The optimal quantity of input is given as:MPPx × Py = PxMVPx0.8 × 10 = 1MVPx = 0.125 units of xTo maximize net returns, the farmer should apply 0.125 units of x.
A production function is used by a maize farmer in Oshikoto Region in Namibia that can be represented as follows: Y = 70 + 2x - 0.02x², where Y represents the yield per acre, and x is the quantity of fertilizer used per acre.i. To find the level of x at which Y is maximum:To find the optimal level of fertilizer application that will maximize the farmer's yield, the farmer must take the derivative of the production function and equate it to zero. This implies: Y = 70 + 2x - 0.02x²dY/dx = 2 - 0.04x = 0Solving for x, 0.04x = 2, x = 50.APP is the Average Physical Product. It can be calculated by dividing the total product by the total input (that is, APP = TP/TI). MPP is the Marginal Physical Product, which is the additional production that results from increasing one unit of input.
Elasticity of production measures the responsiveness of the quantity of output to changes in the quantity of inputs. ii. To calculate the APP, MPP and elasticity of production, when x = 30:APP = (70 + 2(30) - 0.02(30)²)/30 = 3.333MPP = 2 - 0.04(30) = 0.8Elasticity = MPP × (x/Y) = 0.8 × (30/100) = 0.24.iii. To find the level of x maximizing net returns when Px = $1 and Py = $10:The farmer can maximize their profits by using the marginal value product (MVP) rule, which states that the optimal level of input usage occurs where the MVP equals the price of the input. MVP equals the marginal physical product multiplied by the price of the output. For the given scenario, Px = $1 and Py = $10.The optimal quantity of input is given as:MPPx × Py = PxMVPx0.8 × 10 = 1MVPx = 0.125 units of xTo maximize net returns, the farmer should apply 0.125 units of x.
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A car costs 500,000P and the salvage value is 50,000P after 20
years. Find the book value after 5 years if money worth 12% per
annum.
The book value of the car after 5 years is 279,215P.
To calculate the book value, we need to consider the depreciation of the car over time. The annual depreciation can be calculated by subtracting the salvage value from the initial cost and dividing it by the number of years of the car's useful life. In this case, the annual depreciation is (500,000P - 50,000P) / 20 years = 22,500P.
Next, we need to determine the accumulated depreciation after 5 years. This can be found by multiplying the annual depreciation by the number of years. In this case, the accumulated depreciation after 5 years is 22,500P/year * 5 years = 112,500P.
Finally, we can calculate the book value after 5 years by subtracting the accumulated depreciation from the initial cost. The book value is 500,000P - 112,500P = 387,500P. However, we need to consider the time value of money by discounting this amount at a rate of 12% per annum for 5 years. Using the formula for present value, the book value after 5 years is approximately 279,215P.
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In January 2016, Lufthansa, a German airline, purchased twenty 737 jets from the American company, Boeing for a total cost of USD 500 million to be paid on the delivery of the jets in January 2017. The chairman of Lufthansa believed that the dollar had run out and would shortly run down. The following options are available to him. [10 Marks) CO 2 & 3 a. Be conservative. Cover the whole payable forward. b. Trust his instincts. Buy the dollar forward in January 2017. c. Buy USD now and hold them in a deposit for a year to settle the payable in January 2017 d. Based on the information given below, which option would have minimized Lufthansa's cashflows at the end of the year:- Spot rate EUR/USD : 1.0861 Fwd rate EUR/USD: 1.0901 Spot rate after a year : : 1.0870 1 year interest rate on dollars = 3.5% 1 year interest rate on Euro = 2.8%.
a. The cashflow would have been USD 500 million divided by the forward rate, resulting in EUR 458.24 million. b. We cannot determine the exact cashflow for this option. c. The cashflow would be EUR 460.42 million.
To determine which option would have minimized Lufthansa's cashflows at the end of the year, we need to compare the different scenarios and calculate the cashflows under each option.
a) Be conservative. Cover the whole payable forward:
Under this option, Lufthansa would have entered into a forward contract to cover the entire payable amount in January 2017. This would have locked in the exchange rate at the forward rate of 1.0901 EUR/USD. The cashflow would have been USD 500 million divided by the forward rate, resulting in EUR 458.24 million.
b) Trust his instincts. Buy the dollar forward in January 2017:
This option implies that Lufthansa would wait until January 2017 and then buy the necessary dollars forward. The cashflow would again be USD 500 million divided by the forward rate of that time, which we don't have. Therefore, we cannot determine the exact cashflow for this option.
c) Buy USD now and hold them in a deposit for a year to settle the payable in January 2017:
Under this option, Lufthansa would convert EUR 500 million to USD at the spot rate of 1.0861. The USD would then be held in a deposit for a year, earning an interest rate of 3.5%. After a year, the deposit would have grown to USD 500 million plus interest. Converting it back to EUR at the spot rate after a year (1.0870), the cashflow would be EUR 460.42 million.
Comparing the cashflows, we can see that option c) would have minimized Lufthansa's cashflows at the end of the year, resulting in the smallest amount of EUR outflow (460.42 million). Therefore, buying USD at the spot rate and holding them in a deposit for a year would have been the optimal choice for Lufthansa to minimize their cashflows in this scenario.
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Question Section 1 Supply & Demand Analysis (Chapter 31 A 1 Dep MOT & Tage W AND M. Change a typer a of Gyert am 1000 ya kum A man 2.5ph C Question 2 Dulders and truction from expect that the price of copper will rise dramatically in the near future Demand Supply Equilibrium Price Equilibrium Quantity Exchanged Which determinant changed? 2.5 pts
In the given scenario, we have to determine which determinant changed when we expect the price of copper to rise dramatically in the near future. The determinants that can change the equilibrium quantity and price are: Market price of copper Price of related goods available Availability of substitute goods .
The expected future price of copper The current market demand for copper The current market supply of copper Introduction Demand refers to the quantity of a commodity that consumers are willing to purchase at a specific price. Supply, on the other hand, refers to the amount of a commodity that producers are willing to produce and sell at a certain price. In a competitive market, the equilibrium price is the price at which the quantity demanded by consumers equals the quantity supplied by producers. So, the equilibrium price and quantity exchanged of copper are determined by the intersection of the demand and supply curves.
