Answer:
maximum amount of loan bank that make reserve is $110 million
Explanation:
given data
demand deposits = $200 million
reserve = $150 million
reserve ratio = 20%
to find out
maximum amount of loan bank can make reserve
solution
we get here excess reserve that is
excess reserve = deposits × reserve ratio ...............1
excess reserve = $200 million × 20%
excess reserves is $40 million
so maximum amount of loan bank that make reserve is = $150 million - $40 million
maximum amount of loan bank that make reserve is $110 million
The maximum amount of loans the bank can make from its reserves is $110 million. This is calculated as the difference between the total reserves and the required reserves (based on the reserve ratio).
Explanation:The maximum amount of loans a bank can make is calculated as the difference between its total reserves and its required reserves. In this case, the bank has $150 million in total reserves. Because the reserve ratio is 20 percent, this means that the bank is required to have at least 20% x $200 million = $40 million as reserves. Therefore, the maximum amount of loans the bank can make from its reserves is $150 million - $40 million = $110 million.
To put it differently, if the bank’s total reserves are larger than the required reserves (based on the reserve ratio), the bank is able to make loans. This banking practice contributes to expand the money supply in the economy. However, it’s important to understand that if all depositors were to demand their money back at once, the bank would not have enough reserves on hand to satisfy this demand, which is known as a 'bank run' scenario.
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Compute the dollar change and percent change for each account title, and select the answer choice from the drop-down list. Use year 1 as the base year. Accounts Payable balance on Year 1 is $75,000 and on Year 2 is $65,000. Bonds Payable balance on Year 1 is $225,000 and on Year 2 is $220,000. Common Stock balance on Year 1 is $300,000 and on Year 2 is $310,000. Retained Earnings balance on Year 1 is $100,000 and on Year 2 is $145,000. Total Stockholder’s Equity balance on Year 1 is $400,000 and on Year 2 is $455,000.
Answer:
See Below.
Explanation:
We calculate the changes as follows,
Accounts payable
Year 1 = 75,000
Year 2 = 65,000
$ Change = $-10,000
% Change = -10000/75000 = -13.3%
Bonds Payable
Year 1 = 225,000
Year 2 = 220,000
$ Change = $-5,000
% Change = -5000/ 225,000 = -2.22%
Common Stock
Year 1 = 300,000
Year 2 = 310,000
$ Change = $10,000
% Change = 10000/300000 = 3.33%
Retained Earnings
Year 1 = 100,000
Year 2 = 145,000
$ Change = $45,000
% Change = 45,000/ 100,000 = 45%
Total Stockholders' Equity
Year 1 = 400,000
Year 2 = 455,000
$ Change = $55,000
% Change = 55,000/400,000 = 13.75%
Hope that helps.
1. The loanable fund model tells us that, other things being equal, capital will tend to flow from countries with __ to countries with __.
2. International differences in the demand for domestic loanable funds are primarily due to variations in __, while differences in the supply of funds generally reflect differences in __
Answer:
1) The loanable fund model tells us that, other things being equal, capital will tend to flow from countries with low interest rates to countries with high interest rates.
2) International differences in the demand for domestic loanable funds are primarily due to variations in investment opportunities , while differences in the supply of funds generally reflect differences in savings rate.
Explanation:
1) According to the loanable funds model people living in countries with low interest rate will move their money to other countries which have higher interest rates in order to earn a higher interest rate on their money. This is also known as hot money flow. For example If I live in UK has an interest rate of 4% and Germany has an interest rate of 8%, I will move my money to Germany to earn extra interest on my money. This is an example of money flowing from a country with low interest rate to a country with high interest rate.
2) There will be higher demand for loanable funds if there are more investment opportunities because people will borrow money to invest in other ventures in order to make more money than the interest they are paying, if the investment opportunities are low then the demand for loanable funds will also be low as people would not want to borrow money. And the supply of loanable funds is the money that people save in banks, so the higher the savings rate the higher the supply of loanable funds will be.
The loanable fund implies that, other things being equal, capital will tend to flow from countries with low interest rates to countries with high interest rates.
What are loanable funds model?
International differences in the demand for domestic loanable funds are primarily due to variations in investment opportunities, while differences in the supply of funds generally reflect differences in savings rate.
The loanable funds model is known to be a kind of a model that often uses supply and demand to show or depict how an interest rate is set by the interaction that exist between savers who are said to supply money and investors who ware known to borrow money.
The loanable funds model for a closed economy is known to be in equilibrium and the supply of loanable funds curve often intersects the demand for loanable funds curve.
Conclusively, International differences in the aspect of demand for domestic loanable funds are known to be as a result of some differences in investment that are made available.
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Andrew's share of net income is $35,000 and Barbara's share of net income is $45,000. Which of the following would be included in a closing entry as a result of these allocations?a. Andrew's capital account would be debited for $35,000.b. Andrew's capital account would be credited for $40,000.c. The income summary would be debited for $80,000.d. Barbara's capital account would be credited for $40,000.
Answer:
c. The income summary would be debited for $80,000
Explanation:
While closing the entry we debited the income summary account for $80,000 which includes the Andrew share of net income for $35,000 and Barbara share of net income for $45,000
In mathematically,
Income summary = Andrew share of net income + Barbara share of net income
$80,000 = $35,000 + $45,000
$80,000 = $80,000 = Balanced
Aptitude tests measure: a. The cognitive abilities that intelligence tests measure. b. Learning that has occurred as a result of exposure to a relatively defined learning experience. c. Learning that has occurred informally through life experiences. d. Learning that has occurred through formal structured input.
