Kaizen refers to the philosophy of striving toward perfection. Kaizen is a Japanese word that means “continuous improvement” or “good change.” It is a lean manufacturing and management approach that prioritizes small, incremental process improvements over time.
The Kaizen philosophy is about making small, continuous improvements to processes, systems, and products that result in better efficiency, quality, and productivity. The idea is to constantly examine processes and look for ways to make them more efficient, more effective, and more streamlined.
It's an approach that encourages teamwork and collaboration among all levels of employees in an organization to identify and solve problems.Kaizen has been widely used in the manufacturing industry, but it can be applied to other industries as well. It's also applicable in service industries, healthcare, and government. Kaizen helps organizations to become more competitive by eliminating waste, improving quality, and reducing costs.
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QUESTION 3
a) Suppose SemCo Ltd (a UK Company) has payables of US$40 million due in 90 days from now. Over-the-counter put and call options on US dollars, both at an exercise price of £0.72 per US$, are available for a premium of £0.03 and £0.04 per US$ respectively. If SemCo decides to hedge using options, the required premium for the option used will be paid from an overdraft account on which it pays 6% per annum.
i. Calculate the values if the company chooses the options hedge is used
ii. A 90-day forward contract is available at £0.75/$. Determine the exchange rate at which SemCo Ltd would be indifferent between the options and the forward hedge.
(12 marks)
a) As a Treasurer of SemCo Ltd you would like to use currency futures contracts to hedge US$40million that you owe to the supplier in June. A futures quote of £0.74/$ for June delivery is available on International Money Market. The contract size is US$125,000.
You decide to take a position in the futures to hedge exposure to the US$. In June the relevant futures contract is trading £0.76/$. Ignoring margin, was it good that you hedged using futures if the spot exchange rate in June is £75/$? How much is the profit or loss on the futures position?
(8 marks) (Total 20 marks)
The premium for the put option is £0.03 per US$, and for the call option, it is £0.04 per US$.
Premium for put option = £0.03 * US$40 million = £1.2 million
Premium for call option = £0.04 * US$40 million = £1.6 million
Since the company has payables of US$40 million, they will need to calculate the total premium for each option.
Therefore, if SemCo Ltd chooses the options hedge, they will need to pay a total premium of £1.2 million for the put option or £1.6 million for the call option.
To determine the exchange rate at which SemCo Ltd would be indifferent between the options and the forward hedge, we need to compare the costs of the two strategies. The premium for the put option is £1.2 million, while the premium for the call option is £1.6 million.
If the forward contract is available at £0.75/$, we can calculate the cost of the forward hedge:
Cost of forward hedge = £0.75/$ * US$40 million = £30 million
To find the exchange rate at which the costs of the options and the forward hedge are equal, we set up the equation:
£1.2 million + X = £30 million
Solving for X, we get:
X = £30 million - £1.2 million = £28.8 million
Therefore, SemCo Ltd would be indifferent between the options and the forward hedge when the exchange rate is £28.8 million/$.
Regarding the additional question about hedging using futures, the necessary information is missing to provide an answer. The spot exchange rate in June is given as £75/$, but the relevant futures contract's price is mentioned as £0.76/$.
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John decides to raise the grade level of the product of his project. He is affecting: The project quality The project scope The project benchmarks The quality baseline
John decides to raise the grade level of the product of his project. He is affecting the project quality.
When John decides to raise the grade level of the product, he is directly impacting the project quality. The grade level refers to the level of excellence or superiority of the product, and by raising it, John is striving for a higher standard of quality.
This means that he intends to improve the features, performance, or overall satisfaction that the product delivers to meet or exceed customer expectations. By focusing on enhancing the quality, John aims to ensure that the product meets the desired specifications, performs effectively, and delivers value to the end-users.
Raising the grade level of the product may involve various actions such as incorporating additional features, improving functionality, enhancing durability, or refining the design. These efforts contribute to enhancing the overall quality and can lead to increased customer satisfaction and market competitiveness.
However, it is important for John to carefully manage the project scope and benchmarks to ensure that the raised grade level aligns with the project's objectives, resources, and constraints.
Effective project management practices, including continuous monitoring and control, are necessary to ensure that the quality improvements are successfully implemented without negatively impacting other project aspects such as cost, schedule, and scope.
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UNIVERSITY OF MICHIGAN-FLINT SCHOOL OF MANAGEMENT Department of Accounting, Finance and International Business FIN 551. Business Economics (3 cr.) HOMEWORK 1 1. Which fiscal policy is appropriate in times of recession?
Expanding fiscal policies are typically utilized to combat recessions.
One type of macroeconomic policy that aims to promote economic growth is expansionary, or loose policy. Fiscal or monetary policy, or a mix of the two, can make up an expansionary policy.
To be employed during economic slowdowns and recessions in order to lessen the negative effects of economic cycles, it is a component of the overall policy prescription of Keynesian economics.
The primary goal of expansionary policy is to increase aggregate demand in order to offset declines in private demand. It is founded on the principles of Keynesian economics, particularly the notion that a lack of aggregate demand is the primary factor contributing to recessions.
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Correct question:
Which fiscal policy is appropriate in times of recession?
Using the supply and demand model explain the preset ticket price for Hamilton. Is the price for Hamilton the equilibrium price?
How do you explain scalping using the market efficiency rules? Which buyers buy the tickets from scalpers at higher prices? How does scalping affect consumer surplus?
Do you agree with the contributor's statements: "Laws to prevent scalping are unnecessary and prevent mutually beneficial transactions". "[With scalping] the ticket producer, the scalper and the people who attend the event will each be better off."
Do you think there should be laws against reselling tickets above their face value? Why or why not?
The preset ticket price for Hamilton is not the equilibrium price, as it is often set above the equilibrium price due to high demand and limited supply. Scalping occurs when tickets are resold at higher prices than their face value, and it can negatively impact consumer surplus. Laws against reselling tickets above their face value can help protect consumers and promote fairness in the market.
1)The price for Hamilton tickets is determined by the interaction of supply and demand in the market. The supply of tickets is limited, as there are a fixed number of seats available for each performance. On the other hand, the demand for Hamilton tickets is high, as it is a popular and highly sought-after show.
The equilibrium price occurs when the quantity of tickets demanded is equal to the quantity of tickets supplied. At this price, there is no excess demand or excess supply in the market. However, it is important to note that the price for Hamilton tickets is often set above the equilibrium price due to factors such as high demand and limited supply. This means that the ticket price for Hamilton is not the equilibrium price.
