Answer:
The correct answer is B.
Explanation:
Giving the following information:
Project A:
Costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year.
Project B:
The initial cost of $120,000, an operating cost of $8,000 per year, and a $40,000 salvage value after its 3-year life.
Assume the interest rate is 10% per year.
Both projects present a 3-year life cycle.
To determine which option is correct, we need to calculate the net present value using the following formula:
NPV= -Io + ∑[Cf/(1+i)^n]
Cf= cash flow
Project A:
Cf1= 30,000/1.10= 27,272.73
Cf2= 30,000/1.10^2= 24,793.39
Cf3= 45,000/1.10^3= 33,809.17
Total= 85,875.29
NPV= -80,000 + 85,875.29= 5,875.29
Because the net present value is positive, Project A should be accepted.
Project B doesn't provide income, therefore it shouldn't be accepted.
Levi is replying to an email a customer sent seeking information about his company’s products. Which greeting should he avoid using in a business email?
A.
Hi
B.
Hey
C.
Hello
D.
Dear
Select the correct answer.
Which statement is true in the context of business etiquette for sending digital messages?
A.
Digital messages should use abbreviations.
B.
Digital messages should be informal.
C.
Digital messages should be courteous.
D.
Digital messages should use a colorful font.
Select the correct answer.
Which of these messages would be considered inappropriate for business communication?
A.
Good night
B.
Goodbye
C.
OK, bye
D.
See you tomorrow
ellsbury corporation has a goal to reduce its cash conversion cycle. which of the following actions, holding all else equal, is likely to accomplish this goal? multiple choice
The reduction of Ellsbury Corporation's cash conversion cycle is a priority. Given everything else being equal, which of the following activities is most likely to achieve this objective Ellsbury improves the productivity of its manufacturing process, cutting the average amount of time it takes to transform raw materials into completed goods by 10%.
The fact that roe is a risk-adjusted performance metric is one of its benefits.
The fact that ROE is a risk-adjusted performance indicator is one of its benefits. A company would want to have a higher gross margin if everything else was equal. entire resources. The asset turnover, profit margin, and current ratio for Klamath Corporation are 3.5, 5.2%, and 0.5 respectively.
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Herr Corporation has 3,000 shares of 7%, $100 par value preferred stock outstanding at December 31, 2019. At December 31, 2019, the company declared a $105,000 cash dividend. Determine the dividend paid to preferred stockholders and common stockholders under each of the following scenarios.
The preferred stock is noncumulative, and the company has not missed any dividends in previous years.
1. The dividend paid to preferred stockholders ____________
2. The dividend paid to common stockholders _____________
Answer and Explanation:
The computation is given below:
a. For preferred stockholders
= 3000 shares × $100 × 7%
= $21,000
b. For common stockholders
= $105,000 - $21,000
= $84,000
In this way it should be calculated
The same should be considered and relevant
Which trade measurement includes services, foreign investments, loans and foreign aid, financial capital, and financial transfers?
Trade Deficit
Balance of Payments
Trade Barriers
Balance of Trade Surpluses
The trade measurement that includes services, foreign investments, loans and foreign aid, financial capital, and financial transfers are "Balance of Payments.'
It is sometimes referred to as the balance of international payments.
Balance of Payments is a summation of all transactions activities conducted by a country both inside and outside the country.
This includes business activities such as individuals, companies, and government bodies inside a particular country and those of that country's citizens in the foreign land.
Hence, in this case, it is concluded that the correct answer is option B. "Balance of Payment."
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2.suppose 40% of the people entering X electronics store this month make a purchase. If 10 people enter the store, find the expected number making a purchase. Suppose that for the next month X electronics store forecasts 1000 customers will enter the store. (i)What is the expected number of customers who will make purchase? (ii) Find also the Standard Deviation.
i) The expected number of customers who will make a purchase in the current month is 4.
ii) The standard deviation for the number of customers making a purchase in the current month is approximately 1.55.