Answer: c. Learning that has occurred informally through life experiences
Explanation: Aptitude test is used to determine a candidates level of intelligence, abilities, and skills in different areas, this test helps to discover inherent abilities of a person to perform in certain areas of task. It is widely used by top organizations during their recruitment exercise to get the best candidate for a particular position.
•Note: In undergoing an aptitude test, no previous knowledge is put into consideration.
There are various types of aptitude tests and they are adopted based on the area of skills to be discovered, a few of them includes
• Numerical test: It is used to test ones ability in calculations, figures or numbers, charts, graphs, etc.
•Verbal test: It is used to test verbal skills, ability to interpret information and get the best out of it.
•Cognitive ability test: used to determine a candidate's level of intelligence, therefore it covers so many areas.
•In-tray test is used to determine time and resource management skills
Others includes; diagrammatic test, abstract reasoning, mechanical reasoning test etc.
Aptitude tests primarily measure the cognitive abilities that intelligence tests measure. They are designed to evaluate an individual's potential to learn new skills, adapt to new situations, and solve problems, which are all aspects of cognitive abilities. The other options provided may be aspects of what aptitude tests measure, depending on the specific aptitude test.
Explanation:Aptitude tests are utilized to gauge various aspects of our cognitive capabilities. Broadly speaking, these tests are structured to measure the ability to learn or acquire a particular skill or set of skills. They provide information on an individual's potential to use the mind to solve new problems, learn from experience, and adapt to new situations.
With reference to the options provided, the most accurate choice would be (a) The cognitive abilities that intelligence tests measure. Intelligence tests and aptitude tests share a common objective, which is to measure cognitive abilities, nevertheless, they are not exactly the same. Intelligence tests, such as the WAIS-IV and WISC-V, typically measure a wider range of cognitive abilities, whereas aptitude tests are used to measure specific skills or areas of knowledge.
The other options could be aspects of what aptitude tests measure contingent on the precise aptitude test and what it was designed to evaluate. For instance, an aptitude test might evaluate learning that has occurred formally through defined learning experiences (option b), informally through life experiences (option c), or through formal structured input (option d). However, it's the cognitive abilities that are the foundational components of these learning experiences.
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People end up tossing 12% of what they buy at the grocery store (Reader's Digest, March, 2009). Assume this is the true population proportion and that you plan to take a sample survey of 540 grocery shoppers to further investigate their behavior.a- Show the sampling distribution of ( p¯ ), the proportion of groceries thrown out by your sample respondentsb- what is the probability that the sample proportion will be within ±.02 of the population proportion?c- what is the probability that your survey will provide a sample proportion within ±.015 of the population proportion?
Answer:
Consider the following calculations
Explanation:
People end up tossing 12% of what they buy at the grocery store (Reader's Digest, March, 2009). Assume this is the true population proportion and that you plan to take a sample survey of 540 grocery shoppers to further investigate their behavior.
a- Show the sampling distribution of ( p¯ ), the proportion of groceries thrown out by your sample respondents
sampling distribution of ( p¯ ) is normal with
mean = 0.12 and
standard error = sqrt(p(1-p)/n) = sqrt(0.12*0.88/540) =0.0140
b- what is the probability that the sample proportion will be within ±.03 of the population proportion?
z value for 0.03 difference, z=0.03/0.014 =2.14
The required P= P( -2.14<z<2.14) = P( z <2.14) – P( z <-2.14)
=0.9838 - 0.0162
=0.9676
c- what is the probability that your survey will provide a sample proportion within ±.015 of the population proportion?
z value for 0.015 difference, z=0.015/0.014 =1.07
The required P= P( -1.07<z<1.07) = P( z <1.07) – P( z <-1.07)
=0.8577 - 0.1423
=0.7154
d- What would be the effect of taking a larger sample on the probabilities in parts (b) and (c)? Why?
Taking a larger sample will decrease the standard error. The probabilities in parts (b) and (c) will increase.
The problem describes the usage of properties of the sampling distribution to solve calculation of proportions. It involves understanding of concepts such as population proportion, sample proportion, standard deviation and usage of z-values to find probabilities.
To solve this problem, we will be using properties of the sampling distribution. We will base our calculations according to formula p' = x/n, where x represents the 'successes' (in this case groceries thrown out), n represents the sample size, and p' is the sample proportion, serving as the point estimate for the population proportion.
a- In sampling distribution of sample proportion (p¯), p equals the population proportion (0.12), and q equals 1 - p (1 - 0.12 = 0.88). The sample size (n) is 540. Here, the mean (µ) of the sampling distribution is equal to p and the standard deviation is √pq/n, with both np and nq should be more than 5, which they are.
b- To calculate the probability that the sample proportion will be within ±.02 of the population proportion, we find z-values by subtracting the population proportion from the sample proportions and dividing it by the standard deviation. We then use these z values with a z-table or software to find the respective probabilities.
c- The same steps apply for determining the probability that the sample proportion is within ±.015 of the population proportion. Difference lies in the calculation of the z-values.
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Village Corp., a calendar year corporation, began business in year 1. Village made a valid S corporation election on December 5, year 4, with the unanimous consent of its shareholders. The eligibility requirements for S status continued to be met throughout year 5. On what date did Village's S status become effective?
a. January 1, year 4
b. January 1, year 5
c. December 5, year 4
d. December 5, year 5
Answer:
The correct answer is letter "B": January 1, year 5.
