Answer:
B
Explanation:
International trade is the exchange of goods and services across a countries borders
International trade can be export or import
export is sending a good to a foreign country
import is receiving goods from a foreign country
international trade increases the variety of goods available to consumers
a downside is it increases the competition faced by local producers
The buying and selling of products and services between businesses in several nations is referred to as international trade. On the global market, commodities such as consumer products, raw resources, food, and machinery are all purchased and sold.
The benefit of international trade is that consumers have access to more products. Thus, the correct answer to this question is option (B).
Through commerce, nations may obtain commodities and services that might not otherwise be accessible domestically and grow their markets. Market competition has increased as a result of global commerce.
Global trade offers individuals and nations the chance to experience products and services that are either unavailable or more expensive domestically.Political economists like Adam Smith and David Ricardo were among the first to acknowledge the significance of international commerce.However, some contend that commerce with other countries can really be detrimental to smaller countries, placing them at a disadvantage in the global arena.Therefore, The benefit of international trade is that consumers have access to more products. Thus the correct answer to this question is option (B).
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Customer goods returned will be credited to which account ?
Answer:
Goods Account (based on the question)
Alternatively :
In Accounts you would usually have a seperate account called ' Returns Inward' and they will be debited there.
take a look at the figure. The basic shape of the body of the lamp shown is a A. cylinder. B. pyramid. C. cone. D. sphere.
The basic shape of the body of the lamp shown is the cone. A cone is formed by a set of line segments, half-lines, or lines connecting a common point.
What is a cone?The cone in the shape of the figure is a three-dimensional geometric shape. That smoothly forms a flat base to a point called the apex or vertex. A cone is formed by a set of line segments, half-lines, or lines connecting a common point, the apex. the points on a base that is in a plane that does not contain the apex.
A cone refers that a shape consisting of a circular base and the once continuous curved base tapering to a point (the apex) above the center of the circular base.
Therefore, The lamp shown is the cone. A cone is formed by a set of line segments
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If the consumption function is defined as C = 5,500 + 0.9Y, what is the
autonomous level of consumption expenditure?
A. $4,950
B. $5,500
C. $6,050
D. $6,111
Answer:
Option B ($5,500) is the appropriate choice.
Explanation:
The given expression is:
⇒ [tex]C = 5,500 + 0.9Y[/tex]
At the zero (0) level of income, the consumption would be the Autonomous consumption.
then,
Y = 0
On substituting the value of "Y" in the given expression, we get
⇒ [tex]C=5,500+0.9(0)[/tex]
⇒ [tex]=5,500+0[/tex]
⇒ [tex]=5,500[/tex] (%)
Sheffield Corp. is planning to sell 1070 boxes of ceramic tile, with production estimated at 800 boxes during May. Each box of tile requires 44 pounds of clay mix and a 0.50 hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $17 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Sheffield has 3300 pounds of clay mix in beginning inventory and wants to have 5400 pounds in ending inventory. What is the total amount to be budgeted for direct labor for the month
Answer:
Results are below.
Explanation:
Giving the following information:
Production= 800 boxes
Each box of tile requires 0.50 hours of direct labor.
Employees of the company are paid $17 per hour.
First, we need to determine the number of hours required:
Number of hours= 800*0.5= 400 hours
Now, the total direct labor cost:
Direct labor cost= 400*17= $6,800
You are long 10 put contracts on Cisco (CSCO) with a strike price of $55.00. The option premium is $1.75 per share, and the market price of CSCO on the day you enter the contracts is $54.25. If you are long the underlying shares of CSCO, what will the total gain or loss be of your position if you exercise the contracts when CSCO is selling for $49.00 per share
Answer:
$42.50
Explanation:
Here, buying a put option means that the option holder will gain when the share price falls below the strike price.
Strike price is $55
Premium paid is $1.75 per share
Premium paid = $1.75 * 10 = $17.5
Shares are selling for $49
=> $(55- 49) * 10 contracts = $60.
So, net profit = $60 - $17.5 = $42.5
Consider the recorded transactions below.