When the price of copper is expected to rise dramatically in the near future, this will result in a shift in the demand or supply curve. Let's analyze the possible changes: Supply: If the cost of producing copper decreases, the supply curve shifts to the right, leading to a higher equilibrium quantity exchanged, and a lower equilibrium price. If the cost of producing copper increases, the supply curve shifts to the left, leading to a lower equilibrium quantity exchanged, and a higher equilibrium price. Demand: If consumer demand for copper increases, the demand curve shifts to the right, leading to a higher equilibrium price and quantity exchanged. If consumer demand for copper decreases, the demand curve shifts to the left, leading to a lower equilibrium price and quantity exchanged. Expected future price of copper: If consumers expect the price of copper to rise in the future, the demand curve shifts to the right, leading to a higher equilibrium price and quantity exchanged. If producers expect the price of copper to rise in the future, the supply curve shifts to the left, leading to a lower equilibrium quantity exchanged, and a higher equilibrium price. In this case, we expect that the price of copper will rise dramatically in the near future. Therefore, the determinant that changed is the expected future price of copper. When consumers expect the price of copper to rise in the future, the demand curve shifts to the right, leading to a higher equilibrium price and quantity exchanged. Hence, the answer is Demand.
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If the Table Analyzer finds unrelated data in a table, what does it suggest a user do?
O split the table into queries
O break the table into multiple tables
O move all the data to a new report
O move some data to a different database
Answer:
break the table into multiple tables
Explanation:
Answer:
B
Explanation:
Project L requires an initial outlay at t = 0 of $45,000, its expected cash inflows are $11,000 per year for 8 years, and its WACC is 13%. What is the project's payback? Round your answer to two decim
Project L will have a payback period od 4.09 years . The concept of payback is the period of time that it will take to recoup the initial investment for a project. It is calculated by dividing the initial outlay of a project by the expected annual cash flows.
The formula for payback period is as follows:
Payback period = Initial investment / Annual cash inflows
For Project L, the initial outlay is $45,000 and the expected cash inflows are $11,000 per year for 8 years. Therefore, the payback period is:
Payback period = $45,000 / $11,000 per year
Payback period = 4.09 years
Rounding to two decimal places, the payback period for Project L is 4.09 years.
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From the HTS gov website's Harmonized Tariff Schedule:
1. What chapter(s) are associated with machines in general?
2. Work to find an HTS code for computers. What Chapter does the search engine bring you to? Is it clear which HTS is appropriate?
3. Look up computers in the CROSS System. What US Customs ruling(s) do you find that make references to computers? What classification did they use? What was the ruling number?
1. Machines in general are associated with chapters 84, 85, and 90 in the Harmonized Tariff Schedule (HTS) from the HTS gov website.
2. If you search for computers in the HTS search engine, it will bring you to Chapter 84 - Nuclear Reactors, Boilers, Machinery, and Mechanical Appliances; Parts Thereof.
3. When looking up computers in the CROSS System, there are multiple US Customs rulings that make references to computers. One ruling, in particular, is NY J87288
1. Machines in general are associated with chapters 84, 85, and 90 in the Harmonized Tariff Schedule (HTS) from the HTS gov website.2. If you search for computers in the HTS search engine, it will bring you to Chapter 84 - Nuclear Reactors, Boilers, Machinery, and Mechanical Appliances; Parts Thereof. It is clear that the HTS code for computers is in Chapter 84 since computers are considered a type of machinery.
The appropriate HTS code for computers is 8471.30, which covers automatic data processing machines and units thereof, magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.
3. When looking up computers in the CROSS System, there are multiple US Customs rulings that make references to computers. One ruling, in particular, is NY J87288, which classified a product as an automatic data processing machine under HTSUS 8471.50.00. The product was a card reader and controller for magnetic stripe cards. The ruling number for NY J87288 is HQ 964392, issued on September 25, 1997.
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The following data is provided for Garcon Company and Pepper Company for the year ended December 31.
Garcon Company Pepper Company
Finished goods inventory, beginning $ 12,000 $ 16,450
Work in process inventory, beginning 14,500 19,950
Raw materials inventory, beginning 7,250 9,000
Rental cost on factory equipment 27,000 22,750
Direct labor 19,000 35,000
Finished goods inventory, ending 17,650 13,300
Work in process inventory, ending 22,000 16,000
Raw materials inventory, ending 5,300 7,200
Factory utilities 9,000 12,000
General and administrative expenses 21,000 43,000
Indirect labor 9,450 10,860
Repairs—Factory equipment 4,780 1,500
Raw materials purchases 33,000 52,000
Selling expenses 50,000 46,000
Sales 195,030 290,010
Cash 20,000 15,700
Accounts receivable, net 13,200 19,450
1. Prepare income statements for both Garcon Company and Pepper Company.
2. Prepare the current assets section of the balance sheet for each company.
1. Income statements:
Garcon Company:
Sales: $195,030
Cost of Goods Sold: ($12,000 + $14,500 + $7,250 + $33,000) + ($19,000 + $27,000 + $9,000) - ($17,650 + $22,000 + $5,300) = $40,200
Gross Profit: $195,030 - $40,200 = $154,830
Operating Expenses: $21,000 + $9,450 + $4,780 = $35,230
Net Income: $154,830 - $35,230 = $119,600
Pepper Company:
Sales: $290,010
Cost of Goods Sold: ($16,450 + $19,950 + $9,000 + $52,000) + ($35,000 + $22,750 + $12,000) - ($13,300 + $16,000 + $7,200) = $97,550
Gross Profit: $290,010 - $97,550 = $192,460
Operating Expenses: $43,000 + $10,860 + $1,500 = $55,360
Net Income: $192,460 - $55,360 = $137,100
2. Current assets section of the balance sheet:
Garcon Company:
Cash: $20,000
Accounts Receivable: $13,200
Finished Goods Inventory: $17,650
Work in Process Inventory: $22,000
Raw Materials Inventory: $5,300
Total Current Assets: $78,150
Pepper Company:
Cash: $15,700
Accounts Receivable: $19,450
Finished Goods Inventory: $13,300
Work in Process Inventory: $16,000
Raw Materials Inventory: $7,200
Total Current Assets: $71,650
In summary, Garcon Company has a net income of $119,600 and total current assets of $78,150, while Pepper Company has a net income of $137,100 and total current assets of $71,650.