Explanation:
The S corporation election must be made by the 15th day of the third month of the taxable year to be valid for the current taxable year. If the election is made after that date, it will take effect on the first year of the next taxable year. Since Village Corp. changed into S corporation on December 5th, year 4, Village's S status will begin on January 1st, year 5.
At each value of the domestic interest rate, decreases in the riskiness of domestic assets ______ capital inflows, ______ capital outflows, and ______ net capital inflows.A. increase; increase; increase B. increase; increase; decrease C. increase; decrease; increase D. decrease; increase; decrease
Answer:
The answer is C. increase; decrease; increase
Explanation:
As the domestic interest rate remains unchanged, decreases in the riskiness of the domestic assets will help to increase the risk-adjusted return on domestic assets and as a result:
+ Stimulate foreign investors to start holding/ holding more domestic asset which means they will inject more capital into the country => Capital inflows increase
+ Discourage foreign investors from decreasing holding on domestic asset because they enjoy higher risk-adjusted return which means there will be less sales of domestic assets subsequently less capital outflows => Capital outflows decrease.
As net capital inflows = Capital inflows - Capital outflows, increase in capital inflows and decrease in capital outflows will Increase net Capital inflows
Thus, C is the correct choice.
Use the data provided on Cadbury to answer the question below. The risk free rate is 4.25%. The expected return on the market portfolio is 9.75%. The corporate tax rate is 40%. The face value of Cadbury's outstanding bonds is 2.450 billion pounds sterling. The coupon rate on Cadbury's bonds is 4.5%. Assume that the bonds pay annual coupons. The yield to maturity on Cadbury's bonds is 4.5%. Cadbury's bonds mature in 7 years. Cadbury has 1.650 billion common shares outstanding. The market price of Cadbury's common shares as of Dec 31, 2008 is 6.25 pounds sterling. Cadbury's Beta is 0.8. Cadbury's cost of debt (afterminus tax) is 2.7%. Cadbury's cost of equity is 8.65%. What is Cadbury's WACC?
Answer:
7.51%
Explanation:
The formula to compute WACC is shown below:
= (Weightage of debt) × (after cost of debt) + (Weightage of common stock) × (cost of common stock)
where,
Weighted of debt = Debt ÷ total firm
The total firm includes debt, and the equity which equals to
= 2.450 billion × $ 1 + 1.650 billion × $6.25
= 2.450 billion + 10.3125 billion
= 12.7625 billion
So, Weighted of debt = ($2.450 billion ÷ $12.7625 billion) = 0.192
And, the weighted of common stock = (Common stock ÷ total firm)
= $10.3125 billion ÷ $12.7625 billion
= 0.808
Now put these values to the above formula
So, the value would equal to
= (0.192 × 2.7%) + (0.808 × 8.65%)
= 0.5184% + 6.9892%
= 7.51%
Final answer:
The Weighted Average Cost of Capital (WACC) measures the average cost of capital for a company, taking into account the proportion of debt and equity financing. To calculate Cadbury's WACC, we need to find the weighted average cost of debt and the weighted average cost of equity. Assuming Cadbury has a 100% debt-to-equity ratio, the WACC can be calculated as follows: WACC = (Weight of Debt * Cost of Debt) + (Weight of Equity * Cost of Equity) = (0.5 * 2.7%) + (0.5 * 8.65%).
Explanation:
The Weighted Average Cost of Capital (WACC) measures the average cost of capital for a company, taking into account the proportion of debt and equity financing. To calculate Cadbury's WACC, we need to find the weighted average cost of debt and the weighted average cost of equity.
For Cadbury, the cost of debt (after tax) is given as 2.7% and the cost of equity is 8.65%. The weights for debt and equity can be calculated by dividing the respective values by the total capital structure.
Assuming Cadbury has a 100% debt-to-equity ratio, the WACC can be calculated as follows:
WACC = (Weight of Debt * Cost of Debt) + (Weight of Equity * Cost of Equity) = (0.5 * 2.7%) + (0.5 * 8.65%).
Julie transferred a building with an adjusted basis of $240,000 for another building with a fair market value of $350,000 and $25,000 in cash.
Answer:
New Building. $ 350,000 (debit)
Cash. $ 25,000 (debit)
Old Building. $ 115,000 (credit)
Profit & Loss Account $ 240,000 (credit)
Explanation:
The adjustment was made for $240,000 to P&L account and the old building was exchanged with new building if $350,000 with cash $25,000.
This is the required entry to be made.
New Building. $ 350,000 (debit)
Cash. $ 25,000 (debit)
Old Building. $ 115,000 (credit)
Profit & Loss Account $ 240,000 (credit)
CompuTronics, a manufacturer of computer peripherals, has excess capacity. The company's Utah plant has the following per-unit cost structure for item no. 89:
Variable manufacturing $ 60
Fixed manufacturing 25
Variable selling 8
Fixed selling 11
Traceable fixed administrative 4
Allocated administrative 2
The traceable fixed administrative cost was incurred at the Utah plant; in contrast, the allocated administrative cost represents a "fair share" of CompuTronics' corporate overhead. Utah has been presented with a special order of 5,600 units of item no. 89 on which no selling cost will be incurred. The proper relevant cost in deciding whether to accept this special order would be:
a. $60.
b. $89.
c. $91.
d. $110.
e. None of these.
Answer:
a. $60.
Explanation:
While computing the relevant cost in case of special order only the variable manufacturing cost is to be considered as it will be changed in special order case.
