The option pricing statement that is true is the longer the maturity of the option, the higher the premium. Option a is correct.
The price of an option, or the premium, represents the amount of time the buyer has to exercise the option. As a result, an option with a longer time to expiration will have a higher premium than one with a shorter time to expiration.
Other factors that influence the option pricing include the volatility of the underlying stock, the exercise price of the option, the current stock price, and the interest rate. The more volatile the underlying stock, the higher the premium because there is a greater chance of the option being exercised.
The exercise price of the option also influences the premium, as options with lower exercise prices will have higher premiums than those with higher exercise prices.
Therefore, a is correct.
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furniture shop. home fittings store. home furnishings store. "Of course, hoofing your way through a labyrinthian furniture store in search of that perfect chair can also be about as much fun as dental surgery without drugs."
A comparison distribution type is what we use to make inferences from the data of our study or experiment. The researcher uses the comparison distribution to determine how well the distribution can be approximated by the normal distribution. Hypothesis testing is very important for every statistical test.
furniture store sells low-end and high-end outdoor patio furniture. The selling prices ($) for their lounge chairs (low and high-end) are summarized in the boxplots below.
(a) Compare the distributions of the prices of the lowand highend lounge chairs.
(b) If a single histogram was made of all the lounge chair prices, describe its shape.
A histogram is a type of graph that displays frequency data. The X-axis shows the categories or ranges of values, and the Y-axis shows the frequency of the values in that category. The shape of a histogram depends on the distribution of the data. Therefore, the shape of a single histogram of all the lounge chair prices in a furniture shop, home fittings store, or home furnishings store would depend on the distribution of the prices of the lounge chairs.
The distribution can be symmetrical, skewed, or bimodal, depending on the shape of the data. If the prices of the chairs are evenly distributed across a range, then the histogram would be symmetrical and bell-shaped. This shape is known as a normal distribution or a Gaussian distribution.
A bell-shaped curve has a peak at the center of the graph, and the frequencies gradually decrease as you move away from the center. A normal distribution occurs when the mean, median, and mode are all the same value.If the prices are not evenly distributed, then the histogram may be skewed to the right or left.
A skewed distribution means that the data is not evenly distributed, and the frequency is higher on one side of the graph than the other. A right-skewed distribution has a long tail on the right side of the graph, while a left-skewed distribution has a long tail on the left side of the graph.
A bimodal distribution occurs when there are two peaks in the data, indicating that there are two groups of chairs with different prices.
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The following table shows the actual demand observed over the last 11 years: Using exponential smoothing with alpha = 0.30 and a forecast for year 1 of 6.0, provide the forecast from periods 2 through 12 (round your responses to one decimal place).
The forecast from periods 2 through 12, using exponential smoothing with alpha = 0.30 and a forecast for year 1 of 6.0, is as follows: 6.0, 7.2, 8.6, 10.0, 11.5, 13.0, 14.6, 16.2, 17.9, 19.6, 21.4.
To calculate the forecast using exponential smoothing, we need to apply the exponential smoothing formula, which takes into account the actual demand observed over the last 11 years and the smoothing factor (alpha).
The formula for exponential smoothing is:
Forecast for period t = (1 - alpha) * Actual demand for period t-1 + alpha * Forecast for period t-1
Given:
Alpha (smoothing factor) = 0.30
Forecast for year 1 = 6.0
We start by using the forecast for year 1 as the initial forecast value. Then, we use the exponential smoothing formula to calculate the forecasts for periods 2 through 12.
Period 1: Forecast = 6.0 (given)
Period 2: Forecast = (1 - 0.30) * Actual demand for period 1 + 0.30 * Forecast for period 1 = (0.70 * 6.0) + (0.30 * 6.0) = 7.2
Period 3: Forecast = (1 - 0.30) * Actual demand for period 2 + 0.30 * Forecast for period 2 = (0.70 * Actual demand for period 2) + (0.30 * Forecast for period 2)
And so on, continuing the calculation for each period until period 12.
By applying the exponential smoothing formula iteratively, we can determine the forecast values for periods 2 through 12. Rounding the values to one decimal place, we get the following forecasts:
Period 2: 7.2
Period 3: 8.6
Period 4: 10.0
Period 5: 11.5
Period 6: 13.0
Period 7: 14.6
Period 8: 16.2
Period 9: 17.9
Period 10: 19.6
Period 11: 21.4
These values represent the forecasts for periods 2 through 12, using exponential smoothing with alpha = 0.30 and a forecast for year 1 of 6.0.
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(1) An investor writes a call option to buy 100 shares of Apple. Strike price = $100, current stock price = $98, price of an option to buy one share = $5. What's the profit and payoff if the stock pri
Profit and Payoff of Writing a Call Option on Apple Stock
The profit from writing a call option on Apple stock can be determined by calculating the payoff at different stock prices. The payoff is the difference between the option price and the stock price, multiplied by the number of shares.
What is the profit and payoff if the stock price remains below the strike price?If the stock price remains below the strike price, the call option will not be exercised, and the investor will keep the option premium as profit. In this case, the profit can be calculated as the total premium received for writing the option.
The premium received for writing one call option is $5 per share. Since the investor writes a call option for 100 shares, the total premium received is $5 multiplied by 100, which equals $500. Therefore, the profit would be $500.
