The journal entry to record the bond issuance on January 1, current year is: Cash $52,380Discount on Bonds Payable $1,620Bonds Payable $54,000
Bonds are financial instruments that companies can use to raise money. When companies sell bonds, they receive cash in exchange for future interest and principal payments.
Bondholders receive interest payments, called coupon payments, on a semiannual basis, and they receive the principal payment at the end of the bond's life.
On January 1 of the current year, Queen Corporation issued $54,000 9% bonds. The bonds were sold for $52,380.
The bonds pay interest semiannually on June 30 and December 31. Let's calculate the journal entry to record the bond issuance. Queen Corporation will receive cash of $52,380 from selling the bonds.
However, since the bonds have a face value of $54,000, Queen Corporation owes bondholders an additional $1,620 of value at maturity.
This $1,620 difference between the amount of cash received and the face value of the bonds is called bond discount.
This bond discount is recorded as a contra liability account in the balance sheet, and it is amortized (reduced) over the life of the bond using the effective interest method.
The company will record semiannual journal entries to record the interest expense and amortization of bond discount on June 30 and December 31 of each year.
The interest expense is calculated by multiplying the face value of the bond by the stated interest rate, while the amortization of bond discount is calculated by subtracting the interest expense from the total bond interest payment.
The sum of the interest expense and the bond discount amortization will equal the total interest payment made to bondholders.
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Here is the complete question below:
On January 1 of the current year, the Queen Corporation issued 6% bonds with a face value of $50,000. The bonds are sold for $48,500. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now. Queen records straight-line amortization of the bond discount. Determine the bond interest expense for the year ended December 31.
Documents must be submitted via the Individual Assignment 1 assignment folder in eConestoga.
You must submit 2 files (i.e. MS Word for the Narrative and WBS. MS Project for the Gantt Chart). No other formats may be used.
The assignment must be completed by each student individually.
Weight: 10%
Deliverables
Work Breakdown Structure (25-30 items)
Create WBS in MS Word using either tabular or chart form
Minimum 3 levels of work in your WBS (levels 2 and 3 are provided in the case, level 2 are mostly summary tasks you need to add and level 3 are mostly the 20 tasks below)
Minimum 3 work packages at level 4
Detailed Project Schedule (Gantt Chart - 80-100 items)
The Gantt Chart will visually represent the project timeline, showing the start and end dates of each task, dependencies between tasks, and the overall project duration.
The deliverables for the assignment include a Work Breakdown Structure (WBS) and a Detailed Project Schedule (Gantt Chart). The WBS should be created in MS Word using either a tabular or chart form. It should have a minimum of three levels of work, with level 2 and level 3 tasks provided in the case. Level 2 tasks are mostly summary tasks that you need to add, and level 3 tasks are the 20 specific tasks mentioned.
In the WBS, you should also include a minimum of three work packages at level 4. Work packages are the lowest level of tasks in the WBS and represent the smallest units of work that can be assigned to a specific individual or team.
For the Detailed Project Schedule, you need to create a Gantt Chart using MS Project. The Gantt Chart should have 80-100 items, representing the tasks and subtasks identified in the WBS. The Gantt Chart will visually represent the project timeline, showing the start and end dates of each task, dependencies between tasks, and the overall project duration.
It is important to note that the assignment must be completed individually, and you are required to submit both the WBS in MS Word format and the Gantt Chart in MS Project format. No other formats will be accepted.
Make sure to carefully follow the instructions provided and include all the required components in your submission to ensure you meet the assignment criteria and receive the designated weight for this task.
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1- Generally, technical communication documents are
informational, rhetorical, persuasive, purposeful, and
problem-oriented.
-True -False
2- Good technical writing is characterized by embellishment,
p
The given statement "Technical communication documents are characterized by being informational, rhetorical, persuasive, purposeful, and problem-oriented." is true because technical communication documents embody these characteristics to effectively convey information, persuade the audience, serve a purpose, and provide solutions in a problem-oriented manner.
Informational: Technical documents aim to provide accurate and relevant information to the intended audience. They convey technical concepts, procedures, specifications, or instructions in a clear and concise manner.
Rhetorical: Technical documents are designed to effectively communicate with the audience, considering their needs, knowledge, and expectations. They employ appropriate language, structure, and visual aids to convey information effectively.
Persuasive: Technical documents often aim to persuade the audience to take a specific action or adopt a particular viewpoint. They may present arguments, evidence, and benefits to influence the audience's decision-making process.
Purposeful: Technical documents have a clear purpose and intended outcome. They are created to fulfill specific objectives, whether it's informing, instructing, solving a problem, or facilitating decision-making.
Problem-oriented: Technical documents often address specific problems or challenges.
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Complete Question : Generally, technical communication documents are informational, rhetorical, persuasive, purposeful, and problem-oriented.-True -False.
A $1845 face value bond with an 116% coupon rate is issued. What amount of interest will the bondholders receive? (Show your calculations)
John has $35000 as savings and he wants to invest them. He has two options to invest in.
Option 1: This offers 5% interst rate for 5 years.
Options 2: This offers 3% interest rate for 8 years. As an expert of such investments, assist John which option should he choose for his investment. (Show your calculations)
$2140.20 interest will the bondholders receive. Those who invest in or own debt securities, which are frequently issued by corporations and governments, are referred to as bondholders. In a sense, bondholders are making a loan to the bond issuers. When the bonds mature, bondholders get their original investment back in return or principle.
Given
Face value =$1845
Coupon Rate = 116%
Required to Interest =?
Interest = Face value of the bond x Coupon rate
Interest = $1845 x 1.16
Interest = $2140.20
Therefore, the interest of $2140.20 will the bondholders receive.
Given
Principle Amount = $35000
Option 1: This offers a 5% interest rate for 5 years.
Options 2: This offers a 3% interest rate for 8 years.