1. Accounts Receivable
Service Revenue
2. Supplies
Accounts Payable
3. Cash
Accounts Receivable
4. Advertising Expense
Cash
5. Accounts Payable
Cash
6. Cash
Deferred Revenue
Beg. bal
End bal.
Debit
Cash
8,800
1,600
8,800
1,100
2,300
1,200
Credit
8,800
1,600
8,800
1,100
Required:
Post each transaction to T-accounts and compute the ending balance of each account. The beginning balance of each account before
the transactions is: Cash, $2,000; Accounts Receivable, $2,800; Supplies, $260; Accounts Payable, $2,100; Deferred Revenue, $160.
Service Revenue and Advertising Expense each have a beginning balance of zero.
The beginning balance of each account before the transactions is: Cash, $3,400; Accounts Receivable,$4,200; Supplies, $400; Accounts Payable,$3,500; Deferred Revenue, $300. Service Revenue and Advertising Expense each have a beginning balance of zero.
What are Transactions?An executed contract between a buyer and a seller to trade goods, services, or financial assets in exchange for money is known as a transaction.
The phrase is also frequently used in business accounting. This straightforward definition might be challenging in corporate bookkeeping.
Depending on whether a corporation utilizes accrual accounting or cash accounting, it may record a transaction sooner or later.
Therefore, The beginning balance of each account before the transactions is: Cash, $3,400; Accounts Receivable,$4,200; Supplies, $400; Accounts Payable,$3,500; Deferred Revenue, $300. Service Revenue and Advertising Expense each have a beginning balance of zero.
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Cheyenne Corp. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $170000 and credit sales are $1710000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Cheyenne Corp. make if the Allowance for Doubtful Accounts has a credit balance of $3400 before adjustment? Bad Debt Expense 8500 Allowance for Doubtful Accounts 8500 Bad Debt Expense 5100 Accounts Receivable 5100 Bad Debt Expense 5100 Allowance for Doubtful Accounts 5100 Bad Debt Expense 8500 Accounts Receivable 8500
Answer:
See below
Explanation:
Given the above information, the adjusting entry for Chynne will be;
On January 1, 2017, Chamberlain Corporation pays $503,200 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $19,800 results from the acquisition. On December 31, 2018, Neville reports revenues of $460,000 and expenses of $328,000 and Chamberlain reports revenues of $784,000 and expenses of $440,000. The parent figures contain no income from the subsidiary. What is consolidated net income attributable to Chamberlain Corporation
Answer:
Explanation:
Calculation to determine consolidated net income attributable to Chamberlain Corporation
Using this formula
Consolidated net income attributable to Chamberlain Corporation=[(Neville Revenues-Neville Expenses)+(Chamberlain Revenues-Chamberlain Expenses)- Annual excess fair-value amortization]-[(Neville Revenues-Neville Expenses)-Annual excess fair-value amortization*percentage of ownership in Neville.
Let plug in the formula
Consolidated net income attributable to Chamberlain Corporation=[($460,000-$328,000)+($784,000-$440,000)-$19,800]-[($460,000-$328,000)-$19,800*40%]
Consolidated net income attributable to Chamberlain Corporation=($132,000+$344,000-$19,800)-($132,000-$7,920)
A interest rate that changes based on the base rate used by the bank
A. Current
B. Fixed
C. High
D. Variable
Answer:
D
Explanation:
Little oil has outstanding 1 million shares with a total market value of 26 million. The firm is expected to pay 1.00 million of dividends next year, and thereafter, the amount paid out is expected to grow by 5% a year in perpetuity. Thus, the expected dividend is 1.05 million in year 2, 1.1025 million in year 3, and so on. However, the company has heard that the value of a share depends on the flow of dividends, and therefore it announces that next year’s dividend will be increased to $2 million and that the extra cash will be raised immediately by an issue of shares. After that, the total amount paid out each year will be as previously forecasted, that is, $1.05 million in year 2 and increasing by 5 percent in each subsequent year.
(a) At what price will the new shares be issued in year 1?
(b) How many shares will the firm need to issue?
(c) What will be the expected dividend payments on these new shares, and what therefore will be paid out to the old shareholders after year 1?