And the other cot like - fixed manufacturing, variable & fixed selling, traceable fixed administrative cost, etc are not relevant as it remains constant
These costs are not useful for decision making. Hence, it is to be ignored
Variable manufacturing costs of $60 should be considered for deciding on whether to accept this special order as the relevant costs are always affected by the management decision.
What are Relevant Costs?
Relevant cost is a management accounting term that describes the avoidable costs incurred only when making certain business decisions. The concept of relevant costs is used to eliminate unnecessary data that can make the decision-making process difficult.
While calculating relevant costs in the event of a special order only variable production costs should be considered as they will be changed in the case of a special order.
And other costs like - consistent production, flexible & consistent sales, consistent management costs, etc. are not as important as they remain constant.
These costs are not helpful in making decisions. Therefore, it should be ignored.
Thus, Option A. is the correct choice.
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A newspaper article informs you that most businesses reduced production in the last quarter of the year, but also sold from their inventories during that quarter. Based on this information, GDP llikely___________.
1. increased.
2. decreased.
3. stayed the same.
4. may have increased, decreased, or stayed the same.
Answer:
2. decreased.
Explanation:
GDP represents the monetary value of all goods and services produced within a nation's geographic borders over a specified period of time. So, since production is reduced, it means GDP will decrease.
The base year is 2012. Real GDP in 2012 was? $15 trillion. The GDP price index in 2015 was? 105, and real GDP in 2015 was? $16 trillion. ?? ?? Calculate nominal GDP in 2012 and in 2015 and the percentage increase in nominal GDP from 2012 to 2015.
Nominal GDP in 2012 is ?$ _ trillion. And percentage increase in production 2012-2015 is _.
Answer:
nominal GDP = 15 trillion
nominal GDP = 16.8 trillion
percentage change in nominal GDP = 12%
percentage change in real GDP = 6.67 %
Explanation:
given data
Real GDP in 2012 = $15 trillion
GDP price index 2015 = 105
real GDP in 2015 = $16 trillion
solution
we get here GDP in 2012 that is express as
GDP deflator = [tex]\frac{nominal\ GDP}{real\ GDP}[/tex] × 100 ................1
100 = [tex]\frac{nominal\ GDP}{15}[/tex] × 100
nominal GDP = 15 trillion
and
nominal GDP in 2015 that is
105 = [tex]\frac{nominal\ GDP}{16}[/tex] × 100
nominal GDP = 16.8 trillion
and
now we get percentage increase in nominal GDP is
nominal GDP = [tex]\frac{nominal\ GDP(current) -Nominal\ GDP(initial)}{Nominal\ GDp(initial)}[/tex] × 100 .....................2
nominal GDP = [tex]\frac{16.8-15}{15}[/tex] × 100
percentage change in nominal GDP = 12%
and
percentage change in real GDP is
percentage change in real GDP = [tex]\frac{real\ GDP(current) -real\ GDP(initial)}{real\ GDp(initial)}[/tex] × 100 .....................3
percentage change in real GDP = [tex]\frac{16-15}{15}[/tex] × 100
percentage change in real GDP = 6.67 %
The nominal GDP in 2012 is $15 trillion, the nominal GDP in 2015 is $16.8 trillion, and the percentage change in nominal GDP in 2012 is 12%, and the percentage change in real GDP in 2015 is 6.67 %.
What is the real GDP?GDP means the Gross Domestic Product, It is a monetary measurement of the market value of every final goods and service created in a limited time period by countries.
According to the above situation,
Real GDP in 2012 = $15 trillion
GDP price index 2015 = 105
Real GDP in 2015 = $16 trillion
Computation of the GDP and the rate of percentage:
The GDP in the year 2012 are:
GDP Deflatlator:
[tex]=\frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100\\\\100=\frac{\text{Nominal GDP}}{15}\times 100\\\\{\text{Nominal GDP}} = 15 \text{trillion}[/tex]
and,
The GDP in the year 2015 are:
[tex]=\frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100\\\\105=\frac{\text{Nominal GDP}}{16}\times 100\\\\{\text{Nominal GDP}} = 16.8 \text{trillion}[/tex]
Then,
Now, the percentage increase in nominal GDP in 2012 is:
[tex]\text{Nominal GDP} =\dfrac{\text{Current Nominal GDP- Initial Nominal GDP}}{\text{Initial Nominal GDP}}\times100\\\\\\\text{Nominal GDP}= \dfrac{16.8-15}{15}\times100\\\\[/tex]
The percentage change in nominal GDP in 2012 is 12%.
The percentage increase in nominal GDP in 2015 is:
[tex]\text{Nominal GDP} =\dfrac{\text{Current Nominal GDP- Initial Nominal GDP}}{\text{Initial Nominal GDP}}\times100\\\\\\\text{Nominal GDP}= \dfrac{16-15}{15}\times100\\\\[/tex]
Percentage change in nominal GDP in 2015 is 6.67%
Therefore, the percentage change in nominal GDP in 2015 is 6.67%.
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A firm is evaluating two independent projects utilizing the internal rate of return technique. Project X has an initial investment of $80,000 and cash inflows at the end of each of the next five years of $25,000. Project Z has a initial investment of $120,000 and cash inflows at the end of each of the next four years of $40,000.
The firm should
A) accept both if the cost of capital is at most 15 percent.
B) accept only Z if the cost of capital is at most 15 percent.
C) accept only X if the cost of capital is at most 15 percent.