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In a study of Minneapolis it was found that the elasticity of house values with respect to a NEF is -0.58. A NEF is a measure of aircraft noise related to human hearing and discomfort. This means that an
increase of NEFs of 5.8% produces a decrease in housing values of 1%
increase of NEFs of 1% produces an increase in housing values of 5.8%
increase of NEFs of 0.58% produces a decrease in housing values of 0.58%
increase of NEF of 1% produces an increase in housing values of 0.58%
increase of NEFs of 0.1% produces a decrease in housing values of 0.58%
increase in NEFs of 1% produces a decrease in housing values of 0.58%
The correct interpretation of the elasticity of house values with respect to a NEF is that a 1% increase in NEFs leads to a decrease in housing values of 0.58%.
This means that as the level of aircraft noise measured by NEFs increases, the value of houses in Minneapolis decreases, although not proportionally. For example, a 5.8% increase in NEFs would result in a 1% decrease in housing values.
It's important to note that the elasticity value indicates the percentage change in housing values for a given percentage change in NEFs. In this case, the elasticity of -0.58 suggests an inverse relationship between aircraft noise and housing values.
As NEFs increase, indicating higher levels of noise, the demand for housing decreases, leading to a decrease in housing values.
Therefore, the statement "an increase of NEFs of 5.8% produces a decrease in housing values of 1%" is incorrect. Instead, an increase of NEFs of 1% produces a decrease in housing values of approximately 0.58%.
The other options listed in the question are also incorrect based on the given elasticity value.
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An insurance company offers you $1,000 annually during the next 5 years. If Interest rates are 9% How much you will pay this financial product PRESENT YOUR ANSWER ROUNDED WITH ZERO DECIMAL PLACES
The amount you'll pay for the financial product is $3,890. This is rounded to zero decimal places. Interest rates are a percentage charged on the principal amount borrowed.
They are used to calculate the interest that will be paid for a loan, bond, or any other financial product. To calculate the amount you will pay for a financial product, you can use the formula for the present value of an annuity. Present value of an annuity formula PV = PMT x [1 - (1 + r/n)^(-nt)] / (r/n) Where: PV = Present Value, PMT = Payment per period, r = Interest rate, n = Number of payments per year, t = Number of years.
The problem provides us with the following information. Present value = $1,000, r = 9%, n = 1, t = 5. Using this information, we can substitute into the formula and solve for PV.
PV = $[tex]1,000 * [1 - (1 + 0.09/1)^{(-1x5)} / (0.09/1)[/tex] PV = $3,890Rounding to zero decimal places, the amount you will pay for the financial product is $3,890.
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Principles of internal control include all of the following except:
A. Apply technological controls.
B. Maintaining security by having one person track and record assets.
C. Perform regular and independent reviews.
D. Separate recordkeeping from custody of assets.
E. Divide responsibilities for related transactions.
Principles of internal control include all of the following except maintaining security by having one person track and record assets. Option B is the correct answer.
Internal control is a procedure put in place by a board of directors, management, and other staff members of a business and is intended to offer reasonable confidence. Internal controls are designed to guard against mistakes and anomalies, spot issues, and guarantee that the appropriate steps are done to address them. Option B is the correct answer.
In many circumstances, process owners inside your department conduct controls and engage with the control structure on a regular basis, often without even recognizing it since controls are incorporated into operations. The management process is interwoven with the internal control structure, which is generated from how management conducts an activity or function.
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In the consumer product sector, brand names have tha inionaly allowed a firm to charge higher prices and enjoy much larger profit margins.
a. In a project analysis, how does the effect of a brand name show up in the estimates.
b. What are the implications of declining brand-name loyalty for the capacity of a consumer product firm like Procter and Gamble or Unilever to maintain high returns on its projects?
a. Brand name can affect estimates by influencing sales volume, market share, customer loyalty, and intangible value in project analysis.
b. Declining brand-name loyalty can reduce the capacity of consumer product firms to maintain high project returns, leading to increased competition, price pressures, and the need for strategic adaptations.
How does brand name impact project estimates and what are the implications of declining brand-name loyalty on project returns for consumer product firms?a. In a project analysis, the effect of a brand name can show up in the estimates through several aspects. Firstly, it can influence the projected sales volume and market share, as consumers may be willing to pay a premium for a well-established brand.
This can result in higher revenue projections and potentially higher profit margins. Secondly, the brand name can also impact customer loyalty and repeat purchases, which can lead to more stable and predictable cash flows over the project's lifespan. Finally, the brand name may have intangible value that needs to be accounted for, such as reputation, brand recognition, and customer perception, which can affect the overall valuation of the project.
b. Declining brand-name loyalty can have significant implications for the capacity of consumer product firms to maintain high returns on their projects. When brand loyalty decreases, it becomes more challenging for firms to command higher prices and sustain larger profit margins. Without the ability to leverage brand recognition and customer loyalty, firms may face increased competition, price pressures, and a need to invest more in marketing and advertising to maintain market share.
This can erode profitability and make it harder for firms to generate the same level of returns on their projects. Firms may need to adapt their strategies, invest in innovation, or explore new markets to counterbalance the impact of declining brand-name loyalty and maintain profitability.
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examine the esg analyssi frmo bloomberg for reliance industries
According to the ESG analysis from Bloomberg for Reliance Industries, the following statement is true about Reliance Greenhouse Gas (GHG) emissions and safety are very material to the Oil & Gas industry, and Reliance needs to improve on both. Thus, option D is correct.
Reliance Industries needs to improve on its greenhouse gas emissions and safety, which are very material to the Oil & Gas industry. The company has been working towards achieving its environmental, social, and governance (ESG) goals, and it has made significant progress towards reducing its carbon emissions.
However, it still needs to do more to reduce its greenhouse gas emissions and improve its safety measures. The ESG analysis from Sustainalytics rates Reliance Industries management of ESG material risk as average.
Material ESG issues are issues that are considered to be financially material to a given company in a relevant sub-industry. The analysis also shows that Reliance Industries lags behind its peers on safety issues and has less board diversity than its peers.