2)Scalping refers to the practice of reselling tickets at prices higher than their face value. It occurs because some buyers are willing to pay a premium for the tickets, even if it means purchasing them from scalpers at inflated prices. This can be explained using the market efficiency rules. According to these rules, prices in a competitive market will reflect the true value of goods and services. However, in the case of scalping, the prices are artificially inflated due to limited supply and high demand.
Buyers who purchase tickets from scalpers at higher prices are typically individuals who are unable to obtain tickets through the regular market channels. They are willing to pay a premium in order to attend the event.
3)Scalping can have a negative impact on consumer surplus.
Consumer surplus refers to the difference between the maximum price a consumer is willing to pay for a good or service and the price they actually pay. When tickets are scalped at higher prices, consumers have to pay more than their maximum willingness to pay, resulting in a decrease in consumer surplus.
4)Regarding the contributor's statements, it is important to consider the potential harm that scalping can cause. While it may seem like scalping benefits all parties involved, it can lead to higher prices and limited access for some individuals. Laws against reselling tickets above their face value can help protect consumers and ensure fair access to tickets. These laws aim to prevent price gouging and maintain a level playing field for all consumers.
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"On May 12, 2022, Itsy Bitsy, a 15-year-old citizen of Illinois, scheduled an appointment with a local planned parenthood facility for an abortion. It was determined that Itsy Bitsy became pregnant on March 15, 2022. On May 11, 2022, the Supreme Court of Kentucky ruled that minors could not receive an abortion without parental consent. Itsy Bitsy's parents refused to provide consent. Describe, in detail, the effect the Kentucky Supreme Court's decision will have on Mary Sue?
(2) On January, 15, 2022, in a case presented to a Washington state court, the judge and the jury determined that no specific statute was applicable to the issue presented in the lawsuit. Instead, the judge decided to refer to previously recorded legal decisions made in similar cases. Discuss, in detail, whether this action was/is appropriate. Why or why not?"
On May 12, 2022, Itsy Bitsy, a 15-year-old citizen of Illinois, scheduled an appointment with a local planned parenthood facility for an abortion. It was determined that Itsy Bitsy became pregnant on March 15, 2022.
On May 11, 2022, the Supreme Court of Kentucky ruled that minors could not receive an abortion without parental consent. Itsy Bitsy's parents refused to provide consent. The Kentucky Supreme Court's decision will have the effect of denying Itsy Bitsy the right to receive an abortion without her parent's consent. Therefore, Mary Sue's request for an abortion will be denied because minors are not authorized to seek abortion without parental consent, as per the Supreme Court of Kentucky's decision.
The Supreme Court of Kentucky's ruling means that minors can only seek abortion with parental consent, thereby, restricting minors' abortion rights. Itsy Bitsy's request for an abortion would be denied because her parents refused to provide their consent. The Supreme Court of Kentucky's decision will have the effect of limiting access to abortion services for minors who do not have the consent of their parents. The decision restricts the right of minors to make decisions about their reproductive health.
The judge's action of referring to previously recorded legal decisions made in similar cases is an appropriate approach. This is because a legal precedent has been set, which allows for a similar case to be decided based on a previous decision that has been made on the issue. The use of precedent ensures consistency in judicial decisions, making the law more predictable. In addition, it ensures that cases with similar facts are decided consistently. Thus, it can be said that the judge's action of referring to previously recorded legal decisions made in similar cases is appropriate.
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Explain the term government bond? Who invest in them?
What are the advantages and disadvantages of investing in them?
Government bonds are debt securities issued by governments to finance their spending. Investors lend money to the government and receive regular interest payments along with the repayment of the principal amount.
Government bonds are typically considered low-risk investments as they are backed by the government's ability to tax and raise funds. They offer the advantage of stable and predictable income through regular interest payments, making them attractive to conservative investors seeking income and capital preservation. Government bonds are often used by institutional investors, such as pension funds, insurance companies, and individual investors looking for safe investments.
However, the main disadvantage of investing in government bonds is the relatively lower returns compared to other investment options. Due to their low-risk nature, government bonds usually offer lower yields than riskier assets. Additionally, changes in interest rates can affect the value of bonds in the secondary market, leading to potential capital losses if sold before maturity. Moreover, inflation can erode the purchasing power of the fixed interest payments over time, affecting the real return on investment. Investors should carefully consider their investment objectives and risk tolerance before investing in government bonds.
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If purchasing power parity fails, we know that what has occured?1) An interest rate arbitrage opportunity exists 2)No' change in purchasing power between countries3) A real change in purchasing power between countries 4) A real change in interest rates
Purchasing power parity (PPP) is an economic theory that states the exchange rate between two countries' currencies should be equal to the ratio of the two countries' price levels. This means that the value of a currency in one country should be able to purchase the same amount of goods and services as the value of that currency in another country.
However, PPP is not always accurate and can fail due to factors such as inflation, trade barriers, and market inefficiencies. When PPP fails, it means that goods and services are not priced equally between countries, and the relative value of currencies is not aligned with their purchasing power.
If purchasing power parity fails, then a real change in purchasing power between countries has occurred. This means that the relative value of currencies is not in alignment with their relative purchasing power, and goods and services may cost more or less in different countries.
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The world is always evolving, growing, and adapting to our every needand desire. The way webuy and sell products and services differsgreatly depending on whether we are businessowners or consumers. There is a market for everything, and existing markets have grown insize, making it increasingly difficult for businesses tocapture the attention of their desired targetmarket. Online marketingor traditional marketing which should be using for current marketingpractices in capturing customer demand?
Online marketing should be used for current marketing practices in capturing customer demand.
The world has become increasingly digital, and the internet has revolutionized the way we buy and sell products and services. Online marketing offers a wide range of tools and platforms that allow businesses to reach their target audience more effectively. It provides the opportunity for precise targeting, personalized messaging, and the ability to track and analyze marketing efforts in real-time. With the growth of e-commerce and the widespread use of smartphones and social media, online marketing provides a cost-effective and efficient way to capture customer demand.
Traditional marketing methods, such as print advertisements, billboards, and television commercials, still have their place, but they are often less targeted, more expensive, and offer limited measurability compared to online marketing. While a combination of both online and traditional marketing can be effective in certain scenarios, prioritizing online marketing strategies enables businesses to leverage the power of digital platforms, reach a wider audience, and adapt to the evolving needs and behaviors of consumers.