D) none of the above
Answer:
If cost of capital is 15%
PROJECT X
Year Cashflow DF@15% PV
0 (80,000) 1 (80,000)
1-5 25,000 3.3522 83,805
NPV 3,805
PROJECT Z
Year Cashflow DF@15% PV
0 (120,000) 1 (120,000)
1-4 40,000 2.8550 114,200
NPV (5,800)
Accept project X if the cost of capital is at most 15%
The correct answer is C
Explanation:
In this case, the net present value of each project will be computed at 15% cost of capital and the project with positive net present value will be accepted.
Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor: Leather (12 strips @ $20) $240 Direct labor (10 hours @ $12) $120 Total prime cost $360 During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour. Compute the costs of leather and direct labor that should have been incurred for the production of 125 boots.
A. $46,500 and $37,500
B. $30,000 and $15,000
C. $36,000 and $36,000
D. $37,200 and $20,000
Answer:
B. $30,000 and $15,000
Explanation:
We can compute this as follows,
We need to calculate flexed budget costs for the production of 125 boots.
Budgeted / boots are as follows,
Leather cost / boot = $240
Direct Labor / boot = $120
The costs that should have been for 125 boots are then,
Leather = 125 * 240 = $30,000
Direct Labor = 125 * 120 = $15,000
Hope that helps.
Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions):2018 2017Accounts receivable (net) $ 20 $ 16Net sales $ 115 100Cost of goods sold $ 60 55Net income $ 20 17Inventory turnover 5.22Return on assets 10.3 %Equity Multiple 2.36Dowling's average total assets for 2018 is (rounded):
(A) 115.(B) 32.(C) 210.(D) 194.
Answer:
Option (D) is correct.
Explanation:
Return on equity:
= Return on assets × Equity multiple
= 10.3% × 2.36
= 24.308%
Profit margin:
= Net income ÷ Sales
= $20 ÷ $115
= 17.39%
Average total assets is calculated as follows:
Return on assets = Net income ÷ Average total assets
10.3% = $20 ÷ Average total assets
Average total assets = $194.17
An economy is operating with output $400 billion above its natural level, and fiscal policymakers want to close this expansionary gap. The central bank agrees to adjust the money supply to hold the interest rate constant, so there is no crowding out. The marginal propensity to consume is 4/5, and the price level is completely fixed in the short run.
Answer:
[tex]\Delta G= 400 billion \frac{1}{5}= 80 billions[/tex]
To close the expansionary gap, the government would need to spending by 80 billion
Explanation:
Assuming this question: "To close the expansionary gap, the government would need to spending by ? billion"
Previous concepts
The government expenditure multiplier "denoted by K, the impact of a change in income following a change in government spending".
The marginal propensity to consume denoted by MPC "is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending occurs with an increase in disposable income"
Solution to the problem
Fo this problem we need to find the Government multiplier (K) with the following formula:
[tex] K=\frac{1}{1-MPC}[/tex]
Wehre MPC represent the marginal propensity to consume. And if we replace we got this:
[tex] K=\frac{1}{1-\frac{4}{5}}=5[/tex]
And now we can find the government decrease with the following formula:
[tex]\Delta G= \Delta Y \frac{1}{K}[/tex]
And for this case the output is [tex]\Delta Y = 400 billion[/tex], and we have everything in order to replace:
[tex]\Delta G= 400 billion \frac{1}{5}= 80 billions[/tex]
So thn the answer woud be: "To close the expansionary gap, the government would need to spending by 80 billion"
"ATC has a value of $70,000 in a good economy and $55,000 in a recession. The firm has $60,000 of debt. The probability of a recession is 50 percent. The firm is considering a project that would change the firm values to $73,000 in a good economy and $50,000 in a recession. If the firm accepts this project, the firm value will ______ and shareholder value will ______."
Answer:
The firm value will decrease by $1,000 and shareholder value will increase by $1,500
Explanation:
Data provided in the question:
Value of ATC in a good economy = $70,000
Value of ATC in recession = $55,000
Debt = $60,000
Probability of a recession = 50%
Final firm value in a good economy = $73,000
Final firm value in recession = $50,000
Now,
Expected total value = ∑(value × Probability)
= ( $73,000 × 50% ) + ( $50,000 × 50% )
= $36,500 + $25,000
= $61,500
Therefore,
Shareholder value = Expected total value - Debt
= $61,500 - $60,000
= $1,500 [Positive value means an increase]
Expected change in firm value = ∑(Change in value × Probability)
= [ ($73,000 - $70,000) × 50% ] + [ ($50,000 - $55,000) × 50% ]
= $1,500 + (- $2,500)
= -$1,000 [Here, negative value means a decrease ]
Hence,
The firm value will decrease by $1,000 and shareholder value will increase by $1,500
Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows: Thalassines Kataskeves, S.A. Income Statement—Bilge Pump For the Quarter Ended March 31 Sales $ 440,000 Variable expenses: Variable manufacturing expenses $ 124,000 Sales commissions 47,000 Shipping 23,000 Total variable expenses 194,000 Contribution margin 246,000 Fixed expenses: Advertising (for the bilge pump product line) 23,000 Depreciation of equipment (no resale value) 108,000 General factory overhead 45,000 * Salary of product-line manager 126,000 Insurance on inventories 8,000 Purchasing department 46,000 † Total fixed expenses 356,000 Net operating loss $ (110,000 ) *Common costs allocated on the basis of machine-hours. †Common costs allocated on the basis of sales dollars. Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company’s total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
Answer:
- $89,000
Explanation:
The computation of the financial advantage or disadvantage is shown below:
= Contribution margin loss - fixed expense
where,
Contribution margin is - $246,000
And, the fixed expense would be
= Advertising (for the bilge pump product line) + Salary of product-line manager + Insurance on inventories
= $23,000 + $126,000 + $8,000
= $157,000
Now put these values to the above formula
So, the value would equal to
= - $246,000 - $157,000
= - $89,000
All other information which is given is not relevant. Hence, ignored it
The financial advantage of discontinuing the bilge pump product line would equal the total avoidable costs of $325,000 minus the current loss of $110,000, leading to a net financial benefit of $215,000.