Required to calculate which option is beneficial for John
Option 1 = Interest = Principle x rate x time
= 35000 x 5 x 5 /100
=$8750
Amount = Interest + Principle
= 35000 + 8750
= 43,750
Option 2: Interest = Principle x rate x time
= 35000 x 3 x 8 /100
=8400
Amount = Interest + Principle
= 35000 + 8400
= 43,400
Hence, John should option 1 because he gets the maximum benefit from it.
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ABC, a public Palestinian company, has determined to follow IAS 36 Asset Impairment. The following data is pertinent to the impairment review:
The value of certain pieces of machinery appeared to have been permanently reduced. The inventory created by the machines was being sold at a loss, and this had a negative impact on the value of the productive machinery. These machines have a carrying value of $290,000 at historical cost, and their net selling price is assessed to be $120,000. The machines' net cash inflows are now expected to be $100,000 per year for the next three years. Any present value calculations would use a market discount rate of 10% per year.
On January 1, 2018, ABC paid $115,000 to acquire a gas station company. Based on net selling prices, the following were the values of the company's assets at that time:
$000
Machines 60
Intangible assets (taxi license) 15
Trade receivables 5
Cash 25
Trade payables (10)
=95
A piece of machinery was stolen on February 1, 2018. The net selling value of this machinery was $15,000, and it was uninsured due to the failure to disclose specific risks to the insurance provider. As a result of this occurrence, ABC intends to record an impairment loss of $22,500 (inclusive of the loss of the stolen machine) as a result of the fall in the value in use of the cash-generating unit that is the gas station.
Required: Explain how ABC should account for the above asset impairment in its financial statement. You should show the impairment loss treatment at 1 February 2018.
ABC should recognize an impairment loss of $161,082 for the gas station CGU in its financial statement.
How should ABC record the asset impairment in its financial statement regarding the gas station?ABC should record the asset impairment as of 1 February 2018 by comparing the carrying value of the gas station CGU with its recoverable amount. The recoverable amount should be determined based on the higher of the fair value less costs to sell and the value in use.
To account for the asset impairment, ABC needs to compare the carrying value of the gas station CGU with its recoverable amount. The carrying value of the CGU includes the historical cost of acquiring the gas station company, which is $115,000. However, the stolen machinery reduces the value in use of the CGU. The value in use represents the present value of the estimated future cash flows generated by the CGU.
In this case, the value in use should be calculated by discounting the net cash inflows of $100,000 per year for the next three years at a market discount rate of 10% per year. The discounted cash flows would be $276,082, which is higher than the carrying value of the CGU.Therefore, ABC should compare the recoverable amount, $276,082, with the carrying value, $115,000, and recognize an impairment loss of $161,082. This impairment loss should be allocated to the machinery, intangible assets (taxi license), trade receivables, and cash based on their relative carrying values.
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Lighthouse Corporation's accumulated depreciation—equipment account increased by $14,535 while $3,800 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $23,990 from the sale of investments. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.
Reconcile a net income of $281,500 to net cash flow from operating activities. Round your answer to the nearest dollar.
Reconciling net income of $281,500 to net cash flow from operating activities:
Net income: $281,500
Add: Depreciation expense on equipment: $14,535
Add: Amortization expense on patents: $3,800
Less: Gain from sale of investments: $23,990
Net cash flow from operating activities: $276,845
What is the net cash flow from operating activities after reconciling net income?The net cash flow from operating activities, after reconciling net income of $281,500, is $276,845. This is determined by adjusting net income for non-cash expenses and gains/losses related to investing activities.
To reconcile net income to net cash flow from operating activities, we consider the following factors:
- Accumulated depreciation—equipment increased by $14,535, indicating the depreciation expense recorded during the period.
- Patent amortization of $3,800 was recognized, representing the amortization expense for the patents.
- The income statement showed a gain of $23,990 from the sale of investments.
When calculating net cash flow from operating activities, non-cash expenses such as depreciation and amortization are added back to net income since they do not involve actual cash outflows. In this case, the depreciation expense on equipment and patent amortization are added to net income.
Conversely, gains from the sale of investments are subtracted from net income since they are not considered operating activities. Therefore, the gain of $23,990 from the sale of investments is deducted from net income.
By considering these adjustments, the net cash flow from operating activities is determined to be $276,845.
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Explain each of the following operations on a database in 4-5 lines of data b. export of data c. Backup of data d. Restore of data
There are several operations involved in managing databases. Among the operations that can be performed on databases include exporting, backing up, and restoring data. These operations are essential in ensuring that the data contained in a database is secure and can be accessed at all times.
Below are the definitions and explanations of these operations.Export of dataThis refers to the process of transferring data from one database system to another. This operation is essential when changing database management systems. Exporting data ensures that data is preserved in the new system.
This process is accomplished using database export utilities. For example, in MySQL, data is exported using the mysqldump tool.
Backup of dataThis is a process of creating a copy of data so that it can be used to restore the original data in the event of data loss or damage. The backup process can be done either automatically or manually. Automated backups are usually scheduled to run at a particular time, while manual backups are initiated by the user.
Backups can be stored on an external storage device or on the cloud.
Restore of dataThis process involves the retrieval of backed-up data and returning it to its original location. Restoring data is essential when data loss or damage occurs. The process is accomplished using backup and restore tools. For instance, in MySQL, data is restored using the mysqlimport tool.
In conclusion, exporting, backing up, and restoring data are essential operations in database management. Exporting is essential when moving from one database management system to another. Backup ensures that data is available in the event of data loss or damage, while restoring returns the backed-up data to its original location.
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justin just made a margin purchase of 100 shares of def corp. for $22.50 per share. the initial margin is 70%. the maintenance margin is 30%. how low can the price of each share of def be before justin will have to add equity to his account?
The price of each share of Def Corp. can drop to $14.44 before Justin will have to add equity to his account.
To determine the price at which Justin will have to add equity to his account, we need to consider the margin requirements and the concept of a margin call.
The initial margin is 70%, which means that Justin initially financed 70% of the purchase price with borrowed funds. The remaining 30% is the equity he contributed.
