Answer and Explanation:
The computation is shown below:
As we know that
Break even point = (Fixed cost) ÷ (Contribution margin per unit)
where,
Contribution margin per unit = Selling price per unit - Variable expense per unit
a. The break even point in sales units is
= ($71,424) ÷ ($51 - $27)
= ($71,424) ÷ ($24)
= 2,976 units
b. In case when the sale price increased to $58 per unit, the break even point is
= ($71,424) ÷ ($58 - $27)
= ($71,424) ÷ ($31)
= 2,304 units
Punitive damages are damages imposed on the wrongdoer by the court as punishment for an unintentional tort.
True
False
Answer:
False.
Explanation:
Punitive damages are the damages that a defendant pays in addition to actual damages. Punitive damages are awarded by a court when the defendant's behavior is found to be intentional or negligent.
In the cases of tort liability, the court applies punitive damages when defendants motif is proved to be intentional.
Therefore, the given statement is false, as the court impose punitive damages for intentional tort.
Explain other advantages of the autociatic leadership style. se Se busines
The autocratic leadership style has several advantages in certain business situations. Firstly, it allows for quick decision-making and efficient execution. In an autocratic leadership approach, the leader has the authority to make decisions without consulting others extensively. This can be advantageous in situations where immediate action is needed or when there is limited time for deliberation. By taking charge and making decisions swiftly, autocratic leaders can ensure that tasks are completed efficiently and objectives are met in a timely manner.
Secondly, autocratic leadership provides clear direction and reduces ambiguity. The leader in this style has a strong control over the decision-making process and can provide clear instructions to their team members. This clarity helps employees understand their roles and responsibilities, minimizing confusion and increasing productivity. Autocratic leaders often set specific goals and expectations, which can be beneficial in situations where precision and adherence to guidelines are crucial.
Additionally, the autocratic style can be effective in organizations or industries that require a hierarchical structure or where strict compliance is necessary. Industries such as the military, manufacturing, or emergency services often rely on autocratic leadership to ensure discipline, maintain order, and promote safety.
However, it is important to note that the autocratic leadership style may not be suitable for all situations or business contexts. It can stifle creativity and innovation by limiting input and involvement from team members. It may also lead to decreased employee satisfaction and motivation, as individuals may feel disempowered or undervalued. Therefore, the autocratic style should be used selectively and combined with other leadership approaches to create a balanced and inclusive organizational culture.
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Imagine the products are in decline and recommend an extension strategy for each one. Make sure you explain your
A Galaxy chocolate bar
Candy Crush mobile app.
Evian water
Ferrari world.
All of these products should use a rebranding extension strategy.
Once a product reaches maturity and the market is saturated, it gradually starts to decline.
Because of this, one approach to lengthen the life of a product strategy is to always seek out ways to make it better, different, and even stand out from similar products that have already hit the market.
Rebranding, offering discounts, and looking for new markets are all examples of extension strategy methods. Rebranding is the process of giving an existing product a fresh look and feel in order to set it apart from the competition. For instance, a cosmetics company might provide additional brushes, blenders, or sponges.
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Which of the following is an example of a raw goods producer?
OA. A packager of sushi
O B. A comedy club
OC. A lumber company
OD. A grocery store
Answer:
C, a lumber company
Explanation:
The definition of a raw goods producer is a type of producer whose job is to provide raw goods, which are goods in their natural state. A raw goods producer cannot provide services but only basic commodities (actual items).
Raw goods are usually basic goods collected or retrieved from nature (the good is not changed or manipulated) and used in the production of manufactured goods.
Basically, think of raw goods as the ingredients in a cooking recipe. A cook does not make or produce the ingredients, the cook simply collects the ingredients from farm who collects the ingredients from nature (raw goods provider). Manufactured goods are what the cook produces out of the cooking ingredients(raw goods).
Out of all the answer choices, the only company which provides raw goods is a lumber company; they simply collect wood, which can be found naturally (without producing it in a factory / man-made) and sell it to producers.
A is wrong, since people use raw goods when MAKING sushi. Since sushi is being produced, it is a manufactured product.
B is wrong, since a comedy club provides services not the selling of real goods.