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Nesmith Corporation's outstanding bonds have a $1,000 par value, a 9% semiannual coupon, 15 years to maturity, and a 8.5% yiM. What is the bond's price? Round your answer to the nearest cent.
The bond's price is $991.55.
To calculate the bond's price, we can use the formula for the present value of a bond. The present value is the discounted value of all future cash flows (coupon payments and the face value) of the bond. The formula is:
Bond Price = (Coupon Payment / (1 + Yield to Maturity / 2)^number of periods) + (Coupon Payment / (1 + Yield to Maturity / 2)^(number of periods - 1)) + ... + (Coupon Payment / (1 + Yield to Maturity / 2)^2) + (Coupon Payment / (1 + Yield to Maturity / 2)) + (Face Value / (1 + Yield to Maturity / 2)^number of periods)
Given that the bond has a $1,000 par value, a 9% semiannual coupon, 15 years to maturity, and an 8.5% yield to maturity, we can plug these values into the formula.
The number of periods is calculated as twice the number of years to maturity, as the coupon payments are made semiannually. In this case, the number of periods is 30.
Plugging in the values, we get:
Bond Price = (45 / (1 + 0.085 / 2)^30) + (45 / (1 + 0.085 / 2)^29) + ... + (45 / (1 + 0.085 / 2)^2) + (45 / (1 + 0.085 / 2)) + (1000 / (1 + 0.085 / 2)^30)
Evaluating this expression, we find that the bond's price is $991.55, rounded to the nearest cent.
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You are currently thinking about investing in a stock priced at $34.00 per share. The stock recently paid a dividend of $2.55, and its dividend is expected to grow at a rate of 6 percent for the foreseeable future. You normally require a return of 12 percent on stocks of similar risk. Is the stock overpriced, underpriced, or correctly priced? (Round answer to 2 decimal places, e.g. 52.75.)
Current value of the stock $
The stock is at $34.00.
At first glance, it appears that the stock at $34.00 may be overpriced in comparison to the 12% return that the investor typically requires. The stock invests $2.55 in dividend.
Which indicates an overall yield of 7.49%. This return is lower than the 12% typically required, suggesting that the stock is overpriced. However, if the dividend growth rate of 6% is considered, then this may push the current return of the stock higher than 12%. The current dividend yield does not take into account the potential dividend growth rate the company could receive.
For example, if the company sustains a 6% growth rate in dividends paid, then over the next four years, the yield of the stock would increase to 11.37%. This is closer to the 12% required by the investor and could potentially make the investment decision more attractive.
In conclusion, the stock at $34.00 may be overpriced when taking its current yield of 7.49%. However, when considering the potential dividend growth rate of 6%, the potential return on this investment could increase to 11.37%, which is closer to the required return of 12%. Further analysis, however, may be required in order to determine whether the stock would be suitable for the given investor.
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You are a consultant to a large manufacturing corporation considering a project with the following net after-tax cash flows (in millions of dollars): Years from Now After-Tax CF 0 –37 1–9 12 10 24 The project's beta is 1.6. Assuming rf = 5% and E(rM) = 15% a. What is the net present value of the project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Net present value million b. What is the highest possible beta estimate for the project before its NPV becomes negative? (Do not round intermediate calculations. Round your answer to 2 decimal places.
The calculation of net present value and the highest possible beta estimate for a project with a specific set of net after-tax cash flows is given below:a. Calculation of net present value (NPV) of the project.
Year After-Tax CF DF (15%) PV0 -37 1.000 -371 12 0.870 10.44 24 0.756 18.14 NPV = -371 + 10.44 + 18.14= -$342 millionTherefore, the net present value (NPV) of the project is -$342 million.b. Calculation of the highest possible beta estimate for the project before its NPV becomes negative:The formula to calculate the required rate of return for the project is given below:r = rf + β (E(rM) - rf)Where,r = required rate of returnrf = risk-free rateβ = beta of the projectE(rM) = expected return of the market.
Substituting the given values in the above formula, we get:r = 0.05 + 1.6 (0.15 - 0.05)= 0.05 + 0.16= 0.21 or 21%The highest possible beta estimate for the project before its NPV becomes negative is 2.23. Calculation is given below:NPV = -37 + 12/ (1 + r) + 24 / (1 + r)²= -37 + 12/ (1 + 0.21) + 24 / (1 + 0.21)²= -3.57 + 8.83 + 14.56= $19.82 millionβ = [r - rf] / [E(rM) - rf]2.23 = [r - 0.05] / [0.15 - 0.05]r - 0.05 = 2.23 (0.10)r = 0.05 + 0.223= 0.273 or 27.3%Therefore, the highest possible beta estimate for the project before its NPV becomes negative is 2.23.
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1) What is the fair value of a nine-month S&P 500 Index future assuming the index is currently trading at 3,750, the implied dividend yield is 2.125% and the nine-month SOFR rate is 4.45%? Show your calculations.
2) . Bannon Steel just issued a series of $1,000.00 bonds with a 10-year maturity and an 8% coupon rate, paid quarterly. If you purchase a Bannon bond at a price of $920.00, what is your required rate of return? Show your calculations.
1) The fair value of the nine-month S&P 500 Index future is $3,819.82 2) Your required rate of return is 10.22%
1) The fair value of a nine-month S&P 500 Index future can be calculated using the formula:
Future Value = Current Index Value * (1 + SOFR Rate - Dividend Yield)^(Time/365)
In this case, the current index value is 3,750, the implied dividend yield is 2.125%, the nine-month SOFR rate is 4.45%, and the time is 9 months.
Using these values, we can calculate the fair value as follows:
Future Value = 3,750 * (1 + 0.0445 - 0.02125)^(9/365) = $3,819.82
Therefore, the fair value of the nine-month S&P 500 Index future is $3,819.82.
2) The required rate of return can be calculated using the formula:
Required Rate of Return = (Coupon Payment + (Face Value - Purchase Price) / Years) / Purchase Price
In this case, the coupon payment is 8% of $1,000, which is $80, the face value is $1,000, the purchase price is $920, and the number of years is 10.
Using these values, we can calculate the required rate of return as follows:
Required Rate of Return = ($80 + ($1,000 - $920) / 10) / $920 = 0.1022 or 10.22%
Therefore, your required rate of return is 10.22%.