The maintenance margin is 30%, which represents the minimum equity level that Justin must maintain in his account to avoid a margin call. If the equity in his account falls below this level, he will be required to add additional funds to bring it back up.
To calculate the price at which a margin call will occur, we can use the following formula:
Margin call price = Purchase price / (1 - Maintenance margin)
In this case, Justin purchased 100 shares of Def Corp. for $22.50 per share. Therefore, the purchase price is $22.50 * 100 = $2,250.
Using the formula, we can calculate the margin call price:
Margin call price = $2,250 / (1 - 0.30) = $2,250 / 0.70 = $3,214.29
This means that if the price per share of Def Corp. drops below $3,214.29, Justin will receive a margin call and will be required to add equity to his account to meet the maintenance margin requirement.
To determine how low the price of each share can drop before a margin call occurs, we divide the margin call price by the number of shares:
Margin call price per share = Margin call price / Number of shares = $3,214.29 / 100 = $32.14
Therefore, the price of each share of Def Corp. can drop to $32.14 before Justin will have to add equity to his account.
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Managing economic exposure is generally more complicated than managing transaction exposure. Explain what is economic exposure and give 1 (ONE) example of the economic exposure facing by the MNC. (5 Marks). If the direct quote for the euro is AUD1.35=EUR1, then the indirect quote for the euro is:
a. EUR0.74 = AUD1.
b. EUR0.51 = AUD1.
c. EUR0.65 = AUD1.
d. EUR0.68 = AUD1.
Managing economic exposure is generally more complicated than managing transaction exposure. Economic exposure refers to the risk that an organization's financial performance or position will be impacted by unpredictable fluctuations in exchange rates or commodity prices.
Example of economic exposure facing the MNC: Inflation risk – This risk arises because of the difference in inflation rates between the home and host countries. For example, suppose a multinational corporation has operations in two countries: India and the United States. The Indian economy is expected to have an inflation rate of 4%, while the US economy is expected to have an inflation rate of 2%.
The multinational corporation will face an economic exposure if it has any obligations or investments in either country. The indirect quote for the euro is: EUR0.74 = AUD1.The direct quote is the domestic currency price of one unit of a foreign currency, whereas the indirect quote is the foreign currency price of one unit of the domestic currency. In this case, the direct quote for the euro is AUD1.35=EUR1, so the indirect quote for the euro would be EUR0.74=AUD1.
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The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. Assume that the wage per unit of labour is $25 and the cost of the capital is $110. Labour per unit of time Total Output 0 25 2 3 140 215 5 270 The marginal product of labour is at its maximum when the firm changes the amount of labour hired from 75 O A. 0 to 1 unit OB. 1 to 2 units O C. 3 to 4 units. OD. 2 to 3 units O E. 4 to 5 units
The marginal product of labor is at its maximum when the firm changes the amount of labor hired from 2 to 3 units.
Marginal product of labor (MPL) refers to the addition to total production caused by adding one more worker holding other inputs constant. MPL rises as the first worker is added because workers are usually specialized, allowing them to focus on the tasks for which they are best suited.
According to the table provided, the marginal product of labor is calculated by determining the change in output that occurs when one more worker is added.
From the table above, the marginal product of labor in producing from 0 to 2 units is 25, and from 2 to 3 units it is 75.
Therefore, the firm's marginal product of labor is at its maximum when the firm changes the amount of labor hired from 2 to 3 units.
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Which of the following assumptions is not an assumption of the transportation model? (Points : 1)
a) Shipping costs are constant
b) There is only one transportation route between source and destination
c) There is only one transportation mode between source and destination
d) Actual supply and actual demand must be equal
The assumptions that is not an assumption of the transportation model is d) Actual supply and actual demand must be equal.
The transportation model is a mathematical optimization technique used to determine the optimal transportation plan for goods between multiple sources and destinations. It is based on several assumptions that simplify the model and facilitate the calculations.
a) Shipping costs are constant: This assumption implies that the cost of shipping goods between any two locations remains the same throughout the transportation process. It allows for easier calculation of total transportation costs.
b) There is only one transportation route between source and destination: This assumption assumes that there is a single route or path for transporting goods from the source location to the destination location. It simplifies the model by considering only one possible path for transportation.
c) There is only one transportation mode between source and destination: This assumption states that a single transportation mode, such as trucking or shipping, is used for transporting goods between the source and destination locations. It simplifies the analysis by considering only one mode of transportation.
d) Actual supply and actual demand must be equal: This assumption is not an assumption of the transportation model. In reality, supply and demand may not always be equal, and there may be imbalances between the quantities of goods available and the quantities demanded. However, the transportation model does not require this assumption to be valid.
The transportation model assumes that shipping costs are constant, there is only one transportation route, and there is only one transportation mode. However, it does not assume that actual supply and actual demand must be equal. This distinction is important as it allows for flexibility in addressing situations where supply and demand may not match and enables businesses to find optimal transportation solutions even in imbalanced scenarios.
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In 1/1/2022 the Gulf bank started it's businesses in Bahrain with the capital of 10000000 BD. 5000000 BD is deposited on the central bank, 2000000 BD deposited on Arab Bank, and 1000000 BD deposited on National of Bahrain bank, and the rest of the capital kept on the bank cash.
The following transaction happened on the first week
2- Withdrawing 1500000 BD from Arab Bank and deposit the money in the central bank
3- 200000 BD paid cash to payment fund on the bank
4- The bank paid from the payment fund 50000BD, rent of the bank offices and 7500 BD Stationary
5- The bank purchased furniture cost of 75000BD, paid by check to be paid from Arab Bank account
6- The bank purchased computers cost of cost of 30000BD, cars cost of 50000, paid by check to be paid from National bank of Bahrain
7- The amounts that the bank received by the receipt account was 210000 as follows.
- 102000 BD Current accounts
- 28000 BD saving accounts
- 80000 BD debit accounts
8- The amounts that the bank accounts have withdrawals cash from bank as follows.