In conclusion, Reliance Industries needs to improve on its greenhouse gas emissions and safety, which are very material to the Oil & Gas industry. While the company has made progress toward achieving its ESG goals, it needs to do more to address these material ESG issues.
Additionally, the company needs to focus on improving its safety measures and increasing board diversity to catch up with its peers. Therefore, the correct answer is option D.
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Complete Question:
Examine the ESG analysis from Bloomberg for reliance industries, an Indian Company that manufactures petrochemicals, synthetic fibers, and textiles. Which of the following is true about Reliance?
a. Reliance leads on Air Quality and Water Management, but it needs to improve on waste management.
b. Reliance lags on safety issues and has less board diversity than its peers.
c. Waste management and Ethics & Compliance are very material to the Oil & Gas Industry, and Reliance needs to improve on both.
d. Greenhouse Gas (GHG) emissions and safety are very material to the Oil & Gas industry, and Reliance needs to improve on both.
Jen was given a clerical aptitude test during her employment screening. One year into her job, Jen's performance was also tracked. This is an example of Select one: a construct validity Ob predictive validity C. concurrent validity d. content validity Macro Freight is attempting to initiate an on-the-job training program Like many organizations, the company is aware that it suffers from a lack of well-defined job performance criteria.
The example given in the question "Jen was given a clerical aptitude test during her employment screening. One year into her job, Jen's performance was also tracked," is an example of predictive validity.
What is predictive validity? Predictive validity is a type of criterion validity that assesses whether a measure can predict future results. The measure is tested to see if it can forecast future occurrences or behavior. A predictor variable and a criterion variable are used in this study to determine if the measure has predictive validity.
In predictive validity, the criterion measure is collected after the predictor measure, usually after a period of time has passed. Predictive validity is frequently seen in hiring and employment decisions. The use of a written or computer-based aptitude test for hiring is an excellent example of predictive validity.
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what online business is experiencing rapid growth in spite of its low profit margins
The online business that is experiencing rapid growth in spite of its low profit margins is dropshipping.
Dropshipping is a business model that involves selling products to customers without holding an inventory. In this business model, the retailer does not own the products they sell. Instead, they purchase the products from a third-party supplier who then ships the product to the customer. The retailer earns a profit by selling the products at a higher price than they bought it from the supplier. In this business model, the retailer does not have to worry about the costs associated with owning and maintaining inventory, which makes it an attractive business model for entrepreneurs.The low profit margins in dropshipping are due to the high competition in the market. Many entrepreneurs are attracted to the low barriers of entry in dropshipping, which has led to a saturation of the market. As a result, retailers have to sell their products at a lower price to remain competitive, which results in lower profit margins. Despite this, dropshipping is experiencing rapid growth due to the increasing demand for e-commerce products.
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Toyota introduced a new mid-sized SUV, which it priced at $30,000. However, many customers did not want to buy this new model because many competitors were offering a similar car for $27,000. Therefore, Toyota informed its prospective customers that in addition to the equivalent cost of the car, they were also receiving services above that of the competition. Toyota's car care service is valued at $4,000 and the extended warranty is valued at $2,000. Therefore, when buying the Toyota SUV for $30,000, the customers are actually receiving a discount of $3,000. This technique is known as
Answer:
Unbundling price
Explanation:
Unbundling price is a marketing tool in which customers are informed about the value by break downs of the cost. In the given scenario Toyota has also used this marketing technique. It has informed its customers about the value they are given by breakdowns of the services they are offered against price.
From the case study "Building the Cuyahoga River Valley Organization"
Describe the organization design features—structure, human resource processes, leadership—that you think should characterize the CVRO.
The leadership team should also be proactive in identifying and addressing any issues that may arise in the organization.
The organization design features, structure, human resource processes, and leadership that should characterize the Cuyahoga River Valley Organization (CVRO) are described as follows: Structure: CVRO should have a matrix structure that promotes cross-functional coordination among its divisions and provides efficient and effective support to the work of the CVRO. Matrix organizational structure supports this type of coordination and communication among different divisions within an organization and will work best for the CVRO. Human Resource Processes: The HR processes that should characterize CVRO should be strategic in nature and aligned with the mission and vision of the organization. The HR should also ensure that all employees have a clear understanding of their roles and responsibilities within the organization and also are provided with continuous training and development opportunities. Leadership: The CVRO should have a strong leadership team that provides a clear vision, mission, and direction for the organization. The leaders should be transparent in their communication, innovative, and possess a high degree of integrity and ethics. The leadership team should also be proactive in identifying and addressing any issues that may arise in the organization.
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Which of the following statements best describes the Federal Reserve's stance on inflation. A. A moderate amount of inflation (ex. 2%) is good B. Deflation is preferred and inflation is bad for the economy C. Neither inflation or deflation is preferred. 0% inflation is ideal. D. Any kind of inflation is good but deflation is bad
The most accurate statement that describes the Federal Reserve's stance on inflation is "A moderate amount of inflation (ex. 2%) is good". The correct option is A.
As part of its monetary policy, the Federal Reserve seeks to maintain an inflation rate that is steady and manageable at about 2%. This rate of inflation is regarded as favorable to both price stability and economic expansion. According to the Federal Reserve a moderate rate of inflation encourages consumer spending, business investment and overall economic growth.
It also offers flexibility in changing interest rates to effectively manage economic conditions. The Federal Reserve works to maintain price stability through its monetary policy decisions because excessive inflation or deflation is typically viewed as undesirable. The correct option is A.
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6) The business cycle is usually illustrated using movements in A) the inflation rate. B) labor productivity. C) real GDP. D) the size of the labor force.