D may sound right, however many items in grocery stores are produced by factories. In order to be a raw goods producer, the company must specialize and serve only raw goods. Grocery stores have manufactured goods such as ice cream, shampoo, cereal, etc.
A lumber company is an example of a raw goods producer as it is involved in the extraction and processing of raw materials (logs) into lumber, which is a primary product used in various industries for construction, furniture, and other applications. Therefore, option C is correct.
A lumber company is a business that specializes in the production and supply of lumber, which refers to processed wood that is used for various purposes.
Lumber companies typically engage in activities such as logging, sawmilling, and timber processing to convert raw logs into marketable lumber products.
They play a crucial role in the timber industry by harvesting trees, processing them into usable materials, and supplying them to construction companies, manufacturers, and other customers in need of wood products.
Lumber companies are essential in providing the raw goods necessary for numerous industries and construction projects.
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What is a stock? What is an IPO?
Answer:
Explanation initial public offering is a company's first time offering it's stock for sale to the public and is generally coincides with listening it shares on a public Stock Exchange
12. How many units must be sold if contribution margin is 50, fixed costs are $5,000 and profits are $30,000?*
700 units
600 units
500 units
900 units
McQuilkin and Copan adopt different positions toward capitalism and socialism. Which author is more favorable to free market capitalism
Answer:
Paul Copan
Explanation:
Dr. Robertson McQuilkin can be considered a very biblical man, and as such, would always favor socialism more than free market capitalism. His phrase "Capitalism is for freedom, socialism is for equality" and the fact that he believed in a strict following of the Bible, you make him a more socialist person.
Dr. Paul Copan is also a very religious man, but his views are less extreme than Dr. McQuilkin's. He is more pragmatic and argues in favor of religion from a more neutral or agnostic point of view. He even argues that religious beliefs and economics are not mutually exclusive.
What is buying and selling?
Victoria Company reports the following operating results for the month of April.
VICTORIA COMPANY
CVP Income Statement
For the Month Ended April 30, 2020
Total
Per Unit
Sales (9,000 units) $450,000 $50
Variable costs 225,000 25.00
Contribution margin 225,000 $25.00
Fixed expenses 184,950
Net income $40,050
Management is considering the following course of action to increase net income: Reduce the selling price by 5%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 20%.
Using the contribution margin technique, compute the break-even point in units and dollars and margin of safety in dollars: (Round intermediate calculations to 4 decimal places e.g. 0.2522 and final answer to 0 decimal places, e.g. 2,510.)
(a) Assuming no changes to selling price or costs.
Break-even point
Enter a number of units
units
Break-even point
$Enter a dollar amount
Margin of safety
$Enter a dollar amount
(b1) Assuming changes to sales price and volume as described above.
Break-even point
Enter a number of units
units
Break-even point
$Enter a dollar amount
Margin of safety
$Enter a dollar amount
Answer:
Victoria Company
1. No Changes:
Break-even point in units = 7,398
Break-even point in dollars = $369,900
Margin of safety = $80,100
2. With changes in sales price and costs:
Break-even point in units = Fixed expense/Contribution margin per unit
= 8,220
Break-even point in dollars = Fixed expense/Contribution ratio
= $390,437
Margin of safety in dollars
= $122,563
Explanation:
a) Data and Calculations:
VICTORIA COMPANY
CVP Income Statement
For the Month Ended April 30, 2020
Total Per Unit
Sales (9,000 units) $450,000 $50
Variable costs 225,000 25.00
Contribution margin 225,000 $25.00
Fixed expenses 184,950
Net income $40,050
Break-even point in units = $184,950/$25 = 7,398
Break-even point in dollars = $184,950/0.5 = $369,900
Margin of safety = $450,000 - $369,900 = $80,100
Management's decision to reduce selling price by 5%
New selling price = $47.50 ($50 * 95%)
Unit sales = 10,800 (9,000 * 1.2)
Total Per Unit
Sales (10,800 units) $513,000 $47.50
Variable costs 270,000 25.00
Contribution margin 243,000 $22.50
Fixed expenses 184,950
Net income $58,050
Break-even point in units = Fixed expense/Contribution margin per unit
= $184,950/$22.50
= 8,220
Contribution ratio = $22.50/$47.50 = 0.4737
Break-even point in dollars = Fixed expense/Contribution ratio
= $184,950/0.4737
= $390,437
Margin of safety in dollars = Budgeted Sales - Break-even Sales
= $513,000 - $390,437
= $122,563
If the market for quilts is perfectly competitive and other quilt producers face the same cost as Alex then what would you expect to happen to both the number of firms making quilts and the equilibrium price of quilts in the long run
Answer:
Since the firms are currently losing money, some of them will eventually exit the market in the long run. Once the total number of firms decreases, the equilibrium price will shift upwards until it reaches a point where the firms are able to break even. in other words, the firms will make 0 economic profit, but they will not lose money either.