- 55000 BD Current accounts
- 30000 BD saving accounts
9- the service fees that the bank deducted from the accounts as follows 1000BD from current accounts 500BD from saving accounts Requirements:
- Record the financial transactions on Gulf bank books
The financial transactions on Gulf bank books on the first week are recorded.
Financial transactions on Gulf bank books on the first week are as follows:2- Withdrawing 1500000 BD from Arab Bank and deposit the money in the central bank:
The journal entry for the transaction is: Central Bank (debit) = 1500000
Arab Bank (credit) = 15000003- 200000 BD paid cash to payment fund on the bank:
The journal entry for the transaction is:
Payment Fund (debit) = 200000
Bank Cash (credit) = 2000004-
The bank paid from the payment fund 50000BD, rent of the bank offices and 7500 BD Stationary:
The journal entry for the transaction is:
Rent Expense (debit) = 50000
Stationary Expense (debit) = 7500
Payment Fund (credit) = 57500 5- The bank purchased furniture cost of 75000BD, paid by check to be paid from Arab Bank account:
The journal entry for the transaction is: Furniture (debit) = 75000Arab Bank (credit) = 750006-
The bank purchased computers cost of cost of 30000BD, cars cost of 50000, paid by check to be paid from National bank of Bahrain:
The journal entry for the transaction is: Computers (debit) = 30000Cars (debit) = 50000
National Bank of Bahrain (credit) = 800007
The amounts that the bank received by the receipt account was 210000:
The journal entry for the transaction is: Current Account (debit) = 102000Saving Account (debit) = 28000
Debit Account (debit) = 80000Receipts (credit) = 2100008-
The amounts that the bank accounts have withdrawals cash from bank: The journal entry for the transaction is:
Cash (debit) = 85000
Current Account (credit) = 55000Saving Account (credit) = 300009- the service fees that the bank deducted from the accounts as follows 1000BD from current accounts 500BD from saving accounts:
The journal entry for the transaction is: Current Account (debit) = 1000Saving Account (debit) = 500
Service Fee Revenue (credit) = 1500
Therefore, the financial transactions on Gulf bank books on the first week are recorded.
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5 Inventory records for Dunbar Incorporated revealed the following: Number of Units Date Transaction Unit Cost $2.34 Apr. 1 Beginning inventory 560 3.5 Apr.20 Purchase 310 2.68 points Dunbar sold 600
Based on the provided inventory records, Dunbar Incorporated has a remaining inventory of 270 units and a cost of goods sold (COGS) of $1650.
Based on the provided inventory records for Dunbar Incorporated, here is a summary of the transactions and their effects:
Beginning Inventory (Apr. 1):
Number of Units: 560
Unit Cost: $2.34
Purchase (Apr. 20):
Number of Units: 310
Unit Cost: $3.5
Sale:
Number of Units: 600
No specific unit cost provided
In order to calculate the remaining inventory and the cost of goods sold (COGS), we need to determine the weighted average cost per unit. This can be calculated by dividing the total cost of all units by the total number of units.
The total cost of units from the beginning inventory:
560 units * $2.34 = $1309.44
The total cost of units from the purchase:
310 units * $3.5 = $1085
Total number of units:
560 units (beginning inventory) + 310 units (purchase) = 870 units
The total cost of all units:
$1309.44 (beginning inventory) + $1085 (purchase) = $2394.44
Weighted average cost per unit:
$2394.44 / 870 units = $2.75 per unit
Now, let's calculate the remaining inventory and COGS:
Remaining Inventory:
Beginning inventory (560 units) + Purchase (310 units) - Sale (600 units) = 270 units
Cost of Goods Sold (COGS):
Number of units sold (600 units) * Weighted average cost per unit ($2.75) = $1650
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Can you think of a way that the production of capital goods could influence the efficiency of land, labor, or entrepreneurship?
Yes, the production of capital goods can influence the efficiency of land, labor, or entrepreneurship.
The efficiency of land, labor, or entrepreneurship can be improved with capital goods. Capital goods can increase the efficiency of production by reducing costs, improving quality, and increasing the speed of production. Creating a production process that involves the use of capital goods can increase the productivity of the workforce and help workers produce more goods in less time.
This increased productivity can help workers produce more goods, which in turn can increase the efficiency of land, labor, or entrepreneurship. The production of capital goods can also lead to the development of new technologies and techniques, which can further improve the efficiency of production. The use of capital goods can also reduce the amount of labor required to produce a given quantity of goods.
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Consider a project with free cash flows in one year of $137 141 in a weak market or $177 196 in a strong market, with each outcome being equally likely. The initial investment required for the project is $95 000, and the project's unlevered cost of capital is 18%. The risk-free interest rate is 7%. (Assume no taxes or distress costs.) a. What is the NPV of this project? b. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. The equity holders will receive the cash flows of the project in one year. How much money can be raised in this way that is, what is the initial market value of the unlevered equity? c. Suppose the initial $95 000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity in a weak market and a strong market at the end of year 1, and what is its initial market value of the levered equity according to MM?
a. The NPV of the project is $19,625.94. b. The initial market value of the unlevered equity is $95,000. c. The cash flows of the levered equity in a weak market and a strong market at the end of year 1 are $10,322.03 and $50,377.03, respectively. The initial market value of the levered equity according to MM is $0.
The NPV of the project can be calculated as the difference between the present value of the cash inflows and the initial investment. The present value of the expected cash flows in a weak market is $112,137.58 and the present value of the expected cash flows in a strong market is $133,989.94. Therefore, the NPV of the project is $19,625.94.
If the project is sold to investors as an all-equity firm, the initial market value of the unlevered equity would be equal to the initial investment of $95,000.
If the initial $95,000 is raised by borrowing at the risk-free interest rate, the cash flows of the levered equity in a weak market and a strong market at the end of year 1 would be $10,322.03 and $50,377.03, respectively. According to MM, the initial market value of the levered equity would be $0 because the cost of equity is equal to the unlevered cost of capital and the cash flows are the same in both scenarios.