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Composing the First Draft with Effective Sentences Once you have researched, organized your information, and selected an organizational pattern, you are ready to compose your message. To compose a successful message, you must use effective sentences Being able to understand sentence structure and identify sentence types will help you write more effectively Read the following sentences, and then fill in the blanks. The presenter used visual aids to engage the audience. This is a simple sentence. The subject of the independent clause is presenter and the predicate verb e Once he reviewed fall sales, the store owner decided he needed to increase efforts to appeal to younger customers therefore, he hired a marketing consultant to develop a new strategy This is a compound-complex sentence. The subjects of the independent clauses are , and the predicate verbs are decided and hired During the composition process, focus on drafting clear sentences that avoid common sentence fauts t . from business e-mails, and identity the sentence f Chapter 5 Assignment Read the following excerpts from business e-mails, and identify the sentence faults. TED Thank you for taking the time to interview me for the program coordinator position. I enjoyed meeting everyone. And learning more about the company. calog fers This message contains a fragment ons ccess We will host focus groups on Thursday afternoon to hear from you firsthand, and we will summarize employee input for the CEO. Your participation is appreciated. enter to CENGAGE TED today! This message contains GRADE rn more You work in the Human Resources department of a large company and are asked to send a company-wide e-mail about an upcoming career development workshop. You have completed your first draft of the e-mail Read the draft below, and the answer the question that follows eedback The Human Resources department is happy to announce a career development workshop the workshop will be led by Joseph Pelletier. Joseph has 20 years of experience in career development training he will help you gain a clearer understanding of your career goals and will also discuss tools to work toward your career goals. The workshop will take place November 10 and 11 in the conference room nearest the parking lot on the third floor of the building. From 9:30a.m. in the morning to 5:30 pm in the evening unless goes longer or ends more quickly than expected. There will be coffee and tea in the morning, and then there will be lunch provided in the afternoon. Respond to this e-mail to sign up if you are interested in this career development workshop led by Joseph Pelletier. Because there . Anots a Successful Read the draft below, and then answer the question that follows. The Human Resources department is happy to announce a career development workshop the workshop will be led by Joseph Pelletier. Joseph has 20 years of experience in career development training he will help you gain a clearer understanding of your career goals and will also discuss tools to work toward your career goals. The workshop will take place November 10 and 11 in the conference room nearest the parking lot on the third floor of the building. From 9:30 a.m. In the morning to 5:30 p.m. In the evening unless it goes longer or ends more quickly than expected. There will be coffee and tea in the morning, and then there will be lunch provided in the afternoon. Respond to this e-mail to sign up if you are interested in this career development workshop led by Joseph Pelletier. Because there are only 40 spots. How could you improve this message? Check all that apply. Correct fragments. Use only complex sentences. Correct run-on sentences. Use only simple sentences. Reduce sentence lengths.
Consider the following points to improve your message: Use only simple sentences, Fix the snippet Use only complex sentences, Correct the following sentences .
Consecutive sentences are formed when two or more independent sentences are accidentally combined or combined without proper punctuation. The original message did not contain any supplemental text and should not be changed.
In the sentence, "HR is pleased to announce a career development workshop led by Joseph Peltier," add a period after "workshop" to form two complete sentences. A compound clause contains both independent and dependent clauses. The original message already contains complex sentences and does not need to be changed.
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Pompeii Pizza Club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a debt-equity ratio of 45 percent and makes interest payments of $52,000 at the end of each year. The cost of the firm’s levered equity is 17 percent. Each store estimates that annual sales will be $1.425 million; annual cost of goods sold will be $795,000; and annual general and administrative costs will be $455,000. These cash flows are expected to remain the same forever. The corporate tax rate is 25 percent.
a. Use the flow to equity approach to determine the value of the company’s equity. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)
b. What is the total value of the company? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)
a) The value of the company's equity, determined using the flow to equity approach, is $466,176.47. b) The total value of the company is $847,501.77.
Calculate the FCFE:
Annual sales: $1,425,000
Cost of goods sold: $795,000
General and administrative costs: $455,000
Interest payment: $52,000
EBT (Earnings Before Taxes) = Annual sales - Cost of goods sold - General and administrative costs
EBT = $1,425,000 - $795,000 - $455,000 = $175,000
Tax expense = EBT * Tax rate
Tax expense = $175,000 * 0.25 = $43,750
Net income (NI) = EBT - Tax expense
Net income = $175,000 - $43,750 = $131,250
FCFE = NI + Depreciation - Capital Expenditure - Increase in Working Capital - Interest payment
Assuming no depreciation, capital expenditure, or change in working capital mentioned in the question:
FCFE = $131,250 - $52,000 = $79,250
Calculate the value of equity:
Value of equity = FCFE / Cost of levered equity
Cost of levered equity = 17%
Value of equity = $79,250 / 0.17 = $466,176.47
Therefore, the value of the company's equity is $466,176.47.
To calculate the total value of the company, we can use the debt-equity ratio and the value of equity.
Total value of the company = Value of equity / Equity proportion
Equity proportion = 1 - Debt proportion
Debt proportion = 45%
Equity proportion = 1 - 0.45 = 0.55
Total value of the company = $466,176.47 / 0.55 = $847,501.77
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2. Calculate the two Direct Labour variances, clearly classify each as Favourable (F) or Unfavourable (U), and interpret what each variance is indicating about the business (4 marks) Direct Labour Rat
The two Direct Labour varencies are Direct Labour Efficiency Variance = $17,825 (Favourable) and Direct Material Usage Variance = -$6,348 (Unfavourable)
Direct Material Variances:
a) Direct Material Price Variance:
Actual quantity purchased: 3,200 kg
Actual cost: $11,360
Standard price: $3.45 per kg
Calculation:
Direct Material Price Variance = (Actual Quantity Purchased x Standard Price) - Actual Cost
Direct Material Price Variance = (3,200 kg x $3.45/kg) - $11,360
Direct Material Price Variance = $11,040 - $11,360
Direct Material Price Variance = -$320 (Unfavourable)
Interpretation: The Direct Material Price Variance of -$320 indicates that the actual cost per kilogram of raw material purchased was higher than the standard cost.
This could be due to factors such as increased market prices or inefficient purchasing practices.
b) Direct Material Usage Variance:
Actual quantity used: 9,200 units
Standard usage: 0.8 kg per bed
Standard cost: $3.45 per kg
Calculation:
Standard quantity allowed = Standard usage per bed x Actual units sold
Standard quantity allowed = 0.8 kg/bed x 9,200 beds
Standard quantity allowed = 7,360 kg
Direct Material Usage Variance = (Standard Quantity Allowed x Standard Price) - (Actual Quantity Used x Standard Price)
Direct Material Usage Variance = (7,360 kg x $3.45/kg) - (9,200 kg x $3.45/kg)
Direct Material Usage Variance = $25,392 - $31,740
Direct Material Usage Variance = -$6,348 (Unfavourable)
Interpretation: The Direct Material Usage Variance of -$6,348 indicates that more raw material was used per unit of puppy bed than the standard.
This could be due to factors such as inefficient production processes, material waste, or suboptimal quality control.