To find the expected number of customers making a purchase, we can multiply the total number of customers entering the store by the probability of making a purchase.
(i) For the current month:
Number of people entering the store = 10
Probability of making a purchase = 40% = 0.4
Expected number of customers making a purchase = Number of people entering the store * Probability of making a purchase
Expected number of customers making a purchase = 10 * 0.4
Expected number of customers making a purchase = 4
Therefore, the expected number of customers who will make a purchase in the current month is 4.
(ii) To find the standard deviation, we need to consider the binomial distribution since the number of customers making a purchase follows a binomial distribution with parameters n (number of trials) and p (probability of success).
For the current month:
n = Number of people entering the store = 10
p = Probability of making a purchase = 0.4
q = Probability of not making a purchase = 1 - p = 1 - 0.4 = 0.6
Standard deviation (σ) of a binomial distribution is given by the formula:
σ = √(n * p * q)
Substituting the values:
σ = √(10 * 0.4 * 0.6)
σ = √(2.4)
σ ≈ 1.55
Therefore, the standard deviation for the number of customers making a purchase in the current month is approximately 1.55.
For the next month, if the store forecasts 1000 customers to enter the store, we can use the same calculations with updated values of n and p to find the expected number of customers making a purchase and the standard deviation.
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Your organization is having a large party for its worldwide distributors in the United States. Because there will be people from all over the world, what would you serve for meals to avoid offending anyone?
Answer:
view commonly consumed meals across countries. Offer range of meals at the event
12. Regarding business cycles, a boom refers to:
a) A period during which aggregate output declines.
b) The period in the business cycle from a trough up to a peak during which output, and
employment grow.
c) The period in the business cycle from a peak down to a trough during which unemployment
and inflation fall.
d) A prolonged increase in the output level.
For questions 13 and 14, consider the following labour market data for a hypothetical economy:
+16 age population at working age: 100
Number of people in the labour force: 50
Number of unemployed people: 5
Number of people informally employed: 2
13. What is the labour force participation rate?
a) 50% b) 10% c) 40% d) 60%
14. What is the rate of unemployment?
a) 50% b) 10% c) 40% d) 60%
15. Ahmet is a cashier at a supermarket. As the economy moves towards Industry 4.0, the
supermarket starts to use automated tellers. Ahmet loses his job and is now unemployed. This is
an example of:
a) cyclical unemployment b) frictional unemployment
c) structural unemployment d) non-institutional population
Answer: A business cycle or boom-bust cycle refers to the alternating periods of recession and recovery. Changes in production and trade in a market economy cause these alternating periods. We often use the term together with the economic bubble.
12. The period in the business cycle from a trough up to a peak during which output, and employment grow. B
13. The labour force participation rate is 10 percent
14. The rate of unemployment is 40 percent
15. Cyclical unemployment is the component of overall unemployment that results directly from cycles of economic upturn and downturn. Unemployment typically rises during recessions and declines during economic expansions. Moderating cyclical unemployment during recessions is a major motivation behind the study of economics and the goal of the various policy tools that governments employ to stimulate the economy. True
Frictional unemployment: the unemployment which exists in any economy due to people being in the process of moving from one job to another. False
Structural unemployment: unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand. False
Non-institutional: False
Explanation: Hope the explanation above was helpful
1. Some businesspeople believe that elimination agents and wholesalers reduce their operating expenses. Discuss the opportunity costs associated with eliminating intermediaries.
1. While eliminating intermediaries may result in reduced operating expenses, businesses need to weigh these savings against the associated opportunity costs. These costs may include the loss of expertise and value-added services, additional responsibilities and expenses, and reduced customer access to products.
Eliminating intermediaries such as elimination agents and wholesalers reduce operating expenses, but it also has associated opportunity costs that businesses need to consider. One of the primary costs is the loss of the expertise and value-added services that intermediaries offer to businesses and customers. Eliminating intermediaries may result in businesses taking on additional responsibilities and expenses such as marketing, distribution, and logistics.