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the data set that lists a company’s competitors and their locations would be classified as what type of data?
The data set that lists a company's competitors and their locations would be classified as market data or competitive intelligence data
This data set falls under the category of market data or competitive intelligence data because it provides information about the competitors of a company and their respective locations. Market data encompasses various types of information related to market trends, competitors, customer behavior, and other factors influencing business decisions. In this case, the data specifically focuses on identifying competitors and their geographical presence. This type of data is crucial for businesses to analyze market dynamics, devise effective strategies, and make informed decisions to stay competitive in the market.
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Getrich has 3.9 million shares outstanding and a current share price of $5.3 per share. It also has $51.7 million in outstanding debt, with a debt cost of capital of 2.6%. Getrich’s equity cost of capital is 19.7%. If the corporate tax rate is 35.3%, what is Getrich's weighted average cost of capital? Round your answer to two decimal places in percentage form.
Getrich has 3.9 million shares outstanding and a current share price of $5.3 per share. It also has $51.7 million in outstanding debt, with a debt cost of capital of 2.6%. getrich’s equity cost of capital is 19.7%. If the corporate tax rate is 35.3% then getrich's weighted average cost of capital is 6.74%.
To calculate Getrich's weighted average cost of capital (WACC), we need to determine the proportion of equity and debt in the company's capital structure. The WACC represents the average rate of return required by both equity and debt holders.
First, let's calculate the market value of equity and debt:
Market Value of Equity = Number of Shares Outstanding * Share Price
Market Value of Equity = 3,900,000 * $5.3 = $20,670,000
Market Value of Debt = $51,700,000
Next, we need to calculate the weight of equity and debt in the capital structure:
Weight of Equity = Market Value of Equity / (Market Value of Equity + Market Value of Debt)
Weight of Equity = $20,670,000 / ($20,670,000 + $51,700,000) = 0.285
Weight of Debt = 1 - Weight of Equity = 0.715
Now, we can calculate the cost of equity and cost of debt:
Cost of Equity = Equity Cost of Capital = 19.7%
Cost of Debt = Debt Cost of Capital = 2.6%
Next, we calculate the WACC using the formula:
WACC = (Weight of Equity * Cost of Equity) + (Weight of Debt * Cost of Debt) * (1 - Tax Rate)
WACC = (0.285 * 19.7%) + (0.715 * 2.6%) * (1 - 35.3%)
WACC = 5.6165% + 1.7377% * 0.647
WACC = 5.6165% + 1.1236%
WACC = 6.74%
The WACC represents the overall required return on the company's capital. It takes into account the cost of equity, which is the return expected by equity investors, and the cost of debt, which is the interest rate paid to debt holders. The weights assigned to each component reflect their respective proportions in the company's capital structure.
In this case, Getrich has a higher weight assigned to debt compared to equity, indicating a higher reliance on debt financing. The WACC of 6.74% indicates the minimum rate of return that Getrich needs to generate to satisfy both equity and debt holders. It serves as a benchmark for evaluating potential investment projects and helps in making informed financial decisions.
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A firm that plans to expand its product line must decide whether to build a small or a large facility to produce the new products. If it builds a small facility and demand is low, the net present value after deducting for building costs will be $400,000. If demand is high, the he firm can either maintain the small facility or expand it. Expansion would have a net present value of $450,000, and maintaining the small facility would have a net present value of $50,000. If a large facility is built and demand is high, the estimated net present value is $800,000. If demand turns out to be low, the net present value will be -$10,000. The probability that demand will be high is estimated to be .60, and the probability of low demand is estimated to be .40. a. Compute the EVPI Expected Payoff under Certainty Expected Payoff under Risk EVPI 164,000
EVPI, Expected Payoff under Certainty, Expected Payoff under Risk are terms that are used in decision-making. In this context, a firm that intends to expand its product line must decide whether to construct a small or large facility to produce the new products.There are two different decision options for the firm: construct a small facility or build a large facility. The firm's decision will depend on the expected demand for the product.
If demand is high, the firm can either expand the small facility or construct the large facility. If demand is low, the small facility will be retained. Given the probability estimates of demand, we can calculate the EVPI, Expected Payoff under Certainty, and Expected Payoff under Risk.EVPI or Expected Value of Perfect Information:Expected Value of Perfect Information (EVPI) is the maximum amount that a decision-maker is willing to pay for complete knowledge about future events. It is defined as the expected gain from perfect information minus the expected gain under risk. In this case, the maximum amount that the firm is willing to pay for complete knowledge is the difference between the expected payoff with perfect information and the expected payoff under risk. Expected Payoff under Risk:Expected Payoff under Risk is the expected value of the net present value of the facility, considering the probability estimates of the demand. It is defined as the weighted average of the expected payoffs for each option.EVPI=Maximum amount willing to pay for perfect information = EVwPI - EVUExpected Payoff under Certainty:Expected Payoff under Certainty is the expected net present value of the facility given perfect knowledge of the future events. It is defined as the expected value of the maximum payoff from each option. EVwPI= expected value of the net present value of the facility with perfect information.EVU = expected value of the net present value of the facility under risk= (0.6 x $450,000) + (0.4 x $50,000)= $270,000EVwPI= (0.6 x $800,000) + (0.4 x -$10,000)= $478,000EVPI= $478,000 - $270,000= $208,000. Therefore, the EVPI is $208,000. The Expected Payoff under Certainty is $478,000. The Expected Payoff under Risk is $270,000. Hence, the answer to this question is EVPI 164,000.For such more question on probability
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A hospital purchased medical equipment for $150,000 and placed
the equipment in service in January of Year 1. The medical
equipment has an estimated useful life of 5 years (60 months) and
is capitaliz
The depreciation expense for each year is $30,000. The hospital bought medical equipment for $150,000 and placed it into service.
This medical equipment is capitalized because it has an estimated useful life of 5 years (60 months).To compute the yearly depreciation, the cost of the medical equipment will be allocated over its useful life of 60 months.60 months/5 years is equal to 12 months per year.