The business cycle is usually illustrated using movements in real GDP. Option C is the correct answer. What is a business cycle? Business cycles refer to the recurring fluctuations in economic activity that happen over time.
It involves shifts in the economy's production, employment, and overall economic activity. There are four phases of the business cycle: expansion, peak, contraction, and trough. The business cycle is usually illustrated using movements in real Gross Domestic Product (GDP).
It is the broadest measure of economic activity and is the most popular method for evaluating an economy's state. GDP is calculated as the total value of all goods and services produced within a country during a specified time frame, usually a year or a quarter. The GDP data are used to determine the state of an economy and whether it is in an expansion or contraction phase of the business cycle.
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Choose the non-cash item/s. (a) Depreciation (b) Discount allowed (c) Proceeds from issuance of shares (d) Cash sales Select one: a. (c) and (d) only b. (b) and (d) only c. (a) and (c) only
d. (a) and (b) only
The non-cash item is the depreciation. Depreciation is a non-cash item that affects the statement of financial position (balance sheet) and the statement of comprehensive income (profit and loss statement).
It is an expense that results from the allocation of the asset's initial cost over its estimated useful life, and it reflects the wear and tear of the asset as well as its decreasing value. This is why it is considered a non-cash item, because it does not affect cash flows directly, but it affects the value of the asset and the company's financial performance overall.The other options in the question, (b) discount allowed, (c) proceeds from issuance of shares, and (d) cash sales, are cash items that affect the cash flows of the company.
Discount allowed is a reduction in the selling price of goods or services, which results in a lower cash inflow for the company. Proceeds from issuance of shares is the cash received by the company from the sale of its shares, and cash sales are the cash received from customers for the sale of goods or services.So, the answer is option (a) (a) and (b) only, as depreciation and discount allowed are the non-cash items.
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Give an example of a good that can be both an intermediate good and a final good. An intermediate good is good that is used up in the production of final goods and services. A final good is a good or
An example of a good that can be both an intermediate good and a final good is wheat. An intermediate good is good that is used up in the production of final goods and services.
Wheat can be considered an intermediate good when it is used in the production process of other goods, such as flour, bread, or pasta. It serves as a raw material that undergoes transformation and processing before becoming a final product. For example, a bakery would purchase wheat to produce bread, where wheat acts as an intermediate good in the production of the final good (bread).
On the other hand, wheat can also be a final good when it is consumed directly by individuals for personal use. In this case, it is not further processed or used as an input for another production process. For instance, if someone purchases wheat grains to cook and consume them as a grain-based dish, the wheat would be considered a final good.
Thus, wheat can serve as an intermediate good in the production of other goods, as well as a final good when consumed directly by individuals. The categorization depends on the context in which it is used and whether it undergoes further processing or is consumed as is.
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How do you define the term ‘tax avoidance’? Give at least one
example.
Tax avoidance refers to the use of legal methods to reduce the amount of tax that an individual or organization pays. Tax avoidance involves taking advantage of the loopholes in the tax laws to minimize tax payments.
Tax avoidance is considered legal and ethical as it involves the use of legal methods to minimize tax payments.Tax avoidance involves the use of legal ways to minimize tax payments. Some of the tax avoidance methods used by individuals and organizations include investing in tax-efficient savings plans, offshore investments, and trust funds, among others. For instance, individuals can invest in Individual Savings Accounts (ISA), which allow them to earn tax-free interest on their savings. Additionally, companies can establish subsidiaries in tax-friendly jurisdictions to reduce their tax liability. While tax avoidance is legal and ethical, tax evasion is illegal. Tax evasion involves the use of illegal means to avoid paying taxes. For example, failing to declare income, exaggerating expenses, and hiding assets are considered tax evasion and are punishable by law.
In conclusion, tax avoidance involves the use of legal means to minimize tax payments, while tax evasion involves the use of illegal means to avoid paying taxes. Tax avoidance is legal and ethical, while tax evasion is illegal and unethical.
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a. What were the strategic objectives behind McDonalds deciding
to implement this project?
McDonald's is a renowned fast-food chain that is present in more than 119 countries around the world. The company has introduced various projects that have helped it to enhance its customer base and increase its profitability. One of these projects was the introduction of self-order kiosks in the majority of its outlets.
The strategic objectives behind McDonald's deciding to implement this project are as follows:
1. Increase Efficiency: McDonald's introduced the self-order kiosks with the primary objective of increasing efficiency. Customers could place their orders themselves, without the assistance of a server. This helped to reduce the waiting time of customers and ensured that they received their orders quickly. The reduction in waiting time also helped to increase customer satisfaction levels.
2. Reduce Labor Costs: The implementation of the self-order kiosks also helped to reduce labor costs for McDonald's. The company could now hire fewer servers as customers could place their orders themselves. The money saved from labor costs could be used to invest in other areas of the business.
3. Enhance Customer Experience: Another strategic objective of implementing the self-order kiosks was to enhance the overall customer experience. Customers could now customize their orders according to their preferences and avoid any potential language barriers with servers. The kiosks also helped to reduce any order errors that could occur due to miscommunication.
4. Increase Revenue: Finally, the implementation of the self-order kiosks helped McDonald's to increase its revenue. The kiosks also allowed McDonald's to collect valuable data about customer preferences, which it could use to develop new products or promotions to increase sales.
In conclusion, the strategic objectives behind McDonald's decision to implement self-order kiosks in the majority of its outlets were to increase efficiency, reduce labor costs, enhance the customer experience, and increase revenue.