This may result in the need for additional staff and resources to ensure that products reach customers on time. Furthermore, eliminating intermediaries may also result in reduced customer access to products, as intermediaries are often responsible for finding new markets and customer segments. In this case, businesses may need to invest additional resources to market and promote their products to reach new customers.
In conclusion, while eliminating intermediaries may result in reduced operating expenses, businesses need to weigh these savings against the associated opportunity costs. These costs may include the loss of expertise and value-added services, additional responsibilities and expenses, and reduced customer access to products.
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Submit an open inquiry question, and in 1-2 paragraphs, reflect on your process to getting to this question. What were the steps you took and how did you narrow down your question? How might researching this question bring deeper understanding of this issue?
The research question should stimulate the creation of a research project on a certain topic.
What is a research question?It is a question that prompts another question about a specific topic.It is a thought-provoking question.When a research project is completed, it must answer this question.To create a research question, you must first understand the topic to which it refers and identify potential questions about that topic that can be answered through a research project.
An example of this could be the question "Do students with higher GPA have greater ease in social interaction?"
Another example for an open inquiry question would be “Was the Vietnam War in the best interest of the American People?” This question has the potential to generate a variety of thoughtful responses and classroom discussions.
Therefore, a research question is discussed above.
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Assume (1) estimated total manufacturing overhead cost = $100,000, (2) estimated total amount of the allocation base = 20,000 direct labor hours, (3) the total direct labor hours actually worked during the period = 21,700, and (4) the total manufacturing overhead actually incurred during the period is $103,000. What is the total amount of underapplied or overapplied overhead for the period?
Answer:
Explanation:
To determine the total amount of underapplied or overapplied overhead, we need to compare the estimated overhead cost with the actual overhead cost that was incurred, based on the actual amount of the allocation base that was used during the period.
First, we need to calculate the predetermined overhead rate:
Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total amount of the allocation base
Predetermined overhead rate = $100,000 / 20,000 direct labor hours
Predetermined overhead rate = $5 per direct labor hour
Next, we can calculate the amount of overhead that should have been applied based on the actual amount of direct labor hours worked:
Applied overhead = Actual direct labor hours worked x Predetermined overhead rate
Applied overhead = 21,700 direct labor hours x $5 per direct labor hour
Applied overhead = $108,500
Finally, we can calculate the amount of underapplied or overapplied overhead:
Underapplied/Overapplied overhead = Actual manufacturing overhead incurred - Applied overhead
Underapplied/Overapplied overhead = $103,000 - $108,500
Underapplied/Overapplied overhead = -$5,500
Since the result is negative, we have an overapplied overhead of $5,500 for the period. This means that the actual manufacturing overhead incurred was less than the overhead that was applied based on the predetermined rate.
HURRY Unfair treatment of job applicants because they look like they are from a different country
Answers
Age discrimination
Ethnic discrimination
Gender discrimination
Religious discrimination
Answer:
ethnic discrimination
Explanation:
it cant be the other if the unfair treatment is due to how somebody looks due to being from a different country
Answer:
ethnic discrimination
Explanation: Got it right on my test!
Calculations of cost and benefit are always which of the following?
OA. Resourceful
OB. Minimum
OC. Rational
OD. Subjective
Answer:
D.
Explanation:
It’s subjective.
I think it’s subjective because it’s about the benefit of the calculations of a cost.
True or False: A partner cannot legally bind the other partners to a business agreement.
Answer: False
Explanation: In many cases, a partner will be able to bind the partnership without the other owners' consent. However, steps can be taken to prevent any one partner from entering into an agreement without the consent of the others.
Can someone explain to me this economics homework assignment?