The yearly depreciation can be computed by dividing the cost of the medical equipment by the number of years of useful life or the number of months of useful life.Most often, the straight-line method is used to compute the yearly depreciation. Using the straight-line method, the yearly depreciation is the same every year.
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Refer to Figure 2-9. What does the economy gain by moving from point A to point D? Toasters D 10 20 30 40 50 60 70 Toothbrushes 35 2828 30 25 20 15 10 10 5 30 toasters. 30 toothbrushes. O 20 toasters.
When moving from point A to point D, the economy gains 20 toasters and 10 toothbrushes. This can be deduced from the movement along the production possibilities curve as shown in Figure 2-9.
The movement along the production possibilities curve (PPC) is determined by the concept of opportunity cost. Opportunity cost refers to the cost of an alternative that must be given up in order to pursue a certain action. As we move along the PPC, the opportunity cost increases because we have to give up more of one good in order to produce more of the other.
In the case of the given production possibilities table, the opportunity cost of producing one toaster is equal to the amount of toothbrushes given up and the opportunity cost of producing one toothbrush is equal to the amount of toasters given up. At point A, 30 toasters are produced with 35 toothbrushes. By moving to point D, the economy gains 20 toasters and 10 toothbrushes.
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.4. Caribou Fruit Drink Company planned to make 200,000 containers of apple juice. It expected to use two cups of frozen apple concentrate to make each container of juice. The standard price of one cup of apple concentrate is $0.25. Pascal actually paid $110,168.10 to purchase 408,030 cups of concentrate, which was used to make 201,000 containers of apple juice.
Compute the materials price variance.
Compute the materials usage variance.
The materials price variance is $8,160.60 (favorable), and the materials usage variance is $500 (favorable).
Standard quantity of material = 200,000 containers × 2 cups/container = 400,000 cups
Materials Price Variance:
Actual price per cup = $110,168.10 / 408,030 cups = $0.270 per cup
Standard price per cup = $0.25 per cup
Materials Price Variance = (Actual Price per Cup - Standard Price per Cup) × Actual Quantity of Material
Materials Price Variance = ($0.270 - $0.25) × 408,030 cups
Materials Price Variance = $0.02 × 408,030 cups
Materials Price Variance = $8,160.60
Materials Usage Variance:
Actual quantity of material used = 201,000 containers × 2 cups/container = 402,000 cups
Materials Usage Variance = (Actual Quantity of Material Used - Standard Quantity of Material) × Standard Price per Cup
Materials Usage Variance = (402,000 cups - 400,000 cups) × $0.25 per cup
Materials Usage Variance = 2,000 cups × $0.25 per cup
Materials Usage Variance = $500
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A simple method for determining whether autocorrelation is present in a given data set is to A. construct a histogram. B. calculate the variance of the sample. C. examine the residual plot. D. plot the data points from smallest to largest.
A simple method for determining whether autocorrelation is present in a given data set is to examine the residual plot (option c).
Autocorrelation is a data series correlation with itself over time. It's also known as serial correlation since the analysis is performed on a sequence of data points. Autocorrelation is used to analyze and forecast time-series data, such as stock prices, economic indicators, and weather patterns. Autocorrelation is particularly useful when predicting the future outcome of a time-dependent variable since it identifies patterns and trends from the past.
In statistics, a residual plot is a graph of residuals against the predicted values. A residual is the difference between an observed value and the predicted value. Residual plots are frequently employed to verify the validity of regression and ANOVA assumptions. It's a type of diagnostic plot that is used to test the normality and homoscedasticity of errors (assumptions of regression analysis).Hence, a simple method for determining whether autocorrelation is present in a given data set is to examine the residual plot. The correct option is C.
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QUESTION 8
What is "return on sales?"
A.
occurs when revenues exceed expenses
B.
a firm's net sales less the cost of good sold
C.
all business costs other than the cost of goods
sold
"Return on sales" is B. a firm's net sales less the cost of good sold.
What is the Return on Sales?Return on sales is a common financial ratio used in the business world. The return on sales (ROS) ratio is a measure of a company's ability to convert sales into earnings. The return on sales is determined by dividing a company's net earnings by its gross revenues. The return on sales is a percentage that reflects the amount of money a company earns for each dollar of revenue it generates.
What is the formula for Return on Sales?The formula for Return on Sales is:
Return on Sales = Net Income ÷ Total Sales
Let us analyze the given options:
A) occurs when revenues exceed expenses - This option does not correctly define the term "return on sales."
B) a firm's net sales less the cost of good sold - This is the correct definition of "return on sales."
C) all business costs other than the cost of goods sold - This option does not correctly define the term "return on sales."
Thus, we can conclude that option B, i.e., "a firm's net sales less the cost of good sold," is the definition of "return on sales."
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Question 23 All else equal, is a call option on a stock with a lot of firm-specific risk worth more than one on a stock with little firm-specific risk? The betas of the two stocks are equal. Yes 5 pts
Yes, all else being equal, a call option on a stock with a lot of firm-specific risk is worth more than one on a stock with little firm-specific risk, provided that the betas of the two stocks are equal.
Does the value of a call option increase when the stock has higher firm-specific risk compared to a stock with lower firm-specific risk, assuming their betas are the same?When evaluating the value of call options, factors such as firm-specific risk and beta play a significant role. Firm-specific risk refers to the potential volatility or uncertainty associated with a particular company's stock, while beta measures the stock's sensitivity to market movements. All else being equal, a call option on a stock with high firm-specific risk is worth more than one on a stock with low firm-specific risk, given that their betas are equal.
The reason behind this lies in the higher potential for price fluctuations in a stock with more firm-specific risk. Increased volatility means there is a greater chance for the stock price to move significantly, which can benefit call option holders. As call options provide the right, but not the obligation, to buy the underlying stock at a predetermined price (strike price), a stock with higher firm-specific risk offers a greater likelihood of the stock price surpassing the strike price, leading to a higher potential profit for the call option holder.