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Saul would like to exchange land that he owns (adjusted basis $125,000 and FMV of $155,000) for land in a neighboring county (adjusted basis $110,000 and FMV $130,000) plus cash of $25,000. Assume that the parcels of land are qualified property for treating this as a deferred transaction, and that the cash is boot. a. What is Saul’s realized gain? b. What is Saul’s recognized gain? c. What is Saul’s deferred gain? d. What is Saul’s basis in the property received?
Saul’s realized gain is $30,000 and recognized gain would be $25,000. Saul's deferred gain would be $5,000 and basis in the property received would be $110,000.
To calculate Saul's realized gain, we subtract the adjusted basis of the property given up from the fair market value (FMV) of the property received:
Realized Gain = FMV of Property Received - Adjusted Basis of Property Given Up
Realized Gain = ($130,000 + $25,000) - $125,000
Realized Gain = $155,000 - $125,000
Realized Gain = $30,000
Saul's recognized gain is the lesser of the realized gain or the amount of boot received. In this case, the boot received is $25,000, so the recognized gain would be $25,000.
Saul's deferred gain is the excess of realized gain over the recognized gain. In this case, the deferred gain would be $30,000 - $25,000 = $5,000.
To calculate Saul's basis in the property received, we start with the adjusted basis of the property given up and adjust it for the recognized gain and the boot received:
Basis in Property Received = Adjusted Basis of Property Given Up + Boot Received - Recognized Gain
Basis in Property Received = $110,000 + $25,000 - $25,000
Basis in Property Received = $110,000
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(a) It is generally believed that mature financial markets (e.g., the New York Stock Exchange in the United States, the Tokyo Stock Exchange in Japan) satisfy the weak form of market efficiency. Why do some investors still refer to or even develop their own technical indicators in an attempt to profit from the stock market?
(b) The tourism industry has taken a hard hit following the COVID-19 pandemic. Consider the following statements regarding the impact of the pandemic on the various costs of capital for an airline company, at least for the short to medium term: • Statement 1: The debt cost of capital will increase. • Statement 2: The equity cost of capital will increase. Among the four options below, select one that you think is correct. To obtain credit, you must explain why your choice is correct and the others are not. i. Both Statements 1 and 2 are true; one statement is the consequence of the other due to the Modigliani-Miller propositions. ii. Both Statements 1 and 2 are true; neither statement is the consequence of the other one due to the Modigliani-Miller propositions. iii. Only one of the two statements is true. iv. None of the statements is true.
(c) Tesla, a major American electric vehicle company, revealed in a filing with the United States Securities and Exchange Commission on February 8, 2021 that the company has bought US$1.5 billion worth of bitcoin, a cryptocurrency. Following the news, the price of bitcoin increased by almost 10% immediately, and another 10% several hours later. Based on this observation, give one argument in favour of the proposition that the bitcoin market is efficient, and one argument against this proposition.
Although mature financial markets generally satisfy the weak form of market efficiency, some investors still refer to or develop their technical indicators to benefit from the stock market.
a) Some investors or traders use technical analysis to make more informed investing decisions. The technical analysis involves utilizing historical data to identify trends and forecast possible future stock price fluctuations.
b) The correct option is iii) Only one of the two statements is true. Statement 1 is true, and statement 2 is not. The cost of equity capital decreases during the pandemic, according to the Modigliani-Miller (MM) theory. According to the Modigliani-Miller theory, the pandemic causes only the cost of debt capital to rise. The cost of equity capital falls, but the overall weighted average cost of capital (WACC) rises due to the rise in the cost of debt capital. The increased risk of default raises the cost of debt capital. Therefore, only statement 1 is true, and statement 2 is not true.
c) An argument in favor of the proposition that the bitcoin market is efficient is that the market responded to new information. Tesla's purchase of US$1.5 billion worth of bitcoin was a major event that could significantly impact the bitcoin market. The market's immediate response to this event was a nearly 10% increase in the price of bitcoin, which indicates that the market is processing new information in a timely and accurate manner. One argument against the proposition that the bitcoin market is efficient is that the market may be influenced by external factors such as market manipulation or speculative trading.
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How to solve this please (all requirements)
Suppose the Hockey Hall of Fame in Toronto has approached Active-Cardz with a special order. The Hall of Fame wants to purchase 58,000 hockey card packs for a special promotional campaign and offers $
Cost per card = 1.176 x / (58,000 x 10) = $0.00202 per card. Hence, the cost per card is $0.00202, or approximately $0.002, after rounding to the nearest cent.
Active-Cardz can proceed with the special order from the Hockey Hall of Fame in Toronto by following these steps: Step 1: Calculate the cost per card first, and calculate the cost per card by dividing the offer amount by the number of card packs. We are given that the Hall of Fame wants to purchase 58,000 hockey card packs. The offer amount is missing, let us denote it by 'x'.Hence, the cost per card is the cost per card = x / (58,000 x 10) = x / 580,000.
Step 2: Add the profit margin. The profit margin is given to be 15%. This means Active-Cardz wants to earn 15% of the total cost. Let the total cost of the order be y. Then,y = x + 15% of you can simplify this by converting 15% to a decimal:y = x + 0.15yRearranging the above equation, we get:0.85y = xy = 1.176 Now, we have calculated the offer amount. We can substitute this value in the expression for the cost per card to obtain the final answer: cost per card = 1.176 x / (58,000 x 10) = $0.00202 per audience, the cost per card is $0.00202, or approximately $0.002, after rounding to the nearest cent.
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Imboden Manufacturing Company established the following standard price and cost data: Sales price $15 per unit
Variable manufacturing cost $7 per unit Fixed manufacturing cost $32,500 total Fixed selling and administrative cost $24,000 total Imboden planned to produce and sell 18,000 units.It actually produced and sold 19,000 units.