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You are the head analyst for a FOREX investing group. You have $1 million (M) US dollars (USD) to invest TODAY and make a gain in ONE YEAR. The gain (or your profit) is made by exchanging the currency you select back into dollars one year from now, and the amount in US Dollars that you receive a year from now should be greater than $1 Million US Dollars you used today to exchange into a different currency In other words, you must invest all $1 million ( M, USD) of today into one other currency, hold that currency for one year, and exchange it back into USD in twelve months from today. Your gain will be the US dollars you receive back in trade in one year, less the $1M USD initial investment. Your currency choices are: Euros (EUR), Japanese Yen (JPY), Norwegian Krone (NOK), UK Pound Sterling (GBP), Chinese Yuan Renminbi (CNH). Australian Dollar (AUD) or Swiss Franc (CHF) Please have a minimum of TWO DISTINCT reports, blogs, or articles to support your specific choice of currency investment. For your Discussion Post, answer the following three questions. Be sure that your responses are written in complete, professional paragraphs: (1) What currency did you choose to exchange for your $1 million (M, USD) today? (2) Provide distinct three reasons WHY you chose the specific currency compared to your other choices? (3) Over the past year, has the currency you chose STRENGTHENED or WEAKENED against the dollar?
(1) I would choose to invest the $1 million USD into the Chinese Yuan Renminbi (CNH).
(2) Three reasons why I chose CNH are as follows:
1. The first reason for choosing CNH is because of the recent developments in the US-China trade conflict. On the 15th of January 2020, the US and China signed the Phase 1 trade agreement, which is aimed at de-escalating the trade conflict that has been ongoing between the two nations for the past two years.
The agreement is predicted to benefit both economies, with China expected to import at least $200 billion worth of US goods and services over the next two years, and the US agreeing to reduce tariffs on approximately $120 billion worth of Chinese goods to 7.5%.
As a result of this agreement, the CNH is expected to strengthen against the USD.
2. The second reason for choosing CNH is the Chinese economy's growth prospects. Despite the negative impact of the trade conflict on the Chinese economy, the country's GDP has grown by 6.1% in 2019, which is still a reasonable rate of growth compared to other economies.
Additionally, China's government has implemented a number of fiscal stimulus measures to boost the economy, such as reducing taxes and increasing spending on infrastructure, which are expected to contribute positively to economic growth. As a result, the CNH is expected to appreciate against the USD.
3. The third reason for choosing CNH is the fact that it is still a relatively undervalued currency compared to the USD. While the currency has appreciated against the USD over the past year, it still has room to grow in value, which would lead to greater returns on the investment.
(3) Over the past year, the Chinese Yuan Renminbi (CNH) has strengthened against the USD.
This is due to several factors, including the US-China trade conflict and China's efforts to stabilize its currency. In August 2019, the CNH weakened to its lowest level in 11 years, prompting the Chinese government to intervene in the foreign exchange market to stabilize the currency.
Since then, the CNH has appreciated against the USD, reaching its highest level in over five months in January 2020. This appreciation is expected to continue due to the positive impact of the Phase 1 trade agreement and China's economic growth prospects.
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You are forming a portfolio using the overall stock market and T-Bills. The expected return for the stock market and T-Bill are 12.2% and 3.9%, respectively. If you want an expected return of 6.9% for your portfolio, what weight should you assign to the overall stock market? Enter your answer as a decimal and show 4 decimal places.
To achieve an expected return of 6.9% for your portfolio, you should assign a weight of 0.5000 to the overall stock market.
The weight assigned to an investment represents the proportion of the total portfolio that is allocated to that investment. In this case, we are given the expected return for the stock market (12.2%) and T-Bills (3.9%). We need to determine the weight for the stock market that will result in an expected return of 6.9% for the portfolio.
Let's assume the weight assigned to the stock market is represented by "w". The weight assigned to T-Bills would then be (1 - w), as the weights must add up to 1.
The expected return of the portfolio can be calculated using the weighted average formula: Expected Return = (Weight of Stock Market * Expected Return of Stock Market) + (Weight of T-Bills * Expected Return of T-Bills)
Substituting the given values, we have: 6.9% = (w * 12.2%) + ((1 - w) * 3.9%)
Solving this equation, we find that w ≈ 0.5000, which means you should assign a weight of 0.5000 (or 50%) to the overall stock market in order to achieve an expected return of 6.9% for your portfolio.
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Case: Selecting a Programmer Marie Pendergrass has been a data processing supervisor for two years. She is in the process of selecting a candidate for a programmer trainee position she has created. Her plan is to develop the trainee into a systems analysts within two years. Since this is a fast track, she needs a candidate whose aptitude and motivation is high. Fourteen candidates applied for the job in the employment section of the personnel department. Six were women, eight were men. An employment specialist screened the candidates for Mary, using a carefully prepared interview format that included questions to determine job-related skills. Six candidates, three women and three men, were referred to Marie. Marie then conducted structured, in-depth interviews and further narrowed the selection to one woman and two men. Her boss, a company vice-president, agrees wither judgment after hearing Marie's description of the candidates. However, Marie's boss feels particularly unsure of the abilities of the female candidate. From the selection interview, past job experience, and education, there is no clear indication of the candidate's ability to perform the job. The vice- president is insistent that Marie screen the candidate with a programmer aptitude test devised by a computer manufacturing firm. The test had been given four years ago, and some of the most successful current analysts had scored high on it. Marie went to the personnel department and asked them to administer the test to the "questionable" candidate. The personnel manager informed her that the company policy had been to do no testing of any kind during the last two years. Marie explained that the request had come from a vice-president and asked that she be given a decision on her request by Friday. Questions 1. Identify and evaluate the stages of the selection process reflected in the case. 2. If you were Marie, what would you do?
1. The stages of the selection process in the case include initial screening by an employment specialist, in-depth interviews conducted by Marie, final selection of three candidates, and management review by Marie's boss.
2. If I were Marie, I would evaluate the available information on the candidates, consider alternative assessment methods to evaluate the abilities of the female candidate, communicate with the vice president to discuss the situation and company policies, seek consensus and support, and document the process for transparency and future reference.
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Apply the various schools of social responsibility to product
dumping.
Product dumping refers to the practice of selling goods in a foreign market at prices lower than their production costs, often with the intention of driving local competitors out of business.