Answer:
a) $26
b) 1,038,462 shares
c) i) 0.037 , ii) 0.963
Explanation:
Total market value = 26 million
a) Determine the price at which the new shares will be issued in year 1
number of shares issued after year 1 = ( 1,000,000 + x )
x = new shares
p = price of new share
Total value of firm = Total market value + Dividend payment
= $26 million + $1 million = $27 million
p = Total value / x = 27 million / x ----- ( 1 )
also : x * ( p ) = $1,000,000
back to equation 1
P = $27,000,000 / ( 1,000,000 + x )
p ( 1,000,000 + x ) = $27,000,000
∴ ( 1,000,000 * P ) + 1,000,000 = $27,000,000
hence P = $26,000,000 / 1,000,000
price at which share new share will be issued = $26
b) Determine the number of shares the firm will issue
P( 1,000,000 + x ) = $27,000,000
= 26 ( 1,000,000 + x ) = $27,000,000
x = ( 27,000,000 / 26 ) - 1,000,000
number of shares ≈ 38462
Number of new shares that the firm will need to issue
= ( 1,000,000 + 38462 ) = 1,038,462 shares
c) Determine the expected dividend payments on these new shares and
dividend payment on new shares = New shares / Total outstanding shares
= 38462 / 1,038,462 = 0.037
dividend payment to old shareholder = 1 - 0.037
= 0.963
The management of Truelove Corporation is considering a project that would require an initial investment of $349,000 and would last for 7 years. The annual net operating income from the project would be $29,400, including depreciation of $45,800. At the end of the project, the scrap value of the project's assets would be $28,400. (Ignore income taxes.) Required: Determine the payback period of the project. (Round your answer to 2 decimal places.)
Answer:
4.64 years
Explanation:
The computation of the payback period is given below;
We know that
Payback period = Investment required ÷ Net annual cash inflow
where,
Net annual cash inflow is
= $29,400 + $45,800
= $75,200
Now the Payback period is
= $349,000 ÷ $75,200
= 4.64 years
hence, the payback period of the project is 4.64 years
The general ledger is:
used to sort, store and summarize a company's transactions and part of the
accounting cycle
used to sort, store and summarize a company's transactions
used to make adjusting entries
part of the accounting cycle
Answer:
used to sort, store and summarize a company's transactions.
Explanation:
Financial accounting is an accounting technique used for analyzing, summarizing and reporting of financial transactions like sales costs, purchase costs, account payables and receivables of an organization using standard financial guidelines such as Generally Accepted Accounting Principles (GAAP) and financial accounting standards board (FASB).
Thus, it is a field of accounting involving specific processes such as recording, summarizing, analysis and reporting of financial transactions with respect to business operations over a specific period of time.
A general journal is used for initially recording a transaction before it's then subsequently transferred or posted to the general ledger. In Financial accounting, this process of transferring information about a transaction from the general journal to the general ledger is known as posting.
Furthermore, the main purpose of a general ledger is to list all accounts used in recording an organization's transactions and as such it contains a list of transactions affecting each account and the account's balance.
Hence, the general ledger is used to sort, store and summarize a company's transactions.
Limitations of direction
Answer:
Explanation: Managament techniques should be adjusted according to specific circumstances.
one techniques maybe good in one situation but maybe not good in other situation.
principles of management are not static in nature.
management is concerned with the human element in an organization.
Explain international trade, alliance and conflict
ice Manager uses a Periodic Review Inventory System: they check the inventory in the Office Supply Closet once every 10 days, placing an order with their supplier depending on the inventory level in the closet. Once the order is placed, it takes 3 days to receive the order. The average demand for file folders is 70 per day. This week, the operator has counted 240 file folders in the closet. What is the Minimum Restocking Level (restocking policy) needed to cover expected demand over time without stocking out?