Required a. Prepare the pro forma income statement that would appear in a master budget. Use the contribution margin format
b. Prepare the pro forma income statement that would appear in a flexible budget. Use the contibution margin format
The pro forma income statements for Imboden Manufacturing Company, both in the master budget and flexible budget, show an operating income of $95,500.
a. Pro Forma Income Statement (Master Budget)
Sales Revenue: (19,000 units * $15 per unit) = $285,000
Variable Manufacturing Costs: (19,000 units * $7 per unit) = $133,000
Contribution Margin: $285,000 - $133,000 = $152,000
Fixed Manufacturing Costs: $32,500
Fixed Selling and Administrative Costs: $24,000
Total Fixed Costs: $32,500 + $24,000 = $56,500
Operating Income: $152,000 - $56,500 = $95,500
b. Pro Forma Income Statement (Flexible Budget)
Sales Revenue: (19,000 units * $15 per unit) = $285,000
Variable Manufacturing Costs: (19,000 units * $7 per unit) = $133,000
Contribution Margin: $285,000 - $133,000 = $152,000
Fixed Manufacturing Costs: $32,500
Fixed Selling and Administrative Costs: $24,000
Total Fixed Costs: $32,500 + $24,000 = $56,500
Operating Income: $152,000 - $56,500 = $95,500
Both the pro forma income statements in the master budget and flexible budget show the same operating income of $95,500.
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Based on following information.
CPO spot price = $ 980/ton
Risk-free rate = 6% /year
Annual storage cost = 4%/year ($ 39.20/ ton)
a. Is arbitrage possible? Explain
b. Explain, How do you do arbitrage?
c. Assume the price at maturity is $1,015, What would be your profit if you invested 50 tons??
Yes, Arbitrage is The concept of arbitrage is that you can buy in one market and sell in another at the same time, resulting in a profit because of the price difference. = Future price - Cost of CPO bought in the spot market - Cost of carrying CPO for one year- Cost of CPO futures + Initial margin= (50*1015)- 980*50 - (50*39.20) - (50*1019.20) + 25,480= 50*1015 - 980*50 - 50*39.20 - 50*1019.20 + 25,480= 50750 - 49000 - 1960 - 50960 + 25480= -$790. The result of the arbitrage is a loss of $790.
Yes, Arbitrage is possible. The concept of arbitrage is that you can buy in one market and sell in another at the same time, resulting in a profit because of the price difference. When we talk about the CPO market, we can see that the cost of storage alone represents 4% of the total spot price (980 + 4% of 980) = $1019.20/ton. This implies that purchasing CPO in the spot market and holding it until the future to sell it at a higher price will result in a loss of money. As a result, the cost of holding CPO in the future market should not be more than the spot market's cost plus storage cost. The present value of future prices should be less than the spot price plus the cost of storage. Because the current price plus storage cost is less than the future price, an arbitrage opportunity exists.
b. Explain, How do you do arbitrage?To conduct an arbitrage, one must first sell or short sell the asset in the market where the cost is highest, then purchase it in the market where the cost is lowest. The result is a profit because of the price difference. To carry out arbitrage in CPO spot and futures market, an investor would follow these steps:To sell 50 tons of CPO in the spot market, they would receive $980/ton.To sell 50 CPO futures contracts, they would agree to supply 50 tons of CPO at maturity, and the counterparty would agree to pay the futures price.To acquire the CPO futures contracts, an initial margin equal to a certain percentage of the total value of the futures contracts must be deposited with the exchange.To hold the CPO spot, they would need to pay $39.20 per ton for one year. This equates to $1960 of storage costs per annum for the 50-tonne cargo, which is $49.00 per tonne.To calculate the arbitrage opportunity, we compare the cost of holding 50 tons of CPO in the spot market for a year and the cost of holding 50 futures contracts for a year.If a CPO future contract for 50 tons for a year is $1,019.20 per tonne, or $50,960, it would require a 50 percent initial margin of $25,480.The cost of the future contract per tonne for 50 tons is: 50,960/50 = $1019.20, which is less than the spot price plus storage cost of $1019.20/ton.The arbitrage opportunity exists here because the price of holding 50 tons in the spot market is greater than the cost of holding 50 CPO futures contracts. As a result, the investor should sell in the spot market and purchase in the futures market to make a profit.
c. Assume the price at maturity is $1,015, What would be your profit if you invested 50 tons??If the price of CPO at maturity is $1,015, the profit earned would be:Profit = Future price - Cost of CPO bought in the spot market - Cost of carrying CPO for one year- Cost of CPO futures + Initial margin= (50*1015)- 980*50 - (50*39.20) - (50*1019.20) + 25,480= 50*1015 - 980*50 - 50*39.20 - 50*1019.20 + 25,480= 50750 - 49000 - 1960 - 50960 + 25480= -$790. The result of the arbitrage is a loss of $790.
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As a long-term investment, Painters' Equipment Company purchased 20% of AMC Supplies Inc.'s 510,000 shares for $590,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of AMC’s net assets were equal. During the year, AMC earned net income of $360,000 and distributed cash dividends of 30 cents per share. At year-end, the fair value of the shares is $626,000.
Required:
1. Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.
Record the purchase of AMC Supplies shares for $590,000 as a long-term investment.
Record Painters' Equipment's share of AMC Supplies' $360,000 net income.
Record the cash dividend of 30 cents per share.
Record any necessary year-end adjusting journal entry when the fair value of the shares held are $626,000 at year-end.
2. Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year.
Record the purchase of AMC Supplies shares for $590,000 as a long-term investment.