Explanation:To determine the financial advantage or disadvantage of discontinuing the bilge pump product line, we must analyze the provided income statement to see which costs will be eliminated or reduced and which will remain unaffected. We'll focus on variable expenses directly associated with the product line and fixed expenses that will be removed if the product line is discontinued.
From the income statement, the variable expenses that would be eliminated if the bilge pump product line were discontinued are:
Variable manufacturing expenses: $124,000Sales commissions: $47,000Shipping: $23,000The total variable expenses amount to $194,000. Concerning fixed expenses, we are specifically looking for expenses that are directly attributed to the bilge pump product line only:
Advertising (for the bilge pump product line): $23,000Depreciation of equipment (no resale value, solely tied to the bilge pump product line): $108,000However, some fixed expenses like the general factory overhead and the purchasing department expenses would remain unaffected by this decision, as indicated in the question. Thus, these costs will continue even if the bilge pump line stops. We sum up all the avoidable costs ($194,000 + $23,000 + $108,000) to find the total savings of $325,000. As the product line is currently operating at a loss of $110,000, the company would experience a net financial advantage equal to the savings ($325,000) minus the loss ($110,000), resulting in a financial advantage of $215,000 if they discontinue the bilge pump product line.
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Value of a mixed stream Harte Systems, Inc., a maker of electronic survillance equipment, is considering selling the rights to market its home security system to a well-known hardware chain. The proposed deal calls for the hardware chain to pay Harte $28 comma 000 and $21 comma 000 at the end of years 1 and 2 and to make annual year-end payments of $12 comma 000 in years 3 through 9. A final payment to Harte of $15 comma 000 would be due at the end of year 10. a. Select the time line that represents the cash flows involved in the offer. b. If Harte applies a required rate of return of 11% to them, what is the present value of this series of payments? c. A second company has offered Harte an immediate one-time payment of $90 comma 000 for the rights to market the home security system. Which offer should Harte accept?
Answer:
A. See attached image
B. $93,446.35
C. He should accept the first offer from the hardware chain
Explanation:
A time line is a line that chronological orders events according to the time they occurred
The present value is the present value of after tax cash flows from an investment.
The present value can be calculated using a financial calculator.
Cash flow for year 1 =$28,000
Cash flow for year 2 =$21,000
Cash flow for year 3 -9 =$12,000
Cash flow for year 10 =$15.000
I = 11%
PV =$93,446.35
Hart should accept the first offer from the hardware chain because the present value of the first offer $93,446.35 is greater than the present value of $90,000.
I hope my answer helps you.
Economist Bruce Kirchhoff contends that business failures are much lower than traditionally reported.
A. True
B. False
When designing an Amazon SQS message-processing solution, messages in the queue must be processed before the maximum retention time has elapsed. Which actions will meet this requirement?
Explanation:
The Amazon Easy Queue Service was launched by Amazon.com in late 2004 and is a centralized message queueing up service. It supports programmatic message transmission through web services as a means of communication via the Internet.
Instantly, Amazon SQS removes messages in line for a longer period of retention of messages.
The automatic processing period for the response is 4 days. Furthermore, the maintenance period of the message can be determined by the Set Queue Attributes actions to reach between 60 and 1.209.600 seconds (14 days).
Darnell lives in San Francisco and runs a business that sells pianos. In an average year, he receives $723,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $423,000; he also pays wages and utility bills totaling $267,000. He owns his showroom; if he chooses to rent it out, he will receive $2,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Darnell does not operate this piano business, he can work as a financial advisor and receive an annual salary of $20,000 with no additional monetary costs. No other costs are incurred in running this piano business.
Identify each of Darnell's costs in the following table as either an implicit cost or an explicit cost of selling pianos.
Implicit Cost
Explicit Cost
The rental income Darnell could receive if he chose to rent out his showroom
The wages and utility bills that Darnell pays
The salary Darnell could earn if he worked as a financial advisor
The wholesale cost for the pianos that Darnell pays the manufacturer
Complete the following table by determining Darnell's accounting and economic profit of his piano business.
Profit
(Dollars)
Accounting Profit
Economic Profit
If Darnell's goal is to maximize his economic profit, heshould stay in the piano business because the economic profit he would earn as a financial advisor would be.
Answer:
See explanation.
Explanation:
Implicit costs are the opportunity costs or costs of doing the next best alternative where as explicit costs are the direct accounting costs associated with an activity.
The rental income Darnell could receive if he chose to rent out his showroom is the implicit cost as this is an alternative he can chose against piano business.
The wages and utility bills that Darnell pays are the explicit costs as they are direct accounting costs of running the piano business.
The salary Darnell could earn if he worked as a financial adviser is the implicit cost as this is again the cost of an alternative.
The wholesale cost for the pianos that Darnell pays the manufacturer is the direct cost of goods sold and as such an explicit cost.
Accounting Profit = Revenue - Explicit costs
Accounting Profit = 723,000 - 423,000 - 267,000 = $33,000
Economic Profit = Revenue - Explicit Costs - Implicit Costs
Economic Profits = 723,000-423,000-267,000-2000-20,000 = $11,000
The economic profit earned from working as a financial adviser
Eco Profit as an adviser = 20000 + 2,000 - 33,000 = $ - 11,000
Since the Economic profit from working as an adviser is negative and less than that of selling pianos, it is profitable to stay in the piano business.