An endogenous variable is a variable that is determined within a model or system. An example could be the level of employment in a particular region, which is determined by factors such as population, labor force participation rate, and job creation within the region.
What is an exogenous variableAn exogenous change is a change that occurs outside of a model or system and affects it. For example, an exogenous change could be a sudden increase in the price of oil due to geopolitical events, which could impact the overall economy.
An exogenous change can impact various factors of spatial utility, depending on the nature of the change. For example, if there is a sudden increase in the price of oil, this could impact transportation costs, which in turn could impact the accessibility of goods and services, and therefore impact the spatial utility of different locations. Similarly, an exogenous change in government policies or regulations could impact the availability of certain amenities or resources in a given location, and therefore impact the spatial utility of that location.
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1. Identify an endogenous variable
2. Identify an exogenous change
3. Which factor of (spatial) utility does an exogenous change impact? In what ways?
As a concept, logos often refers to the what
Answer:
a universal divine reason, immanent in nature,
Explanation:
Suppose the price of a gallon of ice cream rises from $4 to $5, and the price of a can of coffee rises from $2 to $2.50. If the CPI rises from 150 to 200, then people likely will buy a. less ice cream, less coffee b. less ice cream, more coffee c. more ice cream, more coffee d. more ice cream, less coffee
Based on the given information, If the CPI rises from 150 to 200, then people likely will buy less ice cream and less coffee. Thus the correct option is A.
What is CPI?The term CPI stands for Consumer Price Index indicates the cost of a market basket of consumer products and services that households purchase on ordinary and weighted terms.
In the given case, it is clearly given that if the cost of both items rises above the CPI, they are being offered above the price at which supply and demand would be balanced, which would ultimately cause demand to fall.
Therefore, option A is appropriate.
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Tamarisk Company purchased equipment for $228,000 on October 1, 2020. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $12,000. Estimated production is 36,000 units and estimated working hours are 20,000. During 2020, Tamarisk uses the equipment for 550 hours and the equipment produces 1,100 units. Compute depreciation expense under each of the following methods. Tamarisk is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, eg. 5.35 and final answers to 0 decimal places, e.g. 45,892) (a) Straight-line method for 2020 $ (b) Activity method (units of output) for 2020 $ (c) Activity method (working hours) for 2020 $ (d) Sum-of-the-years-digits method for 2022 $ (e) Double-declining-balance method for 2021
a) Straight line method = (228000-12000/8) × 3/12 = 6750. Thus the depreciation expense of Tamarisk Company by using Straight-line method for 2020 is 6750
Describe double declining balance.A method of accounting known as the double declining balance (DDB) depreciation method entails double the rate of depreciation for some assets compared to straight-line depreciation. As a result, depreciation rises the most during the first year of ownership before falling over time. When you buy assets that depreciate more quickly in their initial years, you should employ double declining balance depreciation. A GAAP-approved method for discounting the value of equipment as it ages is double-declining depreciation, which is described as an accelerated method of depreciation. A tangible asset is depreciated at a rate that is double the rate of straight-line depreciation.
b) Activity method = (228000-12000/36000) × 1100 = 6600
c) Activity method = (228000-12000/20000) × 550 = 5940
d) Sum of year digit
= 216000 × 7/36 × 9/12 + 216000 × 6/36 × 3/12 = 40500
e) Double decline balance
= 228000 × 25% × 9/12+228000 × 75% × 25% × 3/12 = 53438
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At the market close on May 12 of a recent year, Sherman Corporation had a closing stock price of $110. In addition, Sherman Corporation had a dividend
per share of $5.39 during the previous year.
Sherman Corporation's dividend yield is 4.9%.
What is the dividend yield?The dividend yield is the financial ratio that explains the percentage of a company's share price paid out in dividends annually.
Investors calculate the dividend yield to evaluate the potential investment company's ability to meet their financial needs, depending on their return expectations.
Some investors favor dividend-paying investments to maintain their financial strength. Some other investors value investment growth more than dividend payments.