Which element of a contract specifies when and how the project will be completed?
The construction *blank*
specifies to the *blank*
when and how the project will be completed.
The element of a contract that specifies when and how the project will be completed is the construction timeline or schedule.
The construction timeline outlines the specific dates, milestones, and deadlines associated with the project. It provides a clear roadmap for the completion of various tasks and stages of the construction project.
The timeline typically includes important details such as start and end dates, key milestones, deliverables, and any interim deadlines. It sets expectations regarding the duration of the project and the sequence of activities to be followed.
By specifying the when and how of the project completion, the construction timeline helps ensure that all parties involved have a common understanding of the project's timeline and can plan their activities accordingly. It serves as a crucial reference point for monitoring progress, managing resources, and identifying any potential delays or deviations from the agreed-upon schedule.
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If a bond is purchased at a premium, the yield to maturity is A) the same as the current yield. B) lower than the nominal yield. C) higher than the nominal yield. D) higher than the current yield.
If a bond is purchased at a premium, the yield to maturity is higher than
the nominal yield.
What is Nominal yield?This is defined as the return of a bond is determined by the percentage of
the face value while Current yield deals with current market value.
Yield to maturity is the total return anticipated on a bond if the bond is
held until it matures and is usually higher than the nominal yield.
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Gatorade countered its Target Audience’s (TA’s) negative experience by offsetting product weaknesses with which Product/Market Opportunity Matrix strategy Question 28 options: Product Development Diversification Distribution Market Penetration Promotion
Gatorade countered its Target Audience’s (TA’s) negative experience by offsetting product weaknesses with product development.
A target audience is the intended audience or also known as the readership of a advertisement, publication,or other message catered specifically to said intended audience. A target audience is a share of consumers which business directs is trying to reach by their advertising efforts.
By offsetting the product weaknesses with the product development, Gatorade countered its Target Audience’s (TA’s). Product development is considered as a series of steps which thus includes the design, conceptualization, development and marketing of newly created or newly rebranded goods or services.
Hence, option A is correct.
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At a sales volume of 30,000 units, Carne Company's total fixed costs are $30,000 and total variable
costs are $45,000. The relevant range is 20,000 to 40,000 units.
Answer:
$2.25
Explanation:
sale volume of company = 30,000 unit
total fixed cost are = $30,000
total variable cost $45,000 for 30,000 unit
1 unit = 45000/30000 = $ 1 . 5
for the sale of 40,000 unit
the total expected cost
= Fixed cost + Variable cost
= $30,000 + 40,000×$1.50
= $30,000+$60,000
= $90,000
Cost per unit:
= $90,000/40,000
= $2.25
You place a stop-loss order to sell 500 shares of AAPL with a stop price of $180. The current price is $185. How much will you receive for each share if during the trading day AAPL declines to $170 and closes the trading day at $188
Answer:
$90,000
Explanation:
Calculation to determine How much will you receive for each share
Using this formula
Amount that will be received = Number of shares * Stop price that was reached in a day
Let plug in the formula
Amount that will be received= 500 shares * $ 180
Amount that will be received= $ 90,000
Therefore How much will you receive for each share is $90,000
at the best answer for the question
The selling of goods and/or services to a customer is called
A.Service Industry
B.Food Service
C.Purchasing
D.Retail
Answer:
The correct answer is D. Retail.