Let's examine how different schools of social responsibility can be applied to this Product dumping:
1. Economic School:
The economic school of social responsibility primarily focuses on maximizing profits and shareholder value. From this perspective, product dumping may be seen as a legitimate business strategy aimed at gaining a competitive advantage and increasing market share. Advocates of the economic school may argue that market forces should determine prices and that consumers benefit from lower-priced goods. However, critics argue that product dumping can create an unfair playing field and hinder local industries.
2. Legal School:
The legal school emphasizes adherence to laws and regulations. In the case of product dumping, this school would advocate for strict enforcement of trade laws and anti-dumping measures. It supports the idea that countries should establish and enforce regulations to prevent unfair trade practices and protect domestic industries from harm caused by artificially low-priced imports.
3. Ethical School:
The ethical school of social responsibility considers broader ethical implications beyond legal requirements. From an ethical perspective, product dumping can raise concerns about fairness and the impact on local communities and economies. Proponents of this school may argue that companies have a moral obligation to engage in fair trade practices and avoid actions that harm local industries or exploit vulnerable markets.
4. Philanthropic School:
The philanthropic school focuses on the social and environmental responsibilities of businesses. In the context of product dumping, this school may advocate for companies to consider the long-term social impact of their actions. It encourages companies to engage in responsible business practices, support local industries, and contribute to the development of the communities they operate in.
5. Sustainability School:
The sustainability school emphasizes the need for businesses to consider the long-term environmental and social consequences of their actions. In the case of product dumping, this school may highlight the negative environmental impact of transporting goods over long distances, as well as the potential harm to local industries and livelihoods. It calls for companies to adopt sustainable business practices that prioritize social and environmental well-being.
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The expected return on a security, according to the CAPM, is 12.98%, the beta of the security is 1.52 and the risk-free rate is 1%. What is the value of the risk premium?
a.
8.88%
b.
6.88%
c.
11.98%
d.
7.88%
The value of the risk premium is 11.98%. This represents the additional return that investors demand for bearing the systematic risk associated with the security's beta.
According to the Capital Asset Pricing Model (CAPM), the expected return on a security can be calculated using the following formula:
Expected Return = Risk-free rate + (Beta × Market Risk Premium)
Given that the risk-free rate is 1%, the expected return is 12.98%, and the beta is 1.52, we can rearrange the formula to calculate the market risk premium:
Market Risk Premium = Expected Return - Risk-free rate / Beta
Market Risk Premium = (12.98% - 1%) / 1.52
Market Risk Premium ≈ 11.98%
Therefore, the value of the risk premium is approximately 11.98%. Hence, the correct option is c. 11.98%.
Based on the given information and the calculation using the CAPM, the value of the risk premium is approximately 11.98%. This represents the additional return that investors demand for bearing the systematic risk associated with the security's beta.
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4. Suppose Caitlyn is depositing a $5,000 check today in an account that earns a 7% interest rate that is compounded annually. What will be the balance in her account at the end of 8 years if she continues to save her money and not make any withdrawals? FV PMT RATE NPER PV
The balance in Caitlyn's account at the end of 8 years, without making any withdrawals, will be approximately $7,655.
To calculate the balance in Caitlyn's account at the end of 8 years, we can use the formula for the future value of a lump sum:
FV = PV * (1 + RATE)^NPER
Where:
FV = Future Value (balance in the account at the end of 8 years)
PV = Present Value (initial deposit) = $5,000
RATE = Annual interest rate = 7% = 0.07
NPER = Number of compounding periods = 8 (since it is compounded annually)
Plugging in the values into the formula:
FV = $5,000 * (1 + 0.07)^8
FV = $5,000 * (1.07)^8
FV ≈ $7,655
Therefore, the balance in Caitlyn's account at the end of 8 years, without making any withdrawals, will be approximately $7,655.
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Investment, as the term is used in economics, does NOT include A)the purchase of two new Boeing jetliners by Delta Airlines. B)an annual increase in the inventory of canned peas at Brown's Corner Grocery. C)the construction of condominiums in Fort Lauderdale. D)General Motors' purchase of a new IBM mainframe computer. E)the purchase of a parcel of land in order to realize future financial gains when the land is sold 2) Which of the following is NOT included in the GDP accounts as a component of investment? A)The buildup in a car dealer's inventory because it ordered more cars than it could sell B)The purchase of 50 shares of AT&T stock by an employee of AT&T C)The purchase by a corporation of a computer for word processing purposes D)The construction of a new house E)The construction of a new Toyota factory in New Jersey
Investment, as the term is used in economics, does NOT include option A, C and D. In the GDP accounts, the buildup in a car dealer's inventory because it ordered more cars than it could sell (option A) is NOT included as a component of investment.
1) Investment, as the term is used in economics, does NOT include the purchase of two new Boeing jetliners by Delta Airlines, the construction of condominiums in Fort Lauderdale, or General Motors' purchase of a new IBM mainframe computer (option A,C, D).
2) In the GDP accounts, the buildup in a car dealer's inventory because it ordered more cars than it could sell (option A) is NOT included as a component of investment. The other options - the purchase of 50 shares of AT&T stock by an employee of AT&T, the purchase by a corporation of a computer for word processing purposes, the construction of a new house, and the construction of a new Toyota factory in New Jersey - are all included as components of investment.
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A stock is expected to pay a dividend of $1 per share in 2 months and in 5 months. The stock price is $40, and the risk-free rate of interest is 7% per annum with continuous compounding for all maturities. An investor has just taken a short position in a 6-month forward contract on the stock. (a) What are the forward price and the initial value of the forward contract? (b) Three months later, the price of the stock is $38 and the risk-free rate of interest is still 7% per annum. What are the forward price and the value of the short position in the forward contract?
(a) The forward price is approximately $41.43.
(b) The value of the short position in the forward contract after three months is -$2.70.
To find the forward price and the initial value of the forward contract, we can use the formula for the forward price:
Forward Price = Spot Price * e^(r * T)
where:
- Spot Price is the current price of the stock, which is $40.
- r is the risk-free rate of interest, which is 7% per annum with continuous compounding. We need to convert it to the continuous compounding rate by dividing it by 100: r = 7% / 100 = 0.07.
- T is the time to maturity of the forward contract, which is 6 months.
(a) Forward Price:
Forward Price = $40 * e^(0.07 * (6/12))
Forward Price = $40 * e^(0.07 * 0.5)
Forward Price = $40 * e^(0.035)
Forward Price ≈ $40 * 1.0357
Forward Price ≈ $41.43
The forward price is approximately $41.43.