The formula for Dividend yield is Dividend per share divided by the current share price per unit, multiplied by 100.
Data and Calculations:Stock price = $110
Dividend per share = $5.39
Dividend yield = 4.9% ($5.39/$110 x 100)
Thus, Sherman Corporation's dividend yield is 4.9%.
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Question Completion:Determine Sherman Corporation's dividend yield. (round to one decimal place)
Kirk and his family decide it is more reasonable for him to attend the local community college. They want to save for the cost of his first year in the automotive program. The local community college program is expected to be $6,845 per year. Which is the most reasonable goal for Kirk and his family to plan to save?
They should save $225 a month for 2 years.
They should save $200 a month for 3 years.
They should save $100 a month for 4 years .
They should save $75 a month for 5 years.
Based on the options provided, Kirk and his family should save $200 per month for 3 years to cover the cost of his first year in the local community college's automotive program. This saving plan will give them more than the cost of the program, providing a cushion for any additional expenses.
Explanation:The local community college's automotive program costs $6,845 per year. If Kirk and his family wanted to save enough for one year of this program, they would have to budget and plan out their savings. To calculate this, they would divide the total cost by the number of months in their saving period.
If they save $225 a month for 2 years (24 months), they would save a total of $5,400 which is not enough to cover the cost. Saving $200 a month for 3 years (36 months) would give them $7,200, more than required. If they save $100 a month for 4 years (48 months), they would save $4,800, which is not enough.Saving $75 a months for 5years (60 months), they would amount to $4,500, also not enough.Therefore, the most reasonable saving goal for Kirk and his family, based on these options, would be to save $200 per month for 3 years. They would have more than enough to cover the program cost and any additional expenses that might occur.
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how should public funds be allocated
Answer:
iiwjebendj
Explanation:
8sidnfbbfndjdijsnennejrjfjrjej
Dividends Per Share
Sandpiper Company has 30,000 shares of cumulative preferred 1% stock, $100 par and 50,000 shares of $25 par common stock. The following amounts were distributed as dividends:
20Y1 $75,000
20Y2 24,000
20Y3 90,000
Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.
The dividends per share for preferred stock for years 20Y1, 20Y2, and 20Y3 are $2.50, $0.80, and $3.00, respectively. The dividends per share for common stock for the same years are $1.50, $0.48, and $1.80, respectively.
To determine the dividends per share for preferred and common stock for each year, we need to divide the total dividend amount by the number of shares for each type of stock.
Preferred Stock:
The preferred stock has a 1% dividend rate and a par value of $100 per share. There are 30,000 shares of cumulative preferred stock.
Year 20Y1:
Dividend per share for preferred stock = Dividend amount / Number of preferred shares
Dividend per share for preferred stock = $75,000 / 30,000
Dividend per share for preferred stock = $2.50
Year 20Y2:
Dividend per share for preferred stock = $24,000 / 30,000
Dividend per share for preferred stock = $0.80
Year 20Y3:
Dividend per share for preferred stock = $90,000 / 30,000
Dividend per share for preferred stock = $3.00
Common Stock:
The common stock has a par value of $25 per share. There are 50,000 shares of common stock.
Year 20Y1:
Dividend per share for common stock = Dividend amount / Number of common shares
Dividend per share for common stock = $75,000 / 50,000
Dividend per share for common stock = $1.50
Year 20Y2:
Dividend per share for common stock = $24,000 / 50,000
Dividend per share for common stock = $0.48
Year 20Y3:
Dividend per share for common stock = $90,000 / 50,000
Dividend per share for common stock = $1.80
In summary, the dividends per share for preferred stock for years 20Y1, 20Y2, and 20Y3 are $2.50, $0.80, and $3.00, respectively. The dividends per share for common stock for the same years are $1.50, $0.48, and $1.80, respectively.