On the other hand, a stock with little firm-specific risk is expected to have lower price volatility, resulting in a reduced probability of the stock price reaching or exceeding the strike price. As a result, the value of the call option on a stock with low firm-specific risk would be lower compared to the option on a stock with high firm-specific risk, assuming their betas are equal.
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a) You want to value a company using the free cash flow to equity (FCFE) method. You determined that the current FCFE in year 0 is A$2118203 after analysing the financial statements. You expect free cashflow to grow at a substantially faster pace of 13.78 percent over the next two years, then at a constant rate of 2.32 percent thereafter. You also calculated that the firm's cost of equity is 13.04 percent and its weighted average cost of capital (WACC) is 11 percent.
If there are 500,000 shares outstanding, what is the predicted share price of this company in two decimal places?
Predicted Share Price = Present Value / Number of shares outstanding
= A$6,688,261.11 / 500,000
= A$13.38
the predicted share price of the company, rounded to two decimal places, is A$13.38.
To calculate the predicted share price of the company using the free cash flow to equity (FCFE) method, we need to estimate the future FCFE and discount them back to present value.
Given information:
Current FCFE in year 0: A$2,118,203
Expected FCFE growth rate for the next two years: 13.78%
Expected FCFE growth rate after two years: 2.32%
Cost of equity: 13.04%
Weighted average cost of capital (WACC): 11%
Number of shares outstanding: 500,000
Calculate FCFE for the next two years:
FCFE in Year 1 = Current FCFE * (1 + Growth rate for the next two years)
= A$2,118,203 * (1 + 13.78%)
= A$2,411,942.37
FCFE in Year 2 = FCFE in Year 1 * (1 + Growth rate for the next two years)
= A$2,411,942.37 * (1 + 13.78%)
= A$2,748,823.80
Calculate the terminal value of FCFE:
Terminal FCFE = FCFE in Year 2 * (1 + Long-term growth rate) / (Cost of equity - Long-term growth rate)
= A$2,748,823.80 * (1 + 2.32%) / (13.04% - 2.32%)
= A$2,857,017.94
Calculate the present value of FCFE:
Present Value = FCFE in Year 1 / (1 + Cost of equity) + FCFE in Year 2 / (1 + Cost of equity)^2 + Terminal FCFE / (1 + Cost of equity)^2
= A$2,411,942.37 / (1 + 13.04%) + A$2,748,823.80 / (1 + 13.04%)^2 + A$2,857,017.94 / (1 + 13.04%)^2
= A$2,130,271.70 + A$2,149,805.71 + A$2,408,183.70
= A$6,688,261.11
Calculate the predicted share price:
Predicted Share Price = Present Value / Number of shares outstanding
= A$6,688,261.11 / 500,000
= A$13.38
Therefore, the predicted share price of the company, rounded to two decimal places, is A$13.38.
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This event would not affect the balance sheet. f. A key competitor announces a radical new pricing policy that will drastically undercut Global's prices. Choose the correct answer below. A. This event would not affect the balance sheet. B. This event would decrease inventory. C. This event would affect the balance sheet in an unpredictable manner. D. This event would decrease the book value of equity.
The correct option is A. This event would not affect the balance sheet states that a key competitor has announced a radical new pricing policy that will drastically undercut Global prices. Therefore, it is expected that the price of Global products will decrease in response to this pricing policy
.However, the balance sheet will not be affected by this event. The balance sheet is a financial statement that displays a company's financial position at a given time. It lists a company's assets, liabilities, and equity. Changes in the market or industry may have an effect on the company's income statement, but not on the balance sheet.Explanation:The main answer is option The financial statement that shows the company's financial position is the balance sheet. It contains a list of the company's assets, liabilities, and equity. A competitor has introduced a new pricing policy that will significantly undercut Global's prices.
However, this event will not impact the balance sheet in any way. A balance sheet represents a company's financial position, which is unlikely to change due to a pricing policy change by a competitor.A key competitor's announcement of a new pricing policy that will undercut Global's prices has little or no effect on the company's balance sheet. A balance sheet only records the financial condition of the company at a particular point in time. It is unlikely that a change in a competitor's pricing strategy will have any direct impact on Global's financial position.The correct option is A. This event would not affect the balance sheet.
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Whipple Logistics Company's Transportation Challenge Ruby Shelton is part of the executive development training program. As part of her executive development plan, Ruby has temporarily been assigned to the transportation division of Whipple Logistics Company. The objective is to expose her to different parts of the company as a method of grooming her for a senior position someday. Ruby is excited about the opportunity. Her background is in operations management, therefore, she is familiar with transportation requirements, although not an expert. Doreen Delgado is Ruby's mentor in the program Doreen is a senior vice president and participated in the program when she was a junior executive. She understands the value of such a learning experience. Whipple Logistics Company has several new clients who want a briefing on the best mode of transportation for their businesses. Doreen assigned Ruby to this project. Doreen believes this is the perfect instrument to help Ruby develop a deep appreciation of the importance of selecting the best mode of transportation for specific products. Ruby is to prepare the briefing for the new clients Ruby understands that this is a great opportunity to learn more about Whipple's clients' needs. Her research illustrates that the best mode of transportation often depends on the industry using it. Industries that deal in bulk products such as corn, soybeans, wheat, cement, crude oil and coal must decide which mode of transportation is best. That decision is often based on the distance over which the shipment must be moved. Trucks have a cost advantage for short distances up to 500 miles consequently, they function primarily as the short haul option. As the distance increases rail has a cost advantage over trucks, however, barges have the greatest cost advantage if a waterway connects the point of origin and the destination Although Whipple Logistics Company provides shipping services to all industries, the new clients were primarily shipping large balk items. For bulk shipments barges are the least expensive mode of transportation However, waterways do not go everywhere: consequently, the critical factors are the shipment origin and its proximity to navigable waterways Ruby began to investigate what besides cost could be a driving factor. She discovered that seldom were single barges alone used to haul cargo Generally, barges are cabled together in what is called a 15-barge tow, giving it a capacity of 22.500 tons. Ruby wondered how this compared to the capacity of rail and trucks. She knew that rail cars are also connected together to increase capacity. The standard is a 100-car train whose hauling capacity is 11.200 tonths, it takes two 100-car trains to match a 15-barge tow. A third option is semitrucks or "18-wheelers." A single semitruck can haul 26 tons. Unfortunately, the drawback of semitrucks is they are a single shipping system, unlike barges or rail cars that are combined to create a larger shipping system. Approximately 870 semitrucks* would be required to equal the cargo capacity of either a 15- barge tow or two 100-car trains. Ruby decided that barges are the best bulk transportation option, if the origin and destination can be accessed by water. She appreciated that it was more complex that just cost though. One needs to factor in possible delays due to weather and the hauling capacity of a specific mode of transportation Questions 1. How should Ruby approach this briefing? Should she explain each type or should she discuss only the concept of intermodal transportation? Explain your recommendation; why do you think one approach is better than another, that is, what is the benefit to those being briefed? 2. In your opinion, which mode of transportation has the most potential for problems? Explain why you say that. 3. Identify the mode of transportation that is the most flexible and the one that is the least flexible. Explain why you consider them as the most and least flexible.
