings several benefits to the restaurant:
1.1. Cost Control: Proper inventory management helps control costs by minimizing wastage and spoilage of ingredients. By accurately tracking inventory levels and usage patterns, Farmers Restaurant can avoid overstocking or understocking, leading to financial savings.
1.2. Customer Satisfaction: Inventory management directly impacts customer satisfaction. A well-managed inventory ensures that the restaurant can consistently fulfill customer orders without running out of key ingredients. This leads to a positive dining experience and helps maintain a loyal customer base.
1.3. Operational Efficiency: Effective inventory management streamlines restaurant operations. By optimizing inventory levels, Farmers Restaurant can minimize storage space requirements and reduce the time spent on inventory management tasks. This allows staff to focus on other critical aspects of running the restaurant.
1.4. Supplier Relationships: Maintaining optimal inventory levels and establishing a reliable ordering system fosters strong relationships with suppliers. Timely and accurate orders improve communication and trust, leading to better service and potential discounts from suppliers.
Best Ordering System for Farmers Restaurant:
After assessing the needs and requirements of Farmers Restaurant, the best ordering system to improve their inventory management would be an automated online ordering system. This system would involve the following features:
2.1. Real-Time Inventory Tracking: An online ordering system would integrate with Farmers Restaurant's inventory management software to provide real-time updates on stock levels. This ensures accurate and up-to-date information on ingredient availability.
2.2. Automated Order Generation: The online ordering system would automatically generate purchase orders based on preset inventory thresholds. When stock levels fall below the specified threshold, the system would generate an order for replenishment.
2.3. Supplier Integration: The ordering system should allow integration with Farmers Restaurant's preferred suppliers. This integration enables seamless communication between the restaurant and suppliers, ensuring timely deliveries and reducing the likelihood of errors.
2.4. Data Analytics and Reporting: The ordering system should provide comprehensive data analytics and reporting capabilities. This includes generating reports on order history, supplier performance, and inventory trends. These insights can help Farmers Restaurant make informed decisions regarding inventory management and identify areas for improvement.
By implementing an automated online ordering system, Farmers Restaurant can streamline their inventory management processes, reduce manual errors, and ensure a steady supply of ingredients while minimizing costs.
Conclusion:
Effective inventory management is crucial for the success of Farmers Restaurant. It helps control costs, improves customer satisfaction, enhances operational efficiency, and strengthens supplier relationships. By implementing an automated online ordering system, Farmers Restaurant can optimize their inventory management processes and reap the benefits of a streamlined and efficient system. This solution will contribute to the overall growth and success of the restaurant
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Question 15 Suppose a bank has assets of $400m. There are five items on its balance sheet: loans; reserves; deposits; capital and convertible debt. Its balance sheet has the following characteristics: Ratio of capital to assets = 6 per cent Total loss absorbing capacity (capital and convertible debt) - 11 per cent of assets Ratio of reserves to assets 20 per cent Suppose the bank experiences a loan default equivalent to 5 per cent of its total loans. Calculate the following amounts: The initial value of loans before the default $ The size of the loss $ million The value of capital after the loan default, before any further action is taken $ $ million million Suppose the regulator required the bank to use some convertible debt to restore the level of capital to an amount equal to 4 per cent of the original balance sheet. What would be the value of convertible debt after this action has been taken? million (Enter your answers in whole numbers only. Do not use decimal points, symbols or words.) 4 pts
The initial value of loans before the default is $252 million. The size of the loss is $12.6 million. The value of convertible debt after the action is $16 million.
To compute the underlying worth of credits before the default, we really want to utilize the proportion of advances to resources.
Considering that the proportion of cash-flow to resources is 6%, the proportion of stores to resources is 20%, and the complete misfortune engrossing limit is 11% of resources, we can verify that the proportion of advances to resources is 100 percent - (6% + 20% + 11%) = 63%.
Accordingly, the underlying worth of advances before the default is 63% of $400 million, which is $252 million.
Then, we really want to ascertain the size of the misfortune coming about because of the advance default. The default is identical to 5% of the complete advances, which adds up to 5% of $252 million, or $12.6 million.
After the advance default, the worth of capital would be decreased by the size of the misfortune. In this way, the worth of capital after the advance default, before any further move is made, would be $400 million (starting worth of resources) - $12.6 million (misfortune from credit default) = $387.4 million.
To reestablish the degree of funding to 4% of the first monetary record, the bank needs to build its capital. Since the underlying worth of resources is $400 million, 4% of that would be $16 million.
To accomplish this expansion in capital, the bank can utilize convertible obligation. The expansion in capital required is $16 million, so the worth of convertible obligation after this activity would likewise be $16 million.
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Why is important to understand the use of credit and the use of
cash when we acquired an asset?
When acquiring an asset, it is important to understand the use of credit and cash. Both options have advantages and disadvantages.
Using cash
Advantages:
Asset is paid for in full upfront.
No interest or payment plans to consider.
Can help establish or improve credit score.
Disadvantages:
Can be limiting, especially for expensive assets.
Can take a significant amount of time to save up.
Does not allow for any credit history to be established or improved.
Using credit
Advantages:
Allows for greater flexibility in terms of budgeting and payment plans.
Can help establish or improve credit score.
Disadvantages:
Can increase the overall cost of acquiring an asset.