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Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $48,400. The machine's useful life is estimated at 10 years, or 394,000 units of product, with a $9,000 salvage value. During its second year, the machine produces 33,400 units of product.
Required:
Determine the machineâs second-year depreciation and year end book value under the straight-line method.
Answer:the machine’s second-year depreciation and year end book value under the straight-line method is $3,990 and$40,420 respectively.
Explanation:
Straight line depreciation is calculated as
Depreciation= Initial value – salvage value / useful life
Depreciation=($48,400- $9,000)/10=$3,990
The depreciation expense each year would be $3990
Book value = Cost of asset- accumulated deprecation
Book value = Cost of asset - (2 years x depreciation)
= $48,400- (2 x $3,990)
= $40,420
Therefore, the machine’s second-year depreciation and year end book value under the straight-line method is $3,990 and$40,420 respectively.
2. You want to convince your employees to sign up for the new health maintenance
program that your company offers because it is cheaper than the older program.
However, you expect most employees to stay with the more expensive program as it
covers more physicians. Which of the following persuasive strategies will be most
effective in this case?
Because the audience is probably going to value emotion as a way of problem-solving in this situation, the persuasive tactic will be most successful.
To succeed in "persuasive strategy," one must balance reason and passion.
The three different categories of persuasive tactics are pathos, ethos, and logos. The most persuasive writing typically combines all three tactics. While ethos relies on the authority of the author or source as justification for action, logos draw conclusions using logic or reason.
It is significant to note that your ability to persuade others affects their behavior. Arguments are used in persuasion to persuade others to follow your path. The way you express your views to others might have an effect on how others interpret a certain issue or concept.
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what is gross income??
Answer:
the amount of money you make before all the taxes and deductions are made.
Explanation:
whay i said for the answer ^
If auto insurance costs $6.54 per $1,000 of coverage, what is the cost (in dollars) to insure a car valued at $18,500?
Answer:
$120.62
ExplanationExplanation:
6.52*18.5=120.62
Need help on these please
Sales tax and VAT are both examples of indirect taxes, which are levied by the seller at the time of sale and paid or sent to the government on the buyer's behalf. Thus option (B) is correct.
What is government?The term government refers that the system which was governed by a state or a country in it, we see there are different governments are being there in states the government is made by the people and govern for the people also in it. There is a system being made and under the system, the government is being run.
A consumption tax that charges consumers for their purchases. Because sales taxes are typically passed on to customers at the moment of sale, it is classified as a consumption tax. A sales tax is an example of an indirect tax, meaning it is not paid to the government directly like an income tax is.
Therefore, Thus option (B) is correct.
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Which of the following can help you improve your information technology skills?
O A. Determining the ethical implications of decisions
B. Accessing and interpreting data
O C. Using word-processing apps, spreadsheets, and presentation software
OD. Working with classmates on reports and presentations
O E. Forming judgements and making decisions about situations and circumstances
Answer:a
Explanation:
The statement "Measurement of ethical decision implications" is correct.
The information regarding the information technology skills is as follows:
It is the technical skills that are significant for working with technical support, development & maintenance.It sets the range that lies between installing the hardware & developing the software for troubleshooting & data analysis.Also, it measures the ethical decision implications.Therefore, all the other options are incorrect
Hence, we can conclude that The statement "Measurement of ethical decision implications" is correct.
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Elasticity and hotel rooms. If average household increases by 20% from 50000 to 60000 per year the quantity of rooms demaned at the rivers motel
Answer:
The theory of elasticity of demand is based on the concept of marginal utility, which is the additional satisfaction or benefit that a consumer derives from consuming one more unit of a good or service. When the marginal utility of a good or service is high, the demand for it is considered to be elastic, meaning that small changes in price or income can lead to large changes in the quantity demanded. Conversely, when the marginal utility of a good or service is low, the demand for it is considered to be inelastic, meaning that large changes in price or income are required to lead to small changes in the quantity demanded.