Hope that helps.
Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share, 200 shares of Lowes (LOW) at $30 per share, and 100 shares of Ball Corporation (BLL) at $40 per share. Suppose over the next year Ball has a return of 12.5%, Lowes has a return of 21%, and Abbott Labs has a return of -10%. The return on your portfolio over the year is ________.
a. 0%
b. 5.7%
c. 3.8%
d. 7.6%
Answer:
ER(P) = RABT(WABT) + RLOW(WLOW) + RBBL(WBBL)
ER(P) = -10(0.50) + 21(0.30) + 12.5(0.20)
ER(P) = -5 + 6.3 + 2.5
ER(P) = 3.8%
Value of ABT = 200 shares @ $50 = $10,000
Value of LOW = 200 shares @30 = $6,000
Value of BBL = 100 shares @ $40 = $4,000
Total value of investments $20,000
Weight of ABT = $10,000/$20,000 x 100 = 50%
Weight of LOW = $6,000/$20,000 x 100 = 30%
Weight of BBL = $4,000/$20,000 x 100 = 20%
Explanation:
In this case, we need to calculate the expected return of the portfolio, which is the aggregate of return of each stock multiplied by the weight of each stock. The weight of each stock is the value of each stock divided by the total investment. The variables are defined as follows:
ER(P) = Expected return of portfolio, WABT = Weight of ABT, WLOW = weight of LOW, WBBL = weight of BBL, RABT= Return of ABT, RLOW = Return of LOW and RBBL = return of BBL.
According to given equation, the return on your portfolio over the year is equal to option C: 3.8%
What is the term Portfolio about?The term portfolio refers to as a collection of various investments, stocks, bonds and fixed deposits. It can include gold and mutual funds.
ER(P) = Return on ABT (Weight of ABT) + Return on LOW(Weight of LOW) + Return on BLL (Weight of BBL)
ER(P) = -10(0.50) + 21(0.30) + 12.5(0.20)
ER(P) = -5 + 6.3 + 2.5
ER(P) = 3.8%
Working Note:-
Value of ABT= 200 shares $50 = $10,000
Value of LOW = 200 shares 30 = $6,000
Value of BLL= 100 shares $40 = $4,000
Total value of investments =$20,000
Weight of ABT = $10,000/$20,000 x 100 = 50%
Weight of LOW = $6,000/$20,000 x 100 = 30%
Weight of BLL= $4,000/$20,000 x 100 = 20%
Therefore, correct option is C.
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Martin is offered an investment where for $6000 today, he will receive $6180 in one year. He decides to borrow $6000 from the bank to make this investment. What is the maximum interest rate the bank needs to offer on the loan if Martin is at least to break even on this investment?A) 3%B) 4%C) 2%D) 1%
Answer:
maximum interest rate = 3%
so correct option is A) 3%
Explanation:
given data
investment = $6000
receive = $6180
borrow = $6000
to find out
maximum interest rate bank needs to offer on the loan
solution
we consider here maximum interest rate bank needs to offer is = r
so value of investment will be express here as
value of investment = amount to be borrowed × ( 1 + r ) ................1
put here value we get rate r
6180 = 6000 × ( 1 + r )
solve it we get
rate = 0.03
maximum interest rate = 3%
so correct option is A) 3%
Marigold Corp. issued at a premium of $9200 a $198000 bond issue convertible into 4800 shares of common stock (par value $20). At the time of the conversion, the unamortized premium is $3600, the market value of the bonds is $218000, and the stock is quoted on the market at $60 per share. If the bonds are converted into common, what is the amount of paid-in capital in excess of par to be recorded on the conversion of the bonds?
Prepare the journal entry to record the conversion of the bonds to common stock.
Answer:
Explanation:
The journal entry is shown below:
Bonds payable A/c Dr $198,000
Premium on bonds payable A/c Dr $3,600
To Common stock A/c $96,000
To Paid in capital in excess of par - Common stock A/c $105,600
(Being the conversion of bonds is recorded)
The computation is shown below:
For Common stock:
= 4,800 shares × $20
= $96,000
And, the remaining balance is credited to paid in capital in excess of par
Consider the following events:25,000 shares of preferred stock, cumulative, 5%, $10 par was issued for $15 a share.The annual cash dividend was declared and paid to the above preferred stock.The company purchased 12,000 shares of common stock at $17 per share to be held as Treasury stock.Interest of $8,000 was paid to bondholders.Bonds Payable with a par value of $100,000 were retired at $108,000.Compute the net cash flow from financing activities (parentheses indicate an outflow):A) $ 58,500B) $(71,500)C) $ 50,500D) $ 45,500
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Estimating ________ is one part of managing shortminusterm cash needs. The second part is estimating ________.
(A) cash inflow; accounts payable
(B) cash inflow; cash outflow
(C) accounts receivable; cash outflow
(D) accounts receivable; cash inflow
Answer:
(B) cash inflow; cash outflow
Explanation:
There are two parts i.e cash inflow and cash outflow.
The cash inflow is increase the cash balance whereas the cash outflow is decrease the cash balance
Like
There are three types of activities in the cash flow statement which are described below:
1. Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.
These changes in working capital would be adjusted. Moreover, the depreciation expense is added to the net income
2. Investing activities: It records those activities which include purchase and sale of the long term assets. The purchase is an outflow of cash whereas sale is an inflow of cash
3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance. The issue of shares is an inflow of cash whereas redemption and dividend is an outflow of cash.