Explanation:
Retail is the sale to the final consumer of goods and services. It is a sector formed by different branches (such as the food industry, the fashion industry, the home industry, etc.), which constitutes the last link in the supply chain that goes from the manufacturer to the consumer, it is In other words, it is the culmination of the process of production of goods and services, when they reach the consumer. This sale is usually carried out in stores, supermarkets, pharmacies, internet platforms and any other place where goods and services can be offered to final recipients.
Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory on account. (2) Returned $50 of the inventory purchased in Event 1. (3) Sold the inventory for $6,000 cash. Based on this information, which of the following shows how the recognition of the return will affect the Company’s financial statements.
Answer 1 A.
Option 1
Balance Sheet Income Statement
Assets = Liab. + Equity Rev. - Exp = Net Inc. Statement of cash flows
(50) (50) NA NA NA NA NA
Explanation:
Purchased return on account will decrease the assets (inventory balance) & also decrease the liability (Accounts payable). Income statement & cash flow statement are not affected.
Answer 1 A. $4,000
Explanation:
Inventory balance = Purchase - Purchase return
]= $5,000 - $1,000 = $4,000
Answer 1 C.
Option 4
Balance Sheet Income Statement
Assets = Liabs + Equity Rev - Exp = Net income Statement of cash flows
NA NA NA NA NA NA 100 OA
Explanation:
Purchased return on cash will decrease the assets (inventory balance) & also increase the assets (Cash balance). Thus impact on assets are net off. Income statement & liability are not affected.
Decrease in inventory balance will increase the cash infow from operating activities of Statement of cash flows
The recognition of the $50 in returned inventory would result in the following changing of the company's financial records:
The return would reduce the inventory on the balance sheet by $50, thereby reducing the asset's value. Reducing accounts payable will also reduce liabilities by the same amount. The return will not have a significant impact on the income statement as it has nothing to do with the revenue or cost of the company's core operations.
Only if a cash refund was included would the return have an impact on the cash flow statement. Hence the cash return will be noted as a flow in the section for operating activities. Ultimately, returns will primarily affect the balance sheet by reducing inventory and accounts payable, while having no immediate impact on the income statement.
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As a stock analyst Mooch covers the common stock of GE, which sells for $11 per share and just paid a dividend of $.52. The best estimate Mooch can come up is that the dividends for GE will be $.55 and then $.605 for the next two years, with steady state annual growth rate of 10 percent thereafter. What required return per year for the common stock of GE must be?
If as a stock analyst Mooch covers the common stock of GE, which sells for $11 per share and just paid a dividend of $.52. The required return per year for the common stock of GE must be is 5%.
How to find the required return?Let make use of Gordon Growth Model to calculate the required return per year for the common stock of GE.
Gordon Growth Model formula:
Required return = D1 / (P0) + g
Where:
D1 = next year's dividend = $.55
P0 = current price of the stock = $11
g = steady state growth rate of dividends =10%
Let plug in the formula
Required return = $.55 / ($11) + 0.10
Required return = 5%
Therefore the required return per year for the common stock of GE is 5%.
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The 15-year average return for the S&P 500 from January 1973 to December 2016 (29 separate 15 year periods) was as high as a 20% average annual return and as low as a 3.7% average annual return. Additionally, the average dividend yield for the S&P is 4.11% and the average annual dividend growth rate is 6.11%.
Using this information, please compare the investment in the 5% 15-year corporate bond with a $100,000 investment in a stock with a 3.7% dividend yield (10 percent less than the S&P 500 average yield) and a 3% dividend growth rate (50 percent of the S&P 500 dividend growth rate).
The annual investment returns are as follows:
Year 1 (13.40%) Year 2 (23.37%) Year 3 26.38% Year 4 8.99%
Year 5 3.00% Year 6 13.62% Year 7 3.53% Year 8 (38.49%)
Year 9 23.45% Year 10 12.78% Year 11 0.00 Year 12 13.41%
Year 13 29.60% Year 14 11.39% Year 15 (0.73%)
The bond interest payment of 5 percent is paid annually and not reinvested. To compare accurately with the bond investment, the stock dividend will not be reinvested, but paid annually as well.
Please calculate the value of the stock account at the end of each year and the dividend income from the stock on an annual basis.