In the case of hotel rooms, the elasticity of demand can be influenced by a variety of factors, including the location of the hotel, the quality of the rooms, and the availability of alternative accommodations. For example, a luxury hotel located in a popular tourist destination may have a relatively inelastic demand, as the high quality and unique location of the hotel makes it difficult for consumers to find substitutes. On the other hand, a budget hotel located in a less popular area may have a relatively elastic demand, as there are many alternative accommodations available at similar prices.
Additionally, it would be important to consider the cross-price elasticity of demand, which measures the responsiveness of demand for a good or service to changes in the prices of related goods or services. In this case, if the prices of other hotels in the area went up, the Rivers Motel could see an increase in demand for its rooms.
Furthermore, the income elasticity of demand, which measures the responsiveness of demand for a good or service to changes in consumer income, would also play a role. In this case, if the average household income increases by 20% from $50,000 to $60,000 per year, it is likely that the quantity of rooms demanded at the Rivers Motel would also increase, as people have more disposable income to spend on luxury goods and services such as hotel rooms.
A public franchise is a right granted Group of answer choices to one firm by another firm; for example, McDonald's Corporation grants restaurant owners a franchise to make its hamburgers. to a firm by government that prevents other firms from producing the same product or service. to a cooperative of buyers that allows the group to purchase goods at wholesale prices. by government that enables a person to engage in arbitrage.
Answer: to a firm by government that prevents other firms from producing the same product or service
Explanation:
A public franchise is a right granted to a firm by government that prevents other firms from producing the same product or service.
This is done by the government in a situation whereby the government doesn't want a competition for the firm or doesn't want other firms to sell that particular good.
For example, if a particular firm comes up with a drug that can cure HIV/AIDS, the government may grant such firm a public franchise.
Broward Manufacturing recently reported the following information: Net income $384,000 ROA 10% Interest expense $126,720 Accounts payable and accruals $1,000,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations. Round your answers to two decimal places.
Answer:
a. Basic earning power (BEP) = 16.63%
b. Return on equity (ROE) = 26.67%
c. Return on invested capital (ROIC) = 16.87%
Explanation:
From the question, we have the following:
Net income = $384,000
ROA = Return on Asset = 10%
Interest expense = $126,720
Accounts payable and accruals = $1,000,000
Tax rate = 25% = 0.25
Common equity finance percentage = 60%
Debt finance percentage = 40%
From the above, we have:
Total assets = Net income / ROA = $384,000 / 10% = $3,840,000
Net total assets = Total assets - Accounts payable and accruals = $3,840,000 - $1,000,000 = $2,840,000
Common equity = Net total assets * Common equity finance percentage = $2,400,000 * 60% = $1,440,000
Debt = Net total assets * Debt finance percentage = $2,400,000 * 40% = $960,000
Earning before tax = Net income / (1 - Tax rate) = $384,000 / (1 - 0.25) = $384,000 / 0.75 = $512,000
Earning before interest and tax = EBIT = Earning before tax + Interest expense = $512,000 + $126,720 = $638,720
We then proceed as follows:
a. Calculation of basic earning power (BEP)
This can be calculated using the following formula:
BEP = EBIT / Total assets = $638,720 / $3,840,000 = 0.166333333333333 = 0.1663, or 16.63%
b. Calculation of return on equity (ROE)
This can be calculated using the following formula:
ROE = Net income / Common equity = $384,000 / $1,440,000 = 0.266666666666667 = 0.2667, or 26.67%.
c. Calculation of return on invested capital (ROIC)
This can be calculated using the following formula:
ROIC = (EBIT * (1 - Tax rate)) / (Common equity + Debt) = ($638,720 * (1 - 0.25)) / ($1,440,000 + $960,000) = ($638,720 * 0.75)) / $2,840,000 = $479,040 / $2,840,000 = 0.168676056338028 = 0.1687, or 16.87%