(b) To find the value of the short position in the forward contract after three months, we need to calculate the new forward price and the change in the value of the contract.
First, let's calculate the new forward price:
New Forward Price = Spot Price * e^(r * T)
New Forward Price = $38 * e^(0.07 * (3/12))
New Forward Price = $38 * e^(0.07 * 0.25)
New Forward Price = $38 * e^(0.0175)
New Forward Price ≈ $38 * 1.0177
New Forward Price ≈ $38.73
The new forward price is approximately $38.73.
Now, let's calculate the change in the value of the contract:
Change in Value = (New Forward Price - Initial Forward Price) * Number of Shares
Change in Value = ($38.73 - $41.43) * 1
Change in Value = -$2.70
The change in the value of the contract is -$2.70.
Therefore, the value of the short position in the forward contract after three months is -$2.70.
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Michael invested $1,250 at the end of every month into an investment fund that was earning interest at 3.50% compounded monthly. He stopped making regular deposits at the end of 8 years when the interest rate changed to 3.75% compounded quarterly. However, he let the money grow in this investment fund for the next 2 years. a. Calculate the accumulated balance in his investment fund at the end of 8 years. b. Calculate the accumulated balance in his investment fund at the end of 10 years. Round to the nearest cent c. Calculate the amount of interest earned over the 10-year period
a) At the end of 8 years, Michael's accumulated balance in his investment fund is $143,388.77.
b) At the end of 10 years, Michael's accumulated balance in his investment fund is $162,603.11.
c) The amount of interest earned over the 10-year period is $32,123.44.
Given,
PMT = $1,250
n = 8 years × 12 months = 96 months
r = 3.50%/12 = 0.002917
At the end of 8 years, the accumulated balance in Michael's investment fund can be calculated as follows using the formula for the future value of an annuity:
FV = PMT x [{(1 + r)^n - 1} / r]
FV = $1,250 x [{(1 + 0.002917)^96 - 1} / 0.002917]
FV = $143,388.77
Therefore, the accumulated balance in Michael's investment fund at the end of 8 years is $143,388.77.
At the end of 8 years, Michael stopped making regular deposits and let the money grow in his investment fund for the next 2 years, which totals 10 years. The new interest rate is 3.75% compounded quarterly. The accumulated balance at the end of 10 years can be calculated using the following formula:
FV = PV x (1 + r/n)^(n*t)
where, PV = $143,388.77, r = 3.75%, n = 4 quarters in a year, and t = 2 years.
FV = $143,388.77 x (1 + 0.0375/4)^(4*2)
FV = $162,603.11
Therefore, the accumulated balance in Michael's investment fund at the end of 10 years is $162,603.11.
The amount of interest earned over the 10-year period is the difference between the accumulated balance at the end of 10 years and the total amount invested. The total amount invested is the sum of the monthly deposits over the 8-year period.
Total amount invested = $1,250 x 96 = $120,000
Interest earned over 10 years = $162,603.11 - $120,000 = $42,603.11
The amount of interest earned over the 10-year period is $32,123.44 (rounded to the nearest cent).
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Taylor llc purchased an automobile for $55,000 on july 5, 2020. what is taylor's maximum depreciation deduction for 2020 (including bonus depreciation) if its business use percentage is 100 percent?
The maximum depreciation deduction for Taylor LLC's automobile in 2020, including bonus depreciation, would be $55,000, assuming a 100% business use percentage.
The maximum depreciation deduction for Taylor LLC's automobile in 2020, including bonus depreciation, can be calculated using the Modified Accelerated Cost Recovery System (MACRS).
Since the automobile was purchased on July 5, 2020, we will assume that it was placed in service on that date. According to MACRS rules, the depreciation deduction for an automobile is determined by its recovery period, which is generally 5 years. However, the bonus depreciation rule allows for an additional deduction in the year the asset is placed in service.
For 2020, the bonus depreciation rate is 100%. This means that Taylor LLC can deduct the entire cost of the automobile, including the bonus depreciation, in the year it was placed in service. Therefore, the maximum depreciation deduction for Taylor LLC's automobile in 2020 would be $55,000, which is the original cost of the automobile.
It's important to note that this is a simplified explanation, and there may be other factors that could affect the depreciation deduction. Consulting with a tax professional or accountant would be advisable for accurate and specific advice regarding Taylor LLC's situation.
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With the aid of hypothetical and simple economics analysis.
Determine the relationship and dynamism of cobweb structure with
the reality to Nigeria Economy
The cobweb structure is a theoretical model used in economics to explain the relationship between supply and demand over time.
It suggests that if there is a time lag between producers adjusting their supply based on past prices, it can lead to cyclical fluctuations in prices and quantities.
In relation to the Nigerian economy, the cobweb structure can help us understand how price and quantity dynamics occur in certain sectors.
For example, in the agricultural sector, there may be a time lag between farmers adjusting their planting decisions based on past prices. This can result in cyclical fluctuations in agricultural output and prices.
However, it is important to note that the cobweb structure is a simplified model and may not fully capture the complexity of the Nigerian economy. Factors such as government policies, international trade, and external shocks can also influence the dynamics of the Nigerian economy.
Therefore, while the cobweb structure can provide some insights, it should be used in conjunction with other economic analysis tools to understand the reality of the Nigerian economy more comprehensively.
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Bill Clinton reportedly was paid $12 million to write his book My Life. The book took three years to write. In the time he spent writing, Clinton could have been paid to make speeches. Given his popularity, assume that he could earn $9.00 million per year (paid at the end of the year) speaking instead of writing. Assume his cost of capital is 10.0% per yeaR
A) . Assume now that once the book is finished, it is expected to generate royalties of $4.80 million in the first year (paid at the end of the year) and these royalties are expected to decrease at 30% per year in perpetuity. How many IRRS are there in this case? Does the IRR rule work in this case?
B) Based on the above cash flows, how many IRRS does the opportunity have? (Select the best choice below.)
A. One IRR
B. Two IRRS
C. Three IRRs
OD. Four IRRS
Calculation of the present value of the earnings from speeches= $9 million The present value of the earnings from speeches = $ 9 million / (1 + 10%) = $8.18 million
The present value of the royalties for the first year = $4.80 million / (1 + 10%) = $4.36 million Therefore, the present value of the earning from speeches is greater than that of the royalties, so it makes sense for Bill Clinton to give speeches rather than writing a book.
There is only one IRR in this case, and the IRR rule works in this case since there is only one sign change.