Once you have performed the calculations, please let me know if you prefer to invest in a 5% corporate bond for 15 years or the stock and why.
What is the value of the stock after year 2? Year 8? Year 11? When does the annual dividend income of the stock exceed the annual interest income of the bond?
1. The value of the stock account after Year 2 is $155,401.626.
2. The value of the stock account after Year 8 is $96,110.0674.
3. The value of the stock account after Year 11 is $96,110.0674.
4. The annual dividend income of the stock exceeds the annual interest income of the bond at the end of Year 15.
Bond interest rate: 5%
Stock dividend yield: 3.7% (10% less than S&P 500 average yield)
Stock dividend growth rate: 3% (50% of S&P 500 dividend growth rate)
We'll assume an initial investment of $100,000.
Year 1:
Bond interest income: $100,000 * 0.05 = $5,000
Stock dividend income: $100,000 * 0.037 = $3,700
Value of stock account: $100,000 + ($100,000 * 0.2337) = $123,370
1. Year 2:
Bond interest income: $100,000 * 0.05 = $5,000
Stock dividend income: $100,000 * 0.037 = $3,700
Value of stock account: $123,370 + ($123,370 * 0.2638) = $155,401.626
2. Year 8:
Bond interest income: $100,000 * 0.05 = $5,000
Stock dividend income: $100,000 * 0.037 = $3,700
Value of stock account: $155,401.626 + ($155,401.626 * (-0.3849)) = $96,110.0674
3. Year 11:
Bond interest income: $100,000 * 0.05 = $5,000
Stock dividend income: $100,000 * 0.037 = $3,700
Value of stock account: $96,110.0674 + ($96,110.0674 * 0) = $96,110.0674
4. At the end of Year 15, the dividend income of the stock exceeds the interest income of the bond.
Stock dividend income: $100,000 * 0.037 = $3,700
Bond interest income: $100,000 * 0.05 = $5,000
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It is was that 5% product of a lot are defective, if 8 products are selected randomly, what is the probability of getting lessThan 3 defective products?
Answer:
QUIERES SER MI AMIGO?
ESQUE ANDO BURRIDO
Company DL must choose between two business opportunities. Opportunity 1 will generate $14,000 before-tax cash in years 0 through 3. The annual tax cost of Opportunity 1 is $2,500 in years 0 and 1 and $1,800 in years 2 and 3. Opportunity 2 will generate $14,000 before-tax cash in year 0, $20,000 before-tax cash in years 1 and 2, and $10,000 before-tax cash in year 3. The annual tax cost of Opportunity 2 is $4,000 in years 0 through 3.
The opportunity that the Company DL should choose if it uses a 10 percent discount rate to compute NPV is option b) Opportunity 1 because it has a higher NPV of $42,266
What is the Opportunity about?Net Present Value (NPV) is a measure of the profitability of an investment, calculated as the present value of the investment's future cash flows, minus the initial investment. It is used to determine whether an investment is financially viable and to compare different investment options.
To calculate the NPV for Opportunity 1:
Cash flow in year 0 = $14,000 - $2,500 = $11,500
Cash flow in year 1 = $14,000 - $2,500 = $11,500
Cash flow in year 2 = $14,000 - $1,800 = $12,200
Cash flow in year 3 = $14,000 - $1,800 = $12,200
NPV = ($11,500 / (1+0.1)⁰) + ($11,500 / (1+0.1)¹) + ($12,200 / (1+0.1)²) + ($12,200 / (1+0.1)³)
= $42,266
To calculate the NPV for Opportunity 2:
Cash flow in year 0 = $14,000 - $4,000 = $10,000
Cash flow in year 1 = $20,000 - $4,000 = $16,000
Cash flow in year 2 = $20,000 - $4,000 = $16,000
Cash flow in year 3 = $10,000 - $4,000 = $6,000
NPV = ($10,000 / (1+0.1)⁰) + ($16,000 / (1+0.1)¹) + ($16,000 / (1+0.1)²) + ($6,000 / (1+0.1)³)
= $41,193
Since Opportunity 1 has a higher NPV of $42,266, Company DL should choose this opportunity. The correct answer is option b)
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Company DL must choose two business opportunities. Opportunity 1 will generate $14,000 before-tax cash in years 0 through 3. The annual tax cost of Opportunity 1 is $2,500 in years 0 and 1 and $1,800 in years 2 and 3. Opportunity 3 will generate $14,000 before-tax cash in year 0, $20,000 before-tax cash in years 1 and 2, and $10,000 before-tax cash in year 3. The annual tax cost of opportunity 2 is $4,000 in years 0 through 3. Which opportunity should Company DL choose if it uses a 10 percent discount rate to compute NPV.