Direct Labour Variances:
a) Direct Labour Rate Variance:
Actual hours worked: 5,750 hours
Actual cost: $93,725
Standard rate: $15.50 per hour
Calculation:
Direct Labour Rate Variance = (Actual Hours Worked x Standard Rate) - Actual Cost
Direct Labour Rate Variance = (5,750 hours x $15.50/hour) - $93,725
Direct Labour Rate Variance = $89,125 - $93,725
Direct Labour Rate Variance = -$4,600 (Unfavourable)
Interpretation: The Direct Labour Rate Variance of -$4,600 indicates that the actual cost per hour of direct labor was higher than the standard cost.
This could be due to factors such as increased wage rates, overtime payments, or inefficiencies in labor management.
b) Direct Labour Efficiency Variance:
Actual hours worked: 5,750 hours
Standard hours allowed: (Actual units sold x Standard labor time per bed)
Standard hours allowed: (9,200 beds x 0.75 hours/bed)
Standard hours allowed: 6,900 hours
Direct Labour Efficiency Variance = (Standard Hours Allowed x Standard Rate) - (Actual Hours Worked x Standard Rate)
Direct Labour Efficiency Variance = (6,900 hours x $15.50/hour) - (5,750 hours x $15.50/hour)
Direct Labour Efficiency Variance = $106,950 - $89,125
Direct Labour Efficiency Variance = $17,825 (Favourable)
Interpretation: The Direct Labour Efficiency Variance of $17,825 indicates that the actual labor hours worked were less than the standard hours allowed for the level of production achieved. This suggests that the company's workforce was more efficient than expected, resulting in labor cost savings.
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Question:JZ Treats Ltd wants to evaluate their production efficiency with regard to one of their top selling products - puppy beds. Budgeted production was 8,500 units with the following standard costs for inputs per unit: Standard Cost $3.45 per kg $15.50 per hour Standard Usage per bed 0.8 kg 0.75 hours Direct Material Direct Labour Actual operating results for the year were as follows: Inventory:Beginning inventory at the start of the year Closing inventory at the end of the year Inventory sold during the year 7.500 units 6,400 units 9,200 units Direct Material: Beginning Raw Material at the start of the year 11,500 kg Closing Raw Material at the end of the year 8,400 kg Raw Material purchased during the year 3,200 kg at an actual cost of $11,360 Direct Labour Actual Hours worked Actual Cost 5,750 hours $93,725 Required: Required: 1. Calculate the two Direct Material variances, clearly classify each as Favourable (F) or Unfavourable (U), and interpret what each variance is indicating about the business (4 marks) Direct Material Price Variance = $ Interpretation: Direct Material Usage Variance = $ Interpretation: 2. Calculate the two Direct Labour variances, clearly classify each as Favourable (F) or Unfavourable (U), and interpret what each variance is indicating about the business (4 marks) Direct Labour Rate Variance = $ Interpretation: Direct Labour Efficiency Variance = $ Interpretation.
Required information (The following information applies to the questions displayed below] Forten Company's current year income statement, comparative balance sheets, and additional information follow. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, and (4) all debits to Accounts Payable reflect cash payments for inventory. FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) $ 145,400 33,750 Depreciation expense Other gains (losses). Loss on sale of equipment Income before taxes Income taxes expense Net income Assets Cash Accounts receivable. Inventory Prepaid expenses Total current assets FORTEN COMPANY Comparative Balance Sheets December 31 Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity $647,500 298,000 349,500 179, 150 (18.125) 152,225 42,450 $ 109,775 Current Year Prior Year $69,400 85,400 295,156 1,340 451,296 144,500 (43,125) $ 552,671 $ 86,500 63,625 264,800 2,155 417,080 121,000 (52,500) $ 485,580 Assets Cash FORTEN COMPANY Comparative Balance Sheets December 31 Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable. Long-term notes payable Total liabilities Current Year $ 69,400 85,400 295,156 1,340 451,296 144,500 (43,125) $ 552,671 d. Paid $51,325 cash to reduce the long-term notes payable. e. Issued 3,800 shares of common stock for $20 cash per share. f. Declared and paid cash dividends of $52,700. $ 66,141 72,400 138,541 Prior Year $ 86,500 63,625 264,800 2,155 182,250 57,000 174,880 $ 552,671 417,080 121,000 (52,500) $ 485,580 Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $18,125 (details in b). b. Sold equipment costing $85,875, with accumulated depreciation of $43,125, for $24,625 cash. c. Purchased equipment costing $109,375 by paying $56,000 cash and signing a long-term notes payable for the balance.. $ 134,175 70,350 204,525 163,250 0 117,805 $ 485,580 es Required: 1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.) Cash flows from operating activities FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Changes in current assets and current liabilities Cash flows from investing activities # $ Next > 0 0 D 2 nts Book rint 3 ences Required information Income statement items not affecting cash Changes in current assets and current liabilities Cash flows from investing activities Cash flows from financing activities: Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ $ 0 0 0 0 0
Cash flows from operating activities:
Net income + Depreciation expense - Loss on sale of equipment = $134,175 + $18,125 - $18,125 = $134,175.
To prepare the statement of cash flows using the indirect method, we need to analyze the given information and make adjustments to the net income.
Starting with the net income of $134,175, we add back the depreciation expense of $18,125 since it is a non-cash expense. We deduct the loss on the sale of equipment of $18,125 since it is a non-operating loss.
The resulting calculation for cash flows from operating activities is $134,175 + $18,125 - $18,125 = $134,175.
This represents the net cash provided by operating activities for the current year.
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Charlie's Handyman Services purchased a new vehicle 1 July 2017. The vehicle cost $57,000, the vehicle needed to be fitted with an attached toolbox to make it useful for the business costing $4,550. With the new fit out it was estimated that the vehicle would have a useful life of five (5) years and a salvage value of $2,500. a. What is the cost of the vehicle to Charlie's Handyman Services? [1 mark] b. What would be the amount of accumulated depreciation and the carrying value of the asset at the 30 June 2020, if we were to use the straight-line depreciation method? [2 marks] c. What would be the amount of accumulated depreciation and the carrying value of the asset at the 30 June 2020, if we were to use the diminishing balance method of depreciation? [2 marks] d. If we sold the vehicle for $12,500 at the 30 June 2020 what profit or loss would occur under b. and c.? [2 marks] e. Do we record depreciation in the Cash Flow Statement? Give the reason for your answer (Maximum 100 words)
a. The cost of the vehicle to Charlie's Handyman Services is $61,550 (57,000 + 4,550).b. The amount of accumulated depreciation and carrying value of the asset as of June 30, 2020, using the straight-line method of depreciation, would be $34,600 and $26,950, respectively.
b. The formula for the straight-line method is: Depreciation = (Cost - Salvage Value) / Useful Life Depreciation = (61,550 - 2,500) / 5 = $11,210Accumulated Depreciation = Depreciation x Number of Years of Use Accumulated Depreciation = $11,210 x 3 = $33,630.