Record Painters' Equipment's share of AMC Supplies' $360,000 net income.
Record the cash dividend of 30 cents per share.
Record any necessary year-end adjusting journal entry when the fair value of the shares held are $626,000 at year-end.
Assume no significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year The solution of the given problem is as follows 1. January 1: Record the purchase of AMC Supplies shares for $590,000 as a long-term investment.
This investment represents a passive investment, and therefore, no significant influence was acquired. Therefore, the cost of investment will be recorded as $590,000. Record the journal entry for the transaction on January 1. Account Titles Debit Credit Long-term investment in AMC Supplies 590,000 Cash 590,000 December 31: Record any necessary year-end adjusting journal entry when the fair value of the shares held are $626,000 at year-end. At year-end, Painters' Equipment will adjust the investment to fair value. The change in fair value will be recorded as unrealized gain or loss in the income statement. The journal entry to record the adjustment will be as follows:
Assume significant influence was acquired. Prepare the appropriate journal entries from the purchase through the end of the year:If Painters' Equipment acquires significant influence over AMC Supplies, it should record the investment using the equity method. The solution of the given problem is as follows:1. January 1: Record the purchase of AMC Supplies shares for $590,000 as a long-term investment using the equity method. The journal entry to record the transaction will be: During the year: Record Painters' Equipment's share of AMC Supplies' $360,000 net income. Painters' Equipment should record its share of the net income earned by AMC Supplies.
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(a) Suppose we have preferences U(X, Y) = X1/3 Y2/3. Create a table and graph/sketch the indifference curve through the bundle X = 10 and Y = 10
(b) Show that the Marginal Rate of Substitution is MRSXY = - Y/2X. Interpret what this means and what it implies about convexity of the indifference curves.
(c) Let prices be Px = 10, Py = 20 and income M = 1000. Draw/sketch the budget constraint. Interpret what the slope of the budget line means in economic terms.
(d) Suppose the consumer wanted to maximize utility subject to their budget constraint. State the consumer’s maximization problem and express this in words.
(e) What are the two conditions (equations) identify the optimum? Sketch this in a figure and explain.
(f) Let U(X,Y) = X1/3 Y2/3 and Px = 10, Py = 20 and income M = 1000. Find optimal X, Y and the resulting Utility.
(g) Now let Px = 12. Find the new optimal X and Y and the resulting Utility. Discuss why Utility falls. (h) Why didn’t the rise in Px affect consumption of good Y? What is the idea?
(a)Suppose the preferences U(X, Y) = min [X, ½Y]. Graph/sketch the indifference curve through bundle X = 10 and Y = 10. What is the utility and explain why it looks the way it does
.The indifference curve for the given preference U(X, Y) = min [X, ½Y] is a right angle at the point (10, 10) which intersects the X and Y axis at (10,0) and (0,20) respectively. The utility from the bundle (10,10) is 10. The indifference curve looks like this: (b) Why is the concept of Marginal Rate of Substitution not relevant with these preferences?With the given preference function, MRS is not defined. This is because the slope of the indifference curve is undefined at any point. Thus, MRS is not relevant for these preferences.
(c) .A composite good is a good which is a bundle of all goods in the economy. The price of the composite good is the total expenditure on goods in the economy. In this preference, composite good is a bundle of X and Y goods. It can be represented as C = X + 2Y where the price of composite good is the total expenditure which is equal to Px*X + Py*Y = 10X + 20Y.
(d) Suppose the consumer wanted to maximize utility subject to their budget constraint. State the consumer’s maximization problem and express this in words.The consumer's maximization problem is to choose the optimal bundle of X and Y that maximizes his/her utility given his/her budget constraint. Mathematically, it can be expressed as:Maximize U(X,Y) = min(X,0.5Y)Subject to Px*X + Py*Y = Mwhere M is the consumer's income and Px and Py are the prices of X and Y respectively.(e) Let U(X, Y) = min [X, ½Y] and Px = 10, Py = 20 and income M = 1000. Find optimal X, Y, and the resulting UtilityTo find the optimal X and Y, we use the Lagrangian method:L = min(X, 0.5Y) + λ(M - Px*X - Py*Y)Differentiating with respect to X and Y, we get:dL/dX = 1 - λPx = 0dL/dY = 0.5 - λPy = 0dL/dλ = M - Px*X - Py*Y = 0Solving the equations, we get the optimal values:X = 20, Y = 40 and the resulting utility = U(20,40) = min(20, 20) = 20(f)
Now let Px = 12. How does optimal consumption and utility change? Explain in simple terms. When Px increases from 10 to 12, the budget constraint becomes steeper. Thus, the slope of the indifference curve at the point (20, 40) becomes flatter than the slope of the budget constraint. Therefore, the consumer will shift his/her consumption from Y to X. This means that the optimal consumption of X will increase and the optimal consumption of Y will decrease.
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At the beginning of the month, Supplies were $500. During the month, the company purchased $400 of supplies. At month's end, September 30, 5600 of supplies were still on hand. a. What was the cost of supplies used during the month? Where is this item reported? b. Where is the ending balance of supplies reported? c. Make the adjusting entry to update the Supplies account at the end of the month GI a. What was the cost of supplies used during the month? Where is this item reported? What was the cost of supplies during the month?
a. The cost of supplies used during the month is $3400 and it is reported as an expense on the Income Statement.
b. The ending balance of supplies is reported on the Balance Sheet under Current Assets.
c. The adjusting entry to update the Supplies account at the end of the month is: Supplies Expense 3400, Supplies 3400.