May lead to significant debt if not managed properly.
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The proposal for this course should be no more than three
pages.
True or False
In general, the statement is true. A proposal for a course should typically be concise and to the point, focusing on the key information and objectives.
While there may be some flexibility in the exact length depending on the specific requirements or guidelines provided by the institution or organization, it is common for course proposals to be no more than three pages.
The limited length of a course proposal encourages the proposer to prioritize essential details and convey the necessary information effectively. This helps ensure that the proposal is clear, concise, and easy to evaluate by the intended audience, such as academic administrators, curriculum committees, or potential funding sources.
However, it's important to note that specific guidelines and requirements for course proposals may vary across different educational institutions or organizations. It is always advisable to refer to the specific guidelines or instructions provided for the course proposal to ensure compliance with any length requirements or formatting guidelines.
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Z=C+I+G C = 400 + 0.5Y_{D} YD=YT
T = 400
I = 200
G = 600
Answer the following questions, and include your working steps:
a) What is the marginal propensity to consumer? What is the marginal propensity to save? How would you interpret them? (4 Marks)
b) Write out the equation that indicates how demand (Z) is a function of income (Y) and the remaining autonomous expenditure. What will be the level of demand if Y = 0 ? What does this level of demand represent? Furthermore, given your equation, what will happen to the level of demand (Z) as Y increases by $1? What does this number represent? (6 Marks)
Marginal propensity to save is 0.5 b) The equation that indicates how demand (Z) is a function of income (Y) is Z = (400 + 0.5Y) + 200 + 600
To find the marginal propensity to consume (MPC), we need to look at the coefficient of the income (Y) term in the consumption function. In this case, the consumption function is C = 400 + 0.5Y. The coefficient of Y is 0.5, so the MPC is 0.5. This means that for every additional dollar of disposable income, individuals will spend half of it on consumption.
To find the marginal propensity to save (MPS), we subtract the MPC from 1. So MPS = 1 - MPC = 1 - 0.5 = 0.5. The MPS represents the proportion of additional income that individuals save rather than spend on consumption.
The equation that indicates how demand (Z) is a function of income (Y) and the remaining autonomous expenditure is Z = C + I + G. Substituting the values given, we have Z = (400 + 0.5Y) + 200 + 600.
If Y = 0, the equation becomes Z = (400 + 0.5(0)) + 200 + 600 = 400 + 200 + 600 = 1200. This level of demand represents the total autonomous expenditure (the sum of autonomous consumption, investment, and government spending) when there is no income.
Given the equation Z = (400 + 0.5Y) + 200 + 600, if Y increases by $1, the level of demand (Z) will increase by 0.5. This number represents the marginal propensity to consume (MPC), which is the proportion of the increase in income that is spent on consumption. In this case, for every $1 increase in income, 0.5 will be added to the level of demand.
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Your storage firm has been offered $95,100 in one year to store some goods for one year. Assume your costs are $95,100, payable immediately, and the cost of capital is 8.3%. Should you take the contract? The NPV will be $. (Round to the nearest cent.)
The net present value (NPV) in this case is $0.00, which means that the present value of the cash inflow is equal to the cash outflow
To determine whether you should take the contract, you need to calculate the net present value (NPV).
The NPV is the difference between the present value of cash inflows and the present value of cash outflows. In this case, the cash inflow is $95,100 in one year, and the cash outflow is also $95,100 payable immediately.
To calculate the NPV, you need to discount the future cash inflow to its present value using the cost of capital, which is 8.3%.
Using the formula: NPV = Cash Inflow / (1 + Cost of Capital)^n - Cash Outflow, where n is the number of years
NPV = 95,100 / (1 + 0.083)^1 - 95,100
Simplifying the equation: NPV = 95,100 / 1.083 - 95,100
Calculating the NPV: NPV = $0.00
The NPV in this case is $0.00, which means that the present value of the cash inflow is equal to the cash outflow. Therefore, taking the contract will neither result in a gain nor a loss.
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A restaurant prepares 200.00 pizza slices and sells them at a rate of $10.00/slice. Expenses for the restaurant include raw material for pizza at $4.00 per slice, $117.00 for monthly rental and monthly insurance of $35.00. Lost sale are taken as $6.00 per unhappy customer. Leftover pizza can be sold for $2.00. The restaurant is open only for 25 days in a month. Today there was a party at nearby office so the demand for pizza went up to 225.00 slices. How much profit could the restaurant earn today?
___________Submit
Answer format: Currency: Round to: 0 decimal places.
The restaurant could earn a profit of $810.00 today by subtracting the expenses from the revenue, which is calculated as the number of slices sold (225) multiplied by the selling price per slice ($10.00).
Today, with a demand for 225 pizza slices, the restaurant can earn a profit of $810.00. This is calculated by subtracting the total expenses, including raw material costs, monthly rental, insurance, and potential lost sales, from the revenue generated by selling the slices at $10.00 each.
The revenue for the day would be $2,250.00 (225 slices * $10.00/slice), and the expenses amount to $1,440.00 ($900 for raw materials + $117 for rental + $35 for insurance + $288 for potential lost sales). The profit is obtained by subtracting the expenses from the revenue: $2,250.00 - $1,440.00 = $810.00. Therefore, the restaurant could earn a profit of $810.00 today.
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