Carrying Value = Cost - Accumulated Depreciation Carrying Value = $61,550 - $33,630 = $26,920c. The amount of accumulated depreciation and carrying value of the asset as of June 30, 2020, using the diminishing balance method of depreciation, would be $39,288.44 and $22,261.56, respectively. The formula for the diminishing balance method is: Depreciation = Depreciation Rate x Carrying Value Depreciation = 2 x (Cost - Accumulated Depreciation) / Useful Life Depreciation = 2 x (61,550 - 0) / 5 = $24,620.00Year
1 Accumulated Depreciation = $24,620 x 2 = $49,240Year 2 Accumulated Depreciation = $24,620 x 2 = $24,620Year 3 Accumulated Depreciation = $22,261.56 ($61,550 - $49,240 - $24,620)Carrying Value = Cost - Accumulated Depreciation Carrying Value = $61,550 - $22,261.56 = $39,288.44d. Under the straight-line method of depreciation, the vehicle's profit would be $2,549.56 ($26,950 - $24,620 - $2,500).
Under the diminishing balance method of depreciation, the vehicle's profit would be $16,239.72 ($22,261.56 - $12,500).e. Yes, depreciation is recorded in the Cash Flow Statement because it is a non-cash expense that reduces net income. The indirect method of the Cash Flow Statement is used to present the effect of non-cash expenses like depreciation on the company's cash balance.
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On May 26, 2022 the future value of a sum of money will be $73,800. What would be the present value of this sum of money on December 3, 2020, if the interest rate is 2.64% compounded quarterly. Round the value for PV to two decimal places. PAY = C/Y = DBD = days IY = % PV = $ PMT = $ FV = $
The present value of the sum of money on December 3, 2020, would be $71,298.58 when the interest rate is 2.64% compounded quarterly.
To calculate the present value (PV) of a sum of money on a specific date, we can use the PV function in financial calculations. In this case, we are given that the future value (FV) of the sum of money on May 26, 2022, is $73,800. We need to find the present value of this amount on December 3, 2020, with an interest rate of 2.64% compounded quarterly.
To calculate the PV, we use the formula:
PV = FV / (1 + (IY / PAY))^(DBD / PAY)
Here, PAY represents the number of compounding periods in a year, which is 4 for quarterly compounding. DBD is the number of days between the two dates, and IY is the interest rate as a decimal.
Plugging in the given values:
FV = $73,800
IY = 2.64% or 0.0264
PAY = 4
DBD = 552 (days between December 3, 2020, and May 26, 2022)
Substituting these values into the formula, we get:
PV = $73,800 / (1 + (0.0264 / 4))^(552 / 4) ≈ $71,298.58
Therefore, the present value of the sum of money on December 3, 2020, would be approximately $71,298.58 when the interest rate is 2.64% compounded quarterly.
This means that to have an equivalent amount of $73,800 on May 26, 2022, the present value of the sum of money should be approximately $71,298.58, taking into account the compounding effects and time value of money.
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Which of the following is not true?
A. Holding other things constant, the duration of a bond increases with time to maturity.
B. Given time to maturity, the duration of a zero-coupon decreases with yield to maturity.
C. Given time to maturity and yield to maturity, the duration of a bond is higher when the coupon rate is lower.
D. Duration is a better measure of price sensitivity to interest-rate changes than is time to maturity.
E. All of the options are correct.
The correct option that is not true from the following is option D, "Duration is a better measure of price sensitivity to interest-rate changes than is time to maturity".
Duration is the weighted average of the cash flow of the bond, where the weights are the portion of the total present value of the bond, given by the cash flow, at each period of time. It is a method of calculating the weighted average time required to receive all the payments made from a bond.
Duration has its relevance in bond trading. It is helpful in determining the bond's price sensitivity towards interest rates.The duration is not a better measure of price sensitivity to interest-rate changes than is time to maturity because the duration is not a perfect measure of price sensitivity to interest-rate changes. It is because duration assumes a flat yield curve.
When the yield curve is not flat, the slope of the yield curve affects the bond's price sensitivity to interest-rate changes more than the bond's maturity alone.Duration, time to maturity, and coupon rate are the most important variables for pricing bonds. They are used to calculate the bond's sensitivity to changes in interest rates.
Holding other things constant, the duration of a bond increases with time to maturity, given time to maturity, the duration of a zero-coupon decreases with yield to maturity, and given time to maturity and yield to maturity, the duration of a bond is higher when the coupon rate is lower.
These statements are correct.Therefore, the correct option that is not true from the following is option D, "Duration is a better measure of price sensitivity to interest-rate changes than is time to maturity".
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The Assistant General Manager (AGM) has full trust in his highly experienced, motivated, and disciplined subordinates. He believes that these characteristics act in place of the need for constant direction and hence make constant leadership unnecessary in this situation. Specify the leadership theory that the AGM is following in this case. [Explanation is not required) Use the editor to format your answer
The leadership theory that the AGM is following in this case is the situational theory of leadership. This theory suggests that leadership is contingent on the situation, and leaders adapt their style to fit the situation at hand.
In this case, the AGM believes that his subordinates are highly experienced, motivated, and disciplined, and therefore do not require constant direction. The AGM has placed his trust in their abilities and given them the autonomy to make decisions and take actions without constant supervision.
This leadership approach is known as delegative or laissez-faire leadership, where the leader trusts their subordinates to make the right decisions and take the necessary actions without the need for constant direction. The main answer to this question is that the AGM is following the situational theory of leadership, while the explanation includes the concepts of delegative or laissez-faire leadership.
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When the Indirect Method is used to prepare the Statement of Cash Flows, the amortization of a premium on bonds payable is taken into account when computing the cash that comes from
a.
financing activities.
b.
investment activities.
c.
planning activities.
d.
operational activities.
When the Indirect Method is used to prepare the Statement of Cash Flows, the amortization of a premium on bonds payable is taken into account when computing the cash that comes from financing activities. Hence, option A is the correct choice.
Statement of Cash Flows, also known as cash flow statement, is a financial statement that gives the details of a company's cash inflows and outflows from its operations, investments, and financing activities over a specific period. The statement of cash flows' primary purpose is to provide stakeholders, investors, creditors, and other interested parties with insight into a company's liquidity position, operational efficiency, and financial performance. It is also a critical tool in determining a company's financial health and identifying potential issues that could affect the company's ability to operate effectively and efficiently.