a) Opportunity 2 because it has a higher NPV of $41,193
b) Opportunity 1 because it has a higher NPV of $42,266
c) Opportunity 2 because it has a higher NPV of $42,266
d) Opportunity 1 because it has a higher NPV of $41,193
narrate a right you have witnessed
Answer:
The point of present perfect (e.g. has witnessed)is that it deemphasizes the time at which the event occured and even the number of times it occured,and emphasizes merely that there was at least one occurrence before the present.
Name any three (3) tests that Hornbill Holdings can use to assess the graduates
Three tests that can be used to assess graduates include:
Skills and knowledge psychometric tests. Ability and aptitude psychometric tests. Personality tests. What are some tests that can be used to test graduates?A skills and knowledge psychometric test will allow Hornbill Holdings to find out how knowledgeable a graduate is in their industry and its processes.
They can also use an ability and aptitude test to find out how adaptive the graduate is to new situations.
Personality tests can then find out if the graduate has the right type of personality for the culture at Hornbill Holdings.
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1. Demonstrate understanding of the value of auditing in an economy and theories explaining the demand for auditing;
2. Discuss the role of auditing and other assurance services in society and the public’s expectation for these services.
3. Describe issues associated with the audit of public sector, not-for-profit and small business entities.
4. Critically evaluate the professional, legal, ethical and regulatory framework within which audits and other assurance engagements are carried out,;
5. Discuss current developments in auditing.
6. Audits can be categorized into different types: Like; (1) financial statement audits, (2) compliance audits, (3) operational audits, and (4) forensic audits.
Required: For each of the following descriptions, indicate which type of audit (financial statement audit, compliance audit, operational audit, or forensic audit) best characterizes the nature of the audit being conducted. Also indicate which type of auditor (external auditor, internal auditor, government auditor, or forensic auditor) is likely to perform the audit engagement.
a. Determine the fair presentation of Ajax Chemical’s balance sheet, income statement, and statement of cash flows.
b. Review the payment procedures of the accounts payable department for a large manufacturer.
c. Examine the financial records of a division of a corporation to determine if any accounting irregularities have occurred.
d. Evaluate a company’s computer services department in terms of the efficient and effective use of corporate resources.
e. Audit the partnership tax return of a real estate development company.
f. Investigate the possibility of payroll fraud in a labor union pension fund.
g. Examine contractual agreements with bankers and other lenders to be sure the company is complying with legal requirements
1. Auditing plays important role by providing assurance and credibility to financial statements which enhances investor confidence and promotes efficient allocation of resources.
Why is auditing important for the economy?Auditing is essential for the economy as it helps maintain trust and confidence in the financial information reported by businesses. By conducting independent assessments of financial statements, auditors provide assurance to stakeholders that the information is reliable and accurate.
This assurance is particularly valuable for investors, creditors, and other parties who rely on financial statements to make informed decisions. Auditing also helps detect and prevent fraud, mismanagement, and other financial irregularities and thereby safeguarding the integrity of the financial system.
2. Auditing and other assurance services play a vital role in society by providing independent evaluations of financial statements and other information enhancing the reliability and credibility of financial reporting.
3. Issues associated with the audit of public sector, not-for-profit, and small business entities include unique reporting requirements, limited resources etc.
4. The professional, legal, ethical, and regulatory framework surrounding audits and assurance engagements should be critically evaluated to ensure independence, competence, integrity, adherence to standards, and the protection of public interest.
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Consider the telecommunications, networking, and wireless technologies you use today as a consumer and student. Does your comfort level with changes in these technologies in your personal life influence how comfortable you would be with adapting to new technologies in the workplace? Why or why not?