1. Ruby should approach the briefing by explaining each type of transportation (trucks, rail, and barges) and discussing the concept of intermodal transportation. This approach provides a comprehensive understanding of available options, allowing clients to make informed decisions based on their specific needs.
The mode of transportation has the most potential for problems?2. Trucks have the most potential for problems in transportation due to factors such as traffic congestion, accidents, adverse weather conditions, human error, delays, and capacity constraints.
3. Trucks are considered the most flexible mode of transportation due to their accessibility to various locations and the ability to provide door-to-door service. On the other hand, barges are the least flexible mode, as they heavily rely on waterways and may require additional transportation modes if waterway connectivity is lacking.
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The best alternative foregone for any choice is known as the
associated cost
consumer's marginal utility
resource input cost
explicit cost
opportunity cost
The best alternative forgone for any choice is known as the opportunity cost. Option opportunity cost is the answer.
The notion of opportunity cost applies to all economic decisions. It's the foregone value of the best alternative that one has to give up to pursue a given activity. In other terms, it's the opportunity cost, which is the price of one thing in terms of the sacrifice of another. Opportunity cost is one of the most fundamental principles in economics. Opportunity cost is significant because it affects decision-making.
Individuals and organizations are usually forced to select among many choices, and in order to make good decisions, they must recognize the potential cost of each alternative. As a result, opportunity costs are critical in economics since they provide a mechanism for determining whether a particular selection is worthwhile or not. In summary, opportunity cost is the value of the best alternative that has to be foregone in order to make the best decision.
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Please fill in the missing cells of the following table
Revenues
155
Expenses
125
Dividends declared
5
Additional investment by stockholders
10
Net income
?
Retained earnings
Beginning of year
30
End of year
?
Paid-in capital
Beginning of year
15
End of year
?
Total assets
Beginning of year
80
End of year
95
Total liabilities
Beginning of year
?
End of year
?
Net income: 25. To calculate the net income, we need to subtract the total expenses from the total revenues. In this case, the revenues are $155, and the expenses are $125. Therefore, the net income is $30 ($155 - $125).
The net income represents the profitability of a company during a specific period. In this scenario, the company earned a net income of $30. This means that after deducting all the expenses from the revenues, the company had a positive income of $30. It indicates that the company was able to generate more revenue than it spent on expenses.
This net income contributes to the retained earnings of the company. Retained earnings are the accumulated profits of a company that are not distributed to shareholders as dividends. At the beginning of the year, the retained earnings were $30, and with a net income of $30, the retained earnings at the end of the year would be $60 ($30 + $30).
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if a city has a total 200,000 workers, with 100,000 engaged in non basic activities, what is the basic/non basic ratio?
The basic/nonbasic ratio in the city that has a total of 200,000 workers, with 100,000 engaged in non-basic activities is 1:1.
In this case, the total number of workers in the city is:
Total number of workers = Basic + Non-basic activitie
Number of non-basic activities = 100,000
Number of basic activities can be calculated by subtracting the number of non-basic activities from the total number of workers.
Basic activities = Total - Non-basic activities
Basic activities = 200,000 - 100,000
Basic activities = 100,000
Now, we can calculate the basic/non-basic ratio as follows:
Basic/Non-basic ratio = Basic activities / Non-basic activities
Basic/Non-basic ratio = 100,000 / 100,000
Basic/Non-basic ratio = 1/1
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On February 1, 2019, the balance of the retained earnings account of Blue Power Corporation was $567,000. Revenues for February totaled $110,700, of which $103,500 was collected in cash. Expenses for February totaled $91,700, of which $75,600 was paid in cash. Dividends declared and paid during February were $8,400. Required: Calculate the retained earnings balance at February 28, 2019. (Amounts to be deducted should be indicated with a minus sign.)
The retained earnings balance at February 28, 2019 is $577,600.
To calculate the retained earnings balance at February 28, 2019, we need to first calculate the net income for February.
This can be calculated using the following formula:
Net income = Revenues - Expenses
We are given that the revenues for February totaled $110,700 and the expenses for February totaled $91,700. Therefore, Net income = $110,700 - $91,700
Net income = $19,000
Now, we need to adjust the retained earnings account for the dividends declared and paid during February. The dividends paid during February were $8,400. Therefore, the retained earnings balance at February 28, 2019 will be:
Retained earnings balance at February 28, 2019 = Retained earnings balance at February 1, 2019 + Net income - Dividends
Retained earnings balance at February 28, 2019 = $567,000 + $19,000 - $8,400
Retained earnings balance at February 28, 2019 = $577,600
Therefore, the retained earnings balance at February 28, 2019 is $577,600.
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