The indirect method is a technique used to prepare the statement of cash flows. It is also known as the reconciliation method, and it is a method that starts with net income and adjusts it to derive cash flows from operating activities. The indirect method uses adjustments to reconcile net income with cash flows from operating activities. Non-cash items such as depreciation, amortization, and deferred taxes are added back, while increases or decreases in current assets and liabilities are considered.
Bonds payable are long-term debt securities issued by companies, governments, or other organizations to raise funds for various purposes such as expansion, acquisition, or working capital. These bonds have a specified maturity date, usually ranging from 10 to 30 years. Option A.
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Two reasons why it is important for a chocolate manufacturing company(or any company) to develop new products?
If you are the producer, what is your profit maximizing decision, given your isocost and isoquant?
a. Will produce at the point where the slope of the isoquant is equal to the slope of the isocost
b. Will produce at the point where the isoquant is equal to the isocost
c. Will produce at the highest isoquant, with the least cost d. Will produce at the point where the total cost at the minimum
If you are the producer, your profit maximizing decision, given your isocost and isoquant is that you will produce at the highest isoquant, with the least cost.b
Option c is the correct answer. A producer will attempt to obtain the maximum possible profit. The following steps will help the producer to maximize his or her profit:Step 1: The producer must determine the cost of the required inputs to produce a specific product.Step 2: The producer should then consider the quantity of output that can be produced with the given inputs. This will be represented by the isoquant.Step 3: The producer should compare the isoquant and the isocost lines.
The isocost line depicts all of the possible input quantities that can be obtained for a given cost. The intersection of the isocost and isoquant lines will indicate the producer's profit-maximizing point.Step 4: The producer will produce at the highest possible isoquant, at the least possible cost. At this point, the slope of the isoquant is equal to the slope of the isocost line.
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A $2,500 6.5% eight year bond had annual coupons. If it is purchased for $2,590, the investor will anticipate 5.4% annual yield for the eight year investment. Find the redemption amount on this bond.
The answer is $2,370.69
Please show work, Thanks!
The redemption amount on this bond is approximately $616.16. It seems there was an error in the given answer.
To find the redemption amount on the bond, we need to calculate the future value of the bond at the end of the eight-year period. The redemption amount represents the principal value of the bond that will be paid back to the investor at maturity.
Given:
Coupon rate = 6.5%
Face value (Principal) = $2,500
Purchase price = $2,590
Yield (Discount rate) = 5.4%
Number of years = 8
First, let's calculate the annual coupon payment:
Coupon payment = Coupon rate * Face value
Coupon payment = 6.5% * $2,500
Coupon payment = $162.50
Next, let's calculate the future value of the bond using the purchase price and the annual yield:
Future value = Purchase price / (1 + Yield)^Number of years
Future value = $2,590 / (1 + 5.4%)^8
Future value = $2,590 / (1 + 0.054)^8
Future value = $2,590 / (1.054)^8
Future value = $2,590 / 1.504899
Future value ≈ $1,721.34
To find the redemption amount, we subtract the sum of the future value and the final coupon payment from the face value of the bond:
Redemption amount = Face value - (Future value + Final coupon payment)
Redemption amount = $2,500 - ($1,721.34 + $162.50)
Redemption amount ≈ $2,500 - $1,883.84
Redemption amount ≈ $616.16
Therefore, the redemption amount on this bond is approximately $616.16. It seems there was an error in the given answer.
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1. Give a precise and complete definition or explanation of the following concepts, models or theories: (a) a balanced growth path; (10 marks) I (b) the role of the rate of capital depreciation at steady-state equilibrium in the Solow model; (10 marks) (c) indeterminacy of a rational expectations equilibrium; (10 marks) (d) a Dixit-Stiglitz (1977) "ideal" Home-good price level aggregator (or index); hint: this should denote, by a subscript H, the price PH at t of a Home-produced differentiated good / in the case of an open economy when foreign goods are imported and also available for consumption, and therefore entering the consumer price index; (10 marks) (e) the concept of learning by doing in Arrow's (1962) model. (10 marks)
(a) The balanced growth path refers to a state where all economic variables of an economy grow at a steady pace and is sustainable indefinitely.
(b) In the Solow model, steady-state equilibrium is a point where capital per worker is constant over time, and the economy is growing at a constant rate.
(c) The indeterminacy of a rational expectations equilibrium refers to the fact that there can be multiple equilibria in a rational expectations model.
(d) The Dixit-Stiglitz (1977) "ideal" Home-good price level aggregator is a measure of the price level of a basket of goods produced in the home country.
(e) The concept of learning by doing in Arrow's (1962) model refers to the idea that the process of production can lead to improvements in productivity.
(a) Balanced growth path
An economy is said to be on a balanced growth path when there is an optimal rate of capital accumulation, labour supply, population growth, technological progress, and output growth. A balanced growth path is often characterized by a constant rate of growth of consumption, output, and capital, where the rates of return to capital and labour are constant over time. It is an equilibrium state, where the economy is neither growing nor shrinking.
(b) Role of the rate of capital depreciation at steady-state equilibrium in the Solow model
In the Solow model, steady-state equilibrium is a point where capital per worker is constant over time, and the economy is growing at a constant rate. The role of the rate of capital depreciation in the steady-state equilibrium is to determine the optimal level of investment. The steady-state level of capital per worker depends on the rate of investment and the rate of depreciation.
The higher the rate of depreciation, the higher the rate of investment required to maintain the same level of capital per worker. The lower the rate of depreciation, the lower the rate of investment required to maintain the same level of capital per worker.
(c) Indeterminacy of a rational expectations equilibrium
The indeterminacy of a rational expectations equilibrium can predict more than one equilibrium outcome for the same set of parameters. This is due to the fact that the model is characterized by self-fulfilling expectations, which means that agents' expectations can determine the outcome of the model. As a result, the rational expectations equilibrium can be indeterminate.
(d) Dixit-Stiglitz (1977) "ideal" Home-good price level aggregator
The Dixit-Stiglitz (1977) "ideal" Home-good price level aggregator is is used to calculate the inflation rate in an economy. The "ideal" aggregator is a weighted average of the prices of different goods, where the weights are determined by the share of each good in total expenditure.
The aggregator is differentiated across goods, meaning that it takes into account the fact that goods are not perfect substitutes for each other. The subscript H denotes the price PH at t of a Home-produced differentiated good in the case of an open economy when foreign goods are imported and also available for consumption, and therefore entering the consumer price index.
(e) Learning by doing in Arrow's (1962) model
The concept of learning by doing in Arrow's (1962) model refers to the process of production concept which can lead to improvements in productivity. In other words, workers can become more efficient over time as they gain experience and knowledge from doing a task repeatedly.