Answer:
Yes, people´s comfort level with changes in technology in their personal lives has a great influence over how comfortable they can be with adapting to new technologies in the workplace.
Explanation:
Telecommunications, networking, and wireless technologies are used regularly by most students, as those who are in studying years have grown with those technologies already developed. However, the rapid changes in technology that are common these days can become quite overwhelming, as they require users to constantly readapt to them. For example, our use of email has changed so much in the past years, with so many new lines of communication and new softwares that one has to learn how to use. And the more we get used to readapting, the more comfortable we can be when those changes become part of the workplace. It´s important to be prepared and to have the proper training to ensure the effective use of technology in such a fast-paced technological era.
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next 8 years because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $16.50 per share 9 years from today and will increase the dividend by 5.75% per year thereafter. The required return on the stock is 13.75%. What is the price of the stock 8 years from today? What is the current share price?
Answer:
The price of the stock 8 years from today will be $206.25
The current price of the stock is $73.58
Explanation:
The constant growth model of DDM is used to calculate the price of a stock whose dividends are expected to grow at a constant rate. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D1 / (r - g)
Where,
D1 is the dividend expected for the next period or D0 * (1+g)r is the required rate of returng is the constant growth rateTo calculate the price today, we use the dividend expected for the next year/period. Thus, to calculate the price at Year 8 or P8, we will use the dividend in Year 9 or D9.
P8 = D9 / (r - g)
P8 = 16.5 / (0.1375 - 0.0575)
P8 = $206.25
To calculate the current price of the stock, we will discount back the price at Year 8 to today. We will use the present value formula. The present value of an amount is,
PV = FV / (1+r)^n
Where,
FV is the future valuen is the number of years or periodr is the required rate of returnPV or P0 = 206.25 / (1+0.1375)^8
PV or price today = $73.58
Which of the following is an example of a macroeconomic statement?
Lay-offs have led to increasing unemployment in the RV industry.
John Smith was recently laid off from his job at Thor.
The Elkhart County unemployment rate is 2%.
The national unemployment rate is 4%.
Answer:
The national unemployment rate is 4%
Explanation:
The following statement is an example of a macroeconomic statement: "The national unemployment rate is 4%."
A macroeconomic statement refers to an economic statement or analysis that focuses on the broader economy as a whole rather than on individual markets or companies. In this case, the statement about the national unemployment rate refers to the overall labor market in the country and not to a specific company or industry. The other statements are either about an individual's experience (John Smith's layoff) or a specific regional unemployment rate (Elkhart County's unemployment rate).
Next year's earnings are estimated to be $5.00. The company plans to reinvest 20% of its earnings at 15%. If the cost of equity is 9%, what is the present value of growth opportunities?
According to the given data, the present value of growth opportunities is $ 11.11. According to present value, a sum of money is worth more today than it will be tomorrow.
What do you mean by the present value?Given a certain rate of return, present value (PV) is the current value of a future financial asset or stream of cash flows. A discount rate or the interest rate that could be obtained through investment is applied to the future value to get the present value.
To put it another way, present value demonstrates that money obtained in the future is not as valuable as money received today. Unspent funds now might depreciate in value over time at an assumed annual rate due to inflation or the rate of return on investments, if any.
Here,
Growth = ROE × RETENTION RATIO
Growth = 15% * 20% = 3%
VALUE OF GROWTH = (EPS* DIVIDEND PAYOUT RATIO) / (COST OF EQUITY - GROWTH)
= (5 * 80%) / ( 9% - 3%)
= 66.67
Value of growth = Dividend ÷ cost of equity
Value of growth = 5 ÷ 9%
Value of growth = 55.56
Present value of growth opportunities = $ 66.67 - $ 55.56
Present value of growth opportunities = $ 11.11
Therefore, the given data, the present value of growth opportunities is $ 11.11. According to present value, a sum of money is worth more today than it will be tomorrow.
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Question 32
$24,800 is invested for 3 months in a savings account with a rate of 9% simple interest per year.
Find the interest.
$66,960.00
$5,580.00
$6,6960
$558.00
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