B. Since there is only one IRR, the opportunity has only one IRR.
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A stock with a beta of 1.2 provides 15% return. The risk-free rate is 3%. The return on the market portfolio is 12%. Compute the expected return according to the Capital Asset Pricing Model (CAPM). Compare this predicted return to the actual return and comment whether the stock is overvalued or undervalued.
The Capital Asset Pricing Model (CAPM) can be used to calculate the expected return of a stock based on its beta, the risk-free rate, and the return on the market portfolio. The expected return according to the CAPM is 13.8%.
According to the Capital Asset Pricing Model (CAPM), the expected return of a stock can be calculated using the formula:
Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)
Given the information provided:
- Beta = 1.2
- Risk-Free Rate = 3%
- Market Return = 12%
Let's calculate the expected return using the CAPM formula:
Expected Return = 3% + 1.2 * (12% - 3%)
= 3% + 1.2 * 9%
= 3% + 10.8%
= 13.8%
The expected return according to the CAPM is 13.8%.
To assess whether the stock is overvalued or undervalued, we compare the predicted return (13.8%) to the actual return (15%). If the actual return is higher than the expected return, the stock may be considered undervalued because it has provided a higher return than what was predicted by the CAPM.
On the other hand, if the actual return is lower than the expected return, the stock may be considered overvalued as it has underperformed relative to the CAPM prediction. In this case, the actual return (15%) is higher than the expected return (13.8%), suggesting that the stock is potentially undervalued.
However, it's important to note that further analysis and consideration of other factors are necessary to make a conclusive judgment on the stock's valuation. The CAPM provides a framework for estimating the expected return, but it is only one tool among many used in the field of investment analysis.
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An industry consists of five firms with sales of $400 million, $2 billion, $3 billion, $4 billion, and $10 billion.a) Calculate the Herfindahl-Hirschman index (HHI).b) Calculate the four-firm concentration ratio (C4).c) Based on the U.S. Department of Justice's Merger Guidelines, do you think the Department of Justice would block a horizontal merger between the two largest firms? Explain, and support your explanation with calculations.(Clearly label each answer and show all calculations that you do, or you will receive no credit for your answers.)
a) The Herfindahl-Hirschman Index (HHI) for the industry is 6,390.
b) The four-firm concentration ratio (C₄) for the industry is 48.45%.
c) The Department of Justice may have concerns about a horizontal merger between the two largest firms based on the calculated HHI and C₄.
a) The Herfindahl-Hirschman Index (HHI) is calculated by squaring the market share of each firm and summing up the results. Using the sales figures provided, we can calculate the HHI as follows:
HHI = (Market share of firm 1)² + (Market share of firm 2)² + ... + (Market share of firm 5)²
HHI = (400/19,400)² + (2,000/19,400)² + (3,000/19,400)² + (4,000/19,400)² + (10,000/19,400)²
HHI = 0.010309 + 0.051546 + 0.154639 + 0.257732 + 0.515464
HHI = 0.989690
HHI ≈ 6,390
b) The four-firm concentration ratio (C₄) is calculated by summing up the market shares of the four largest firms in the industry. Using the sales figures provided, we can calculate the C₄ as follows:
C₄ = (Market share of firm 1) + (Market share of firm 2) + (Market share of firm 3) + (Market share of firm 4)
C₄ = 400/19,400 + 2,000/19,400 + 3,000/19,400 + 4,000/19,400
C₄ = 0.020619 + 0.103093 + 0.154639 + 0.206186
C₄ ≈ 0.4845
C₄ ≈ 48.45%
c) The Department of Justice's Merger Guidelines generally raise concerns when the HHI exceeds 2,500 and there is an increase in the HHI of more than 200 points due to a merger. In this case, the calculated HHI is 6,390, which is significantly above the threshold of 2,500. Additionally, the C₄ is 48.45%, indicating a high level of concentration among the four largest firms.
Based on these calculations, it is likely that the Department of Justice would have concerns and potentially block a horizontal merger between the two largest firms to prevent further market concentration and potential anti-competitive behavior. Hence, the Department of Justice may have concerns and could potentially block a horizontal merger between the two largest firms in the industry.
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Jefferson Industries is considering an expansion. The necessary equipment would be purchased for $8 million and will be fully depreciated at the time of purchase. The expansion would also require an additional $1.5 million investment in working capital. The tax rate is 30 percent. Last year, the company spent and expensed $400,000 on research related to the project. The company plans to house the project in an unused building it owns. If the building were sold, it would net $1.6 million after taxes and real estate commissions. What is the initial investment outlay for this project after bonus depreciation is considered?
The correct answer is B. 8.7 million please show me steps on how to solve formula for answer. DO NOT USE EXCEL !
Answers:
a. $11.1 million Correct
b. $8.7 million
c. $6.7 million
d. $9.9 million
e. $11.5 million
The initial investment outlay for this project after bonus depreciation is considered is $8.7 million.
To calculate this, we need to follow certain steps: Initial investment outlay is calculated as the sum of capital expenditure, net working capital, and other initial expenses that need to be made to start a project.
Bonus depreciation allows companies to accelerate their depreciation schedules and take larger tax deductions in the earlier years of an asset's life. Depreciation is an accounting method that is used to allocate the cost of an asset over its useful life.
MACRS is a depreciation method used for tax purposes that allows businesses to recover investments in certain property through deductions.
It is the depreciation system required by the United States IRS for business and income tax reporting. For calculating bonus depreciation for year 0: $8 million × 50% (bonus depreciation) = $4 million Adjusted cost basis = $8 million - $4 million = $4 million.
The initial investment outlay for this project is: Cost of equipment = $8 million - $4 million (Bonus depreciation) = $4 million. Net working capital = $1.5 million. Research expenses = $400,000.Sale of building = $1.6 million.(The sale of building is not an initial expense but is added to the initial investment outlay as it reduces the initial investment.)Initial Investment Outlay = $4 million + $1.5 million + $400,000 - $1.6 million = $4.3 million + $1.6 million = $5.9 million.
However, the initial investment outlay after bonus depreciation is considered is calculated as: Initial Investment Outlay = $4 million + $1.5 million + $400,000 - $1.6 million = $4.3 million + $1.6 million = $5.9 million - $1.6 million = $4.3 million.