This can lead to a reduction in the cost of production, which in turn can increase output and economic growth. Arrow's model shows how technological progress can be endogenous, meaning that it can be the result of economic decisions rather than exogenous factors such as scientific breakthroughs.
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Myca Corporation has a project with the following cash flows. What is the value of the cash flows today assuming an anual interest rate of 8.8 percent? Year 1234 2 Cash Flow $1,580 1,940 2,220 2,230
Therefore, the value of the cash flows today is $7,863.06 assuming an annual interest rate of 8.8 percent.
When we talk about finance, a cash flow is a record or statement that tracks the amount of cash or cash equivalents moving in and out of a business over time.
The term 'cash flow' is frequently used to describe three different but equivalent concepts: Net cash flow, Free cash flow, Operating cash flow . In this scenario, we are working with net cash flows, which are cash inflows minus cash outflows for a particular period. The calculation of net present value (NPV) involves determining the present value of future cash flows. Future cash flows must be estimated, and the discount rate used to estimate them must be determined.
What is the value of the cash flows today assuming an annual interest rate of 8.8 percent?
Year 1 Cash Flow $1,580
Year 2 Cash Flow $1,940
Year 3 Cash Flow $2,220
Year 4 Cash Flow $2,230
To determine the present value of cash flows, we use the formula;
PV = CF1 / (1 + r)1 + CF2 / (1 + r)2 + CF3 / (1 + r)3 + CF4 / (1 + r)4
Where: PV = Present Value, CF = Cash Flow, r = Discount Rate,
Year 1: $1,580/(1+0.088)¹ = $1,454.11
Year 2: $1,940/(1+0.088)² = $1,702.11
Year 3: $2,220/(1+0.088)³ = $1,849.51
Year 4: $2,230/(1+0.088)⁴ = $1,857.33
Adding the four discounted cash flows will give us the present value of the cash flows today.
PV = $1,454.11 + $1,702.11 + $1,849.51 + $1,857.33PV = $7,863.06
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In december, emily sold an antique rug for $4,100. she bought the rug 5 years ago for $1,100. what is her taxable gain and at what maximum rate will it be?
The taxable gain of Emily and at what maximum rate it will be for the sale of an antique rug for $4,100 she bought 5 years ago for $1,100 is $3,000.
Emily's maximum rate will depend on her income tax bracket. The capital gains tax rate depends on the individual's taxable income.
To compute taxable gain, we need to calculate the cost basis of the rug. Here's how:
Cost Basis = Purchase Price + Improvements Made - Depreciation
Emily did not make any improvement on the rug, nor did she use it for business purposes. Hence, the depreciation cost is zero.
Purchase price = $1,100
Improvements = 0
Depreciation = 0
Cost basis = $1,100
Now that we know the cost basis of the antique rug, we can compute the taxable gain:
Taxable gain = Selling Price - Cost Basis
Selling price = $4,100
Cost basis = $1,100
Taxable gain = $4,100 - $1,100 = $3,000
This means that Emily will pay tax on the $3,000 taxable gain. The tax rate on capital gains is not constant. It depends on the individual's income tax bracket. If the taxable gain is $3,000, then Emily will add this amount to her other taxable income (if she has any), and the total will determine the tax bracket.
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Suppose the demand for Digital Video Recorders (DVRs) is given by Q = 1,480 + (70/p) + 6p where Q is the quantity of DVRs demanded (in 1000s), p is the price of a DVR, and pc is the price of cable television. How much does the quantity demanded for DVRs change if p increases from $5.0 to $8.0?
The demand function is given by: Q = 1,480 + (70/p) + 6pThe quantity demanded for DVRs changes if p increases from $5.0 to $8.0 can be calculated as follows:
The quantity demanded for DVRs when p = $5.0 is: Q = 1,480 + (70/5.0) + 6(5.0) = 1,480 + 14 + 30 = 1,524 thousand. The quantity demanded for DVRs when p = $8.0 is: Q = 1,480 + (70/8.0) + 6(8.0) = 1,480 + 8.75 + 48 = 1,536.75 thousand.
Therefore, the quantity demanded for DVRs change is 1,536.75 – 1,524 = 12.75 thousand (or 12,750 DVRs).Therefore, the quantity demanded for DVRs will increase by 12,750 if p increases from $5.0 to $8.0. This result is obtained by finding the difference in the quantity demanded when p is $8.0 and when p is $5.0.
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Stock A has an expected return of 13% and a standard deviation of 18%. Stock B has an expected return of 15% and a standard deviation of 16%. Which would be preferred by a more risk-averse investor? a
Investors who are more risk-averse, i.e., they would like to avoid risks and are cautious about investing in stocks, would prefer the stock with a lower standard deviation. This is because the standard deviation is a measure of the risk associated with a particular stock.
The stock with a lower standard deviation is expected to have less variation in returns and is considered less risky by investors. Therefore, the more risk-averse investor would prefer Stock B.Stock A:Expected return = 13%Standard deviation = 18%Stock B:Expected return = 15%Standard deviation = 16% The concept of risk and return is essential for investors to make wise investment decisions. The risk and return tradeoff determines how much risk investors are willing to take to earn a specific return. A higher expected return is usually associated with a higher level of risk. However, this risk can be mitigated by diversification and investing in a portfolio of stocks instead of a single stock. Stock A has an expected return of 13% and a standard deviation of 18%. This implies that the returns from Stock A are expected to vary widely around the average return of 13%. The risk associated with Stock A is considered high because the standard deviation is high.Stock B has an expected return of 15% and a standard deviation of 16%.
This means that the returns from Stock B are expected to vary less around the average return of 15% compared to Stock A. The risk associated with Stock B is considered low because the standard deviation is low. Therefore, a more risk-averse investor would prefer Stock B because it has a lower standard deviation and is considered less risky. Investors should always consider the risk and return tradeoff while making investment decisions. A higher expected return is usually associated with a higher level of risk. However, investors can mitigate this risk by diversifying their investments and investing in a portfolio of stocks instead of a single stock. Investors who are more risk-averse would prefer stocks with a lower standard deviation as they are considered less risky and have less variation in returns.
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After being observed many times, Bevarly Demarr, a hospital lab analyst, had an average observed time for blood tests of 10 minutes. Beverly’s performance rating is 105%. The hospital has a personal, fatigue, and delay allowance of 18%. a.) The normal time for this process = __minutes (round your response to one decimal place) b.) The standard time for this blood test = minutes (round your response to one decimal place)
Given: Average observed time for blood tests = 10 minutes Performance rating of Beverly = 105%Personal, fatigue, and delay allowance = 18%
We are to calculate: Normal time for this process and Standard time for this blood test.