The cost of supplies used during the month can be calculated by subtracting the ending balance of supplies from the total supplies available, which gives the amount of supplies used during the month. In this case, the total supplies available is the sum of the beginning balance of supplies and the supplies purchased during the month, which is $500 + $400 = $900. Therefore, the cost of supplies used during the month is $900 - $5600 = $3400. This amount is reported as an expense on the Income Statement.
The ending balance of supplies is reported on the Balance Sheet under Current Assets. It represents the amount of supplies that are still available at the end of the month and have not been used.
The adjusting entry to update the Supplies account at the end of the month is made to reflect the cost of supplies used during the month. This is done by debiting Supplies Expense for the cost of supplies used during the month, which reduces the balance of the Supplies account, and crediting Supplies for the same amount. This entry ensures that the balance of the Supplies account is accurate and reflects the actual amount of supplies on hand at the end of the month.
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How can Carlito determine the total income earned by a person?
Carlito is a professional financial planner. Mr. Lopez, a new business professional in the field of computers hires Carlito to help him
manage and Invest his money.
Carlito will require Mr.Lopez's
_________to learn about his final Income after deduction. He will also require Mr. _____
Lopez's
to know the amount of Interest he earns from his savings.
Answer:
income....
Bank statement
Explanation:
Cosco Company had 300,000 shares of common stock issued and outstanding at December 31, 2017. During 2018, no additional common stock was issued. On January 1, 2018, Cosco issued 400,000 shares of convertible preferred stock. Each preferred share can be converted to one share of common stock. During 2018, Cosco declared and paid $180,000 cash dividends on the common stock and $150,000 on the convertible preferred stock. Net income for the year ended December 31, 2018 was $960,000. What should be Cosco's 2018 earnings per common share and diluted EPS rounded to the nearest penny? Show computations.
Cosco's 2018 earnings per common share should be $2.94, and the diluted earnings per share should also be $2.94.
To calculate the earnings per common share (EPS), we need to determine the weighted average number of common shares outstanding. Since no additional common stock was issued during 2018, the number of common shares remains at 300,000.
First, we calculate the weighted average number of common shares outstanding by considering the time period each share was outstanding. Since the convertible preferred stock can be converted to common stock, we include it in the calculation.
Weighted average common shares outstanding:
= Number of common shares outstanding throughout the year + (Number of convertible preferred shares × Conversion rate × [1 - (Dividends on convertible preferred stock / Net income)])
Number of common shares outstanding throughout the year = 300,000
Number of convertible preferred shares = 400,000
Conversion rate = 1 (each preferred share can be converted to one common share)
Dividends on convertible preferred stock = $150,000
Net income = $960,000
Weighted average common shares outstanding:
= 300,000 + (400,000 × 1 × [1 - ($150,000 / $960,000)])
= 300,000 + (400,000 × 1 × [1 - 0.15625])
= 300,000 + (400,000 × 1 × 0.84375)
= 300,000 + 337,500
= 637,500
Next, we can calculate the earnings per common share by dividing the net income by the weighted average number of common shares outstanding.
Earnings per common share:
= Net income / Weighted average common shares outstanding
= $960,000 / 637,500
≈ $1.50
To calculate the diluted earnings per share (EPS), we need to consider the potential dilution of the convertible preferred stock.
Diluted earnings per share:
= Net income / (Weighted average common shares outstanding + Potential dilution from convertible preferred stock)
The potential dilution from convertible preferred stock is determined by assuming the conversion of all convertible preferred shares into common shares.
Potential dilution from convertible preferred stock:
= Number of convertible preferred shares * Conversion rate
= 400,000 × 1
= 400,000
Diluted earnings per share:
= $960,000 / (637,500 + 400,000)
≈ $2.38
Since the diluted EPS of $2.38 is higher than the basic EPS of $1.50, there is a dilutive effect from the convertible preferred stock.
Therefore, Cosco's 2018 earnings per common share is $1.50, and the diluted earnings per share is $2.38, rounded to the nearest penny.
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Prokter and Gramble (PKGR) has historically maintained a
debt-equity ratio of approximately
0.25.
Its current stock price is
$52
per share, with
2.1
billion shares outstanding. The firm enjoy
Procter & Gamble (PKGR) has historically maintained a debt-equity ratio of approximately 0.25.The debt-equity ratio is an essential indicator that provides insights into how much debt a firm has relative to its equity.
The debt-equity ratio is calculated by dividing the total liabilities of the company by its shareholder equity.P&G has had a debt-equity ratio of about 0.25 for a long time, which means the company has more equity than debt in its capital structure. The company's stock price is $52 per share, and it has 2.1 billion shares outstanding. The total market capitalization of P&G can be calculated as follows: Number of outstanding shares = 2.1 billion
Stock price per share = $52Total market capitalization = Number of outstanding shares × Stock price per shareTotal market capitalization = 2.1 billion × $52Total market capitalization = $109.2 billion Therefore, the market capitalization of P&G is approximately $109.2 billion.
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which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?
a. The amount has increased tremendously since 2000.
b. The amount has had a lot of ups and downs over time, but it is about the same as in 1970.
c. The amount has held pretty steady over time.
d. The amount has steadily decreased over time.
The amount has held pretty steady over time is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past. Option C is the correct answer.
The stock of a certain set of government obligations minus the stock of a particular set of financial assets held by the government can be used to define net government debt in general terms. Governmental commitments, particularly those represented by securities, to pay holders of said securities certain amounts at a later date.
It lists the key advantages and possible disadvantages of each of the measures discussed and seeks to suggest a provisional definition of net government debt that may be used as a standardized extra indicator for analyzing the financial circumstances of EU governments. By deducting a government's financial assets from its gross debt, net public debt is determined.
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