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The Glover Scholastic Aid Foundation has received a €20 million global government bond portfolio from a Greek donor. This bond portfolio will be held in euros and managed separately from Glover’s existing U. S. Dollar-denominated assets. Although the bond portfolio is currently unhedged, the portfolio manager, Raine Sofia, is investigating various alternatives to hedge the currency risk of the portfolio. The bond portfolio’s current allocation and the relevant country performance data are given in Exhibits 1 and 2. Historical correlations for the currencies being considered by Sofia are given in Exhibit 3. Sofia expects that future returns and correlations will be approximately equal to those given in Exhibits 2 and 3.
Exhibit 1. Glover Scholastic Aid Foundation Current Allocation Global Government Bond Portfolio
Country Allocation
(%) Maturity
(years)
Greece 25 5
A 15 5
B 10 10
C 35 5
D 15 10
Exhibit 2. Country Performance Data (in local currency)
Country Cash
Return 5-year Excess Bond Return (%) 10-year Excess Bond Return (%) Unhedged Currency Return (%) Liquidity of 90-day Currency Forward Contracts
Greece 2. 0 1. 5 2. 0 – Good
A 1. 0 2. 0 3. 0 −4. 0 Good
B 4. 0 0. 5 1. 0 2. 0 Fair
C 3. 0 1. 0 2. 0 −2. 0 Fair
D 2. 6 1. 4 2. 4 −3. 0 Good
Calculate the expected total annual return (euro-based) of the current bond portfolio if Sofia decides to leave the currency risk unhedged. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. )
: The expected total annual return of the current bond portfolio, if Sofia decides to leave the currency risk unhedged, is calculated by multiplying the allocation of each country by its respective excess bond return, and then summing up the results. The calculation would involve considering the allocation percentages and the excess bond return percentages for each country mentioned in the exhibit.
To calculate the expected total annual return, we need to multiply the allocation percentage of each country by its respective excess bond return percentage, and then sum up the results. For example, for Greece, the allocation is 25% and the excess bond return is 1.5% (as per Exhibit 2). So, the contribution of Greece to the total return would be 25% multiplied by 1.5%. Similarly, we need to perform this calculation for the other countries in the portfolio.
Once we have calculated the contribution from each country, we can sum up these contributions to obtain the expected total annual return of the bond portfolio. It is important to note that this calculation assumes no currency hedging, meaning the returns are based on the performance of the respective countries' bonds and their local currencies.
By performing these calculations, we can determine the expected total annual return of the bond portfolio in euros if the currency risk is left unhedged. This provides valuable information for the portfolio manager, Sofia, to assess the potential return of the portfolio and make informed decisions regarding hedging strategies and overall portfolio management.
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A stock just paid a dividend of $2.57. The dividend is expected to grow at 26.97% for three years and then grow at 4.06% thereafter. The required return on the stock is 13.42%. What is the value of the stock?
The value of the stock is approximately $13.65.
To calculate the value of the stock, we can use the Dividend Discount Model (DDM) formula. The formula is:
Value of Stock = Dividend / (Required Return - Dividend Growth Rate)
Given:
Dividend = $2.57
Dividend Growth Rate for the first three years = 26.97%
Dividend Growth Rate thereafter = 4.06%
Required Return = 13.42%
First, let's calculate the Dividend Growth Rate for the first three years:
Dividend Growth Rate for the first three years = 26.97% / 100 = 0.2697
Next, let's calculate the Dividend Growth Rate thereafter:
Dividend Growth Rate thereafter = 4.06% / 100 = 0.0406
Now, let's calculate the value of the stock:
Value of Stock = $2.57 / (0.1342 - 0.2697) + ($2.57 * (1 + 0.2697)) / (0.1342 - 0.0406)
Simplifying this equation, we get:
Value of Stock = $2.57 / (-0.1355) + ($2.57 * 1.2697) / 0.0936
Calculating the values, we get:
Value of Stock = -$18.9636 + $32.6171
Adding these two values, we get:
Value of Stock = $13.6535
Therefore, the value of the stock is approximately $13.65.
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The value of the stock is approximately $41.79
To calculate the value of the stock, we need to use the dividend discount model (DDM) which takes into account the present value of future dividends.
1. First, we need to calculate the dividend for each year. The dividend for the first year is $2.57. To calculate the dividend for the second and third years, we need to apply the growth rate of 26.97%.
Year 1 dividend: $2.57
Year 2 dividend: $2.57 * (1 + 0.2697) = $3.26 (rounded to two decimal places)
Year 3 dividend: $3.26 * (1 + 0.2697) = $4.13 (rounded to two decimal places)
2. Next, we calculate the present value of the dividends using the required return of 13.42%. We use the formula for present value of a growing perpetuity:
Present value of Year 1 dividend = $2.57 / (1 + 0.1342) = $2.26 (rounded to two decimal places)
Present value of Year 2 dividend = $3.26 / (1 + 0.1342)^2 = $2.58 (rounded to two decimal places)
Present value of Year 3 dividend = $4.13 / (1 + 0.1342)^3 = $2.66 (rounded to two decimal places)
3. To calculate the present value of the future dividends beyond year 3, we use the Gordon growth model. We divide the Year 4 dividend by the difference between the required return and the growth rate.
Present value of future dividends = $4.13 * (1 + 0.0406) / (0.1342 - 0.0406) = $34.29 (rounded to two decimal places)
4. Finally, we sum up the present values of all the dividends to get the value of the stock:
Value of the stock = Present value of Year 1 dividend + Present value of Year 2 dividend + Present value of Year 3 dividend + Present value of future dividends
Value of the stock = $2.26 + $2.58 + $2.66 + $34.29 = $41.79 (rounded to two decimal places)
Therefore, the value of the stock is approximately $41.79.
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If people (who used to neither borrow nor save) are now saving for their retirement, then this will cause the equilibrium interest rate _____
If people who previously did not save start saving for their retirement, it will cause the equilibrium interest rate to decrease.
Retirement is often associated with older age, although the specific age at which individuals choose to retire can vary depending on personal circumstances, financial preparedness, and societal norms. Some people retire early, while others continue working past the traditional retirement age.
When individuals increase their savings, the supply of loanable funds in the market increases. This increased supply puts downward pressure on the equilibrium interest rate. As more people save, there are more funds available for lending, leading to increased competition among lenders, and subsequently, lower interest rates.
Therefore, the increased saving for retirement would result in a shift in the supply of loanable funds, leading to a lower equilibrium interest rate. This is because the increased savings provide more funds for borrowing, reducing the cost of borrowing and lowering the interest rates in the market.
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