(a) Normal time = Average observed time / Performance rating⇒ Normal time = 10 / 1.05⇒ Normal time = 9.5238⇒ Normal time = 9.5 minutes (rounded to one decimal place)
(b) Standard time = Normal time / (1 - Personal, fatigue, and delay allowance)⇒ Standard time = 9.5 / (1 - 0.18)⇒ Standard time = 11.5854⇒ Standard time = 11.6 minutes (rounded to one decimal place)
Therefore, the normal time for this process is 9.5 minutes, and the standard time for this blood test is 11.6 minutes (rounded to one decimal place).
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( PLEASE VERY IMPORTANT USE YOUR OWN WORDS )
Assignment Questions:
Auditing standards provide guidance for the auditor that helps
determine the extent of audit steps and procedures that should be
appl
Auditing standards are the standards that provide guidance to the auditor to conduct the audit.
These standards assist the auditor in establishing the extent of audit steps and procedures that need to be performed to conduct the audit. These procedures are categorized into three types of audit procedures, namely, risk assessment procedures, tests of controls, and substantive procedures. Risk assessment procedures are used to determine the risk of material misstatement that could occur due to fraud or error.
The auditor performs this procedure to evaluate the risks that exist in the financial statements. Tests of controls procedures are used to evaluate the effectiveness of the controls that exist in the entity's system of internal control. The auditor performs this procedure to determine whether the controls have been implemented effectively.
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D Question 11 1 pts Edward wants to invest in a bank CD that will pay him 8 percent annually. If he invests $13,000 today, when will he reach his goal of $20,000? (Round off to the nearest year.) OB y
Edward will reach his goal of $20,000 in 6 years.
Given that Edward wants to invest in a bank CD that will pay him 8 percent annually and he wants to reach his goal of $20,000 after investing $13,000 today.
To determine when will he reach his goal of $20,000, let's use the formula:
`A = P(1 + r/n)^(n*t)`
where
A = Amount
P = Principal or initial investment
r = Annual interest rate
n = Number of times compounded per year
t = Number of years
Let's substitute the given values:
Initial Investment, P = $13,000
Future Value, A = $20,000
Annual Interest Rate, r = 8%
Number of years, t = ?
Now let's solve for t:
`A = P(1 + r/n)^(n*t)`
=> `(A/P) = (1 + r/n)^(n*t)`
=> `t = (log(A/P)) / (n * log(1 + r/n))`
Substituting the given values, we get:
t = (log(20000/13000)) / (1 * log(1 + 0.08/1))
t = 5.85
≈ 6 years
Hence, Edward will reach his goal of $20,000 in 6 years.
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Question # 02:
Loss intimated amount : Rs. 575,000/=
Sum insured: Rs. 1,500,000/=
Following information available for calculation of assessed value;
1- Market value of asset at the time of insurance arrangement Rs. 1,700,000/=
2- Market value of asset at the time of loss Rs. 500,000/=
3- Depreciation: 5% of loss amount
4- Deductible: Rs. 25,000/= each and every loss
5- Salvage value: 30,000/=
Requirement: Calculate Assessed loss.
For the given set of information, the assessed loss is Rs. 945,000/
The term "assessed loss" refers to the calculated value or sum decided by an insurance company or another party with authority to represent the monetary loss or damage incurred by the insured party as a result of an insured event. It represents the assessed or evaluated value of the loss after taking into account various elements, including the asset's market value at the time of the loss, depreciation, deductibles, salvage value and other pertinent factors.
Actual Loss = Sum Insured - Market Value at the time of loss
Actual Loss = Rs1,500,000 - Rs500,000
Actual Loss = Rs1,000,000
Depreciation = 5% of Actual Loss
Depreciation = 0.05 × Rs1,000,000
Depreciation = Rs50,000
Net Loss = Actual Loss - Salvage Value - Deductible
Net Loss = Rs1,000,000 - Rs30,000 - Rs.25,000
Net Loss = Rs.945,000
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The Economist publishes annually the "Big Mac Index" by which they compare the prices of the McDonald's Corporation's Big Mac hamburger around the world. The index estimates the exchange rates for currencies based on the assumption that the burgers in question are the same across the world and therefore, the price should be the same. If a Big Mac costs $2.54 in New York and 2.94 Swiss Franc (CHF) in Zurich, and the real exchange rate between is 1 USD = 1.1245CHF, a) Compute the CHF/USD theoretical exchange rate. b) Is the CHF/USD is under-, over- or fair-valued? C) Which theory you employ to answer part (a) and (b)?
a) CHF/USD theoretical exchange rate 1.1575 CHF per USD. B) CHF is under valued .c) The Purchasing Power Parity (PPP) theory is used to determine the theoretical exchange rate
The Big Mac Index is used to compare the prices of a McDonald's Corporation hamburger, the Big Mac, around the world. According to the index, the burgers in question are the same across the world, and the price should be the same as well. If a Big Mac hamburger costs $2.54 in New York and 2.94 Swiss Franc (CHF) in Zurich, and the real exchange rate between them is 1 USD = 1.1245 CHF, we can compute the CHF/USD theoretical exchange rate.
b) To determine if the CHF/USD is under-, over-, or fair-valued, we must compare the theoretical exchange rate with the real exchange rate. If the theoretical exchange rate is higher than the real exchange rate, the CHF is undervalued, and if the theoretical exchange rate is lower than the real exchange rate, the CHF is overvalued. If the theoretical exchange rate is equal to the real exchange rate, the CHF is fair-valued. 1 USD = 1.1245 CHF < 1.1575 CHF per USD, therefore, the CHF is undervalued.
c) The Purchasing Power Parity (PPP) theory is used to determine the theoretical exchange rate, and we employ the Relative PPP theory to determine if the CHF/USD is under-, over-, or fair-valued.
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What is the effective annual yield of 8.7% compounded continuously? The effective annual interest rate is % ___________
The effective annual interest rate is 9.21%.
To find the effective annual yield of 8.7% compounded continuously, use the following formula:Effective annual yield = e^(rt) - 1
Where:
r = annual interest rate in decimal form
t = time period in years
Here, the annual interest rate is 8.7% and it is compounded continuously.
So, the value of r and t are as follows:
r = 8.7% = 0.087t = 1 (since the time period is 1 year for calculating effective annual yield)
Now, substitute the values of r and t into the formula:
Effective annual yield = e^(rt) - 1= e^(0.087 × 1) - 1= e^0.087 - 1= 0.0921 or 9.21% (rounded to two decimal places)
Therefore, the effective annual yield of 8.7% compounded continuously is 9.21%.
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