Answer:
910 days
Explanation:
Calculation to determine the Minimum Restocking Level needed to cover expected demand over time without stocking out
Using this formula
Minimum Restocking Level= (Average daily demand × Reorder period)+ (Average daily demand × Lead time)
Let plug in the formula
Minimum Restocking Level= (70 days × 10 days) + (70 days × 3 days)
Minimum Restocking Level=700 days + 210 days
Minimum Restocking Level= 910 days
Therefore the Minimum Restocking Level needed to cover expected demand over time without stocking out is 910 days
Sunland Company's accounting records reflect the following inventories: Dec. 31, 2019 Dec. 31, 2020 Raw materials inventory $ 78000 $ 62000 Work in process inventory 102000 114000 Finished goods inventory 100000 92000 During 2020, Sunland purchased $1450000 of raw materials, incurred direct labor costs of $250000, and incurred manufacturing overhead totaling $160000. How much raw materials were transferred to production during 2020 for Sunland
Answer:
$1,466,000.00
Explanation:
Calculation to determine How much raw materials were transferred to production during 2020 for Sunland
RAW MATERIALS TRANSFERRED TO PRODUCTION
Beginning Raw material inventory $78,000.00
Raw material Purchases $1,450,000
Total Raw material available for use $1,528,000.00
($78,000+$1,450,000)
Less: Ending Raw material inventory $62,000.00
Raw materials transferred to production $1,466,000.00
($1,528,000.00-$62,000.00)
Therefore the Amount of raw materials that were transferred to production during 2020 for Sunland is $1,466,000.00
9.
Which must pass through the state probate court system?
O A. Testamentary trust
O B. Living trust
O C. Pour-over trust
Before a will is written, a testamentary trust must go through probate. The correct answer is option (a).
What do you mean by probate?Before a will is written, a testamentary trust must pass through probate. In the course of probating the will, the executor will also establish the trust. Legal expenses may be deducted from the trust funds if the trustee needs legal counsel on how to manage the trust.
The term "probate" refers to a copy of a will that has been witnessed by a court official and is accompanied by a grant of management of the testator's assets. Only the will's appointed executor is eligible for a probate. A probate is also required if the will covers real estate in more than one state.
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Communication which occurs via small
group discussion would fall under which
category?
A. synchronous
C. horizontal
B. a synchronous
D. vertical
Answer: A. synchronous
Explanation: Communication that occurs via small group discussion would fall under the category of synchronous communication. Synchronous communication refers to a type of communication that occurs in real-time, such as a conversation or a meeting. It involves people interacting with each other at the same time, rather than asynchronously, where people communicate at different times.
Robert believes that entrepreneurship will help you in other aspects of your life. What do you think?
Production Budget Pasadena Candle Inc. projected sales of 800,000 candles for January. The estimated January 1 inventory is 35,000 units, and the desired January 31 inventory is 20,000 units. Prepare a production budget report in units for Pasadena Candle Inc. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Pasadena Candle Inc. Production Budget For the Month Ending January 31 fill in the blank 2 fill in the blank 4 Total units available fill in the blank 5 fill in the blank 7 Total units to be produced in January fill in the blank 8
Answer:
Production budget for Pasadena Candle Inc
Expected units to be sold 800,000
Desired ending inventory, Dec 31 20,000
Total units available 820,000
Estimated beginning inventory, Jan 1 -35,000
Total units to be produced in Jan. 785,000
Many times, margin, instead of retailing price, becomes the firm's decision variable. Suppose we notice Kroger is selling Dove at $0.99 per bar. We also know the manufacturing cost of Dove by its producer, Unilever, is $0.6 per bar, and the manufacturer's margin is 40%. Based on the cost plus pricing formula we discussed in class [ P=C+m%*C], we could figure out Kroger's margin on
Dove is about _______.
a. 18%
b. 25%
c. 38%
d. 65%
You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.7 percent. Stock X has an expected return of 11.4 percent and a beta of 1.25, and Stock Y has an expected return of 8.68 percent and a beta of .85. How much money will you invest in Stock Y? What is the beta of your portfolio? (2 pts)
Answer: See explanation
Explanation:
a. How much money will you invest in Stock Y?