CU, Incorporated (CUI) produces copper contacts that it uses in switches and relays. CUI needs to determine the order quantity, Q, to meet the annual demand at the lowest cost. The price of copper depends on the quantity ordered. Here are price-break and other data for the problem:
Price of copper $ 0.82 per pound up to 2,499 pounds
$ 0.81 per pound for orders between 2,500 and 5,000 pounds
$ 0.80 per pound for orders greater than 5,000 pounds
Annual demand 50,000 pounds per year
Holding cost 20 percent per unit per year of the price of the copper
Ordering cost $ 30
Which quantity should be ordered?
Answer:
If CUI buys at $0.82 per pound
Annual demand (Co) = 50,000 pounds
Ordering cost per order (Co) = $30
Holding cost per item per annum (H) = 20% x $0.82 = $0.164
EOQ = √2DCo
H
EOQ = √2 x 50,000 x $30
$0.164
EOQ = 4,277 units
The solution is not feasible since 4,277 units could not be bought at $0.82 per pound.
If CUI buys at $0.81 per pound
Annual demand (Co) = 50,000 pounds
Ordering cost per order (Co) = $30
Holding cost per item per annum (H) = 20% x $0.81 = $0.162
EOQ = √2DCo
H
EOQ = √2 x 50,000 x $30
$0.162
EOQ = 4,303 units
Total cost for 4,303 units
= DCo + QH + P x D
Q 2
= 50,000 x $30 + 4,303 x $0.162 + $0.81 x 50,000
4,303 2
= $348.59 + $348.54 + $40,500
= $41,197.13
If CUI buys at $0.80 per pound
Annual demand (Co) = 50,000 pounds
Ordering cost per order (Co) = $30
Holding cost per item per annum (H) = 20% x $0.80 = $0.16
EOQ = √2DCo
H
EOQ = √2 x 50,000 x $30
$0.16
EOQ = 4,330 units
The solution is not feasible since 4,330 units could not be bought at $0.80 per pound. Thus, EOQ is 5,001 units.
Total cost for 5,001 units
= DCo + QH + P x D
Q 2
= 50,000 x $30 + 5,001 x $0.16 + $0.80 x 50,000
5,001 2
= $299.94 + $400.08 + $40,000
= $40,700.02
Thus, EOQ equals 5,001 units because the quantity minimises the total cost.
Explanation:
EOQ is a function of square root of 2 multiplied by annual demand and ordering cost per order divided by holding cost per item per annum.
Since this question involves discounts, there is need to calculate EOQ at various discount levels. Holding cost is a function of price. For instance, when price is $0.82, holding cost is 20% of $0.82.
We will calculate the EOQ at various prices and corresponding total cost. Finally, we will consider the quantity that minimizes the total cost. Thus, EOQ equals 5,001 units.
Given the price breaks and costs, it is most cost-effective for CU, Incorporated to order more than 5,000 pounds of copper in order to get the price of $0.80 per pound, according to the Economic Order Quantity (EOQ) model.
Explanation:To answer the question, we first need to understand the concept of Economic Order Quantity (EOQ). EOQ is a model that identifies the optimal order quantity a company can purchase to minimize its inventory costs by calculating the total minimum cost. These costs include ordering costs, holding cost, and the cost of not having inventory when needed.
Given the price breaks in the question, we need to understand that EOQ calculation will give us the starting point to determine which price tier to use. Assuming that the cost of the ordering and the holding costs is the same across all price breaks, it would be more cost-effective to purchase at the lower cost per unit. Therefore, to meet the annual demand at the lowest cost, CUI should order more than 5,000 pounds to get the best price of $0.80 per pound.
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The following is the selected information about the Little Dipper Company for the current year and prior year.
Account
Current Prior Net sales revenue $651,000 $595,000
Cost of goods sold $417,720 $425,000
Gross profit $233,280 $170,000
Selling/general expenses $149,040 $93,500
Net income before tax $84,240 $76,500
Income tax $25,920 $22,800
Net income $58,320 $53,700
What is the current year's cost of goods sold percentage (as would be found on a vertical analysis of the income statement for the current year)?
Answer:
Consider the following calculation
Explanation:
Under Veritical analysis of Income statement every line item is compared as a percentage of gross sales.
So, the cost of goods sold of the current year will be compared as a percentage of gross sales made.
Cost of goods sold in the current year = $ 417,720
Gross sales = $ 6,51,000
Cost of goods sold as a percentage = Cost of goods sold/ sales * 100
= 4,17,720 / 6,51,000 * 100
= 64%
Listmann Corp. processes four different products that can either be sold as is or processed further. Listed below are sales and additional cost data: Product Sales Value with no further Processing Additional Processing Costs Sales Value after further processing Premier $1,350 $900 $2,700 Deluxe 450 225 630 Super 900 450 1,800 Basic 90 45 180
2. Which product(s) should not be processed further? Premier. Deluxe. Super. Basic. Premier and Basic.
Answer:
Deluxe
Explanation:
The computation is shown below:
= Sales Value after further processing - further processing cost - sales value
For Premier
= $2,700 - $900 -$1,350
= $450
For Deluxe
= $630 - $225 - $430
= -$25
For Super
= $1,800 - $450 - $900
= $450
For Basic
= $180 - $45 - $90
= $45
As we see that out of four different products, the deluxe contains negative value which reflect that this product should not processed further that means other three products should processed further