Let the weight of Stock X = x
Let the weight of Stock Y = (1 - x)
Expected return of stock X = 11.4%
Beta of stock X = 1.25
Expected return of stock Y = 8.68%
Beta of stock X = 0.85
The Portfolio Return will then be calculated as:
= (Weight of Stock X × Return of Stock X) + (Weight of Stock Y × Return of Stock Y)
0.127 = [x × 0.114 + (1 - x) × 0.0868]
0.127 = [x × 0.114 + 0.0868 - x × 0.0868]
0.127 = x × 0.0272 + 0.0868
0.127 - 0.0868 = x × 0.0272
0.0402 = 0.0272x
x = 0.402/0.0272
x = 1.4779
Weight of Stock X = 1.4779
Therefore, Weight of Stock Y will be:
= 1 - 1.4779
= -0.4779
The amount that's invested in Stock Y will be:
= $100,000 × (-0.4779)
= -$47,790
b. What is the beta of your portfolio?
Portfolio Beta will be calculated as:
= 1.4779 × 1.25 + (-0.4779) × 0.85
= 1.44
What is your favorite quote? At the top of your journal entry, type out one quote that is a source of inspiration or motivation for you. Place quote marks around it and include an APA style in-text citation next to it.
In a paragraph of 8-10 sentences, explain why you like this quote. Develop your paragraph by sharing personal examples, explanation, and connections to other ideas in this course or other media you have seen, heard, or read.
After your paragraph, create an APA style reference entry for the website or page where you found this quote.
A quote that can be a source of inspiration or motivation for the development of knowledge and critical reasoning is:
"Reading provides the spirit with materials for knowledge, but only thinking makes what we read our own". (John Locke)What is critical reasoning?It corresponds to the ability of human beings to analyze a theory, opinion and vision on a topic according to their own perspectives and rational and logical precepts, always seeking to observe, investigate, contest and prove a thought taken as true.
Therefore, the phrase of the famous Enlightenment thinker John Locke helps in understanding the importance of thought for society, taking reason as the source of knowledge and development of society and individuals.
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EcoMotors’s disclosure notes for the year ending December 31, 2017, included the following regarding its $0.001 par common stock: Employee Stock Purchase Plan Our employees are eligible to purchase our common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The purchase price would be 85% of the lower of the fair market value on the first and last trading days of each six-month offering period. During the years ended December 31, 2017, 2016, and 2015, we issued 221,071, 164,100 and 221,071 shares under the ESPP for $38.0 million, $29.1 million and $14.3 million, respectively. There were 3,620,749 shares available for issuance under the ESPP as of December 31, 2017. Required: Prepare the journal entry that summarizes EcoMotors’s employee share purchases for the year ending December 31, 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
Answer:
Date General journal Debit Credit
Dec 31, 2017 Cash $38,000,000
Compensation expense $6,705,882
[($38,000,000/85%)*15%]
Common stock [221,071 * $0.001] $221
Paid in capital - in excess of par $44,705,661
Diemia Hospital has been considering the purchase of a new x-ray machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed now, it may be sold for $170,000. The new machine will cost $700,000 and an additional cash investment in working capital of $115,000 will be required. The new machine will reduce the average amount of time required to take the x-rays and will allow an additional amount of business to be done at the hospital. The investment is expected to net $150,000 in additional cash inflows during the year of acquisition and $180,000 each additional year of use. The new machine has a three-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life.
Required:
What is the net present value of the investment, assuming the required rate of return is 9%? Would the hospital want to purchase the new machine?
Answer:
1. Present value of cash-out flow = Purchase of new machine + Cost of working capital - Sale of old machine
Present value of cash-out flow = $700,000 + $115,000 - $170,000
Present value of cash-out flow = $645,000
Year Cash flow PVF 9% Net cash flow
1 $150,000 0.917 $137,550
2 $180,000 0.842 $151,560
3 $180,000 0.772 $138,960
4 $180,000 0.708 $127,440
5 $180,000 0.65 $117,000
Present value of Cash inflow $672,510
Present value of Cash outflow ($645,000)
Net present value $27,510
2. Yes, Hospital would want to purchase the new machine because the Net present value is positive.
You are provided with the following information for Najera Inc. for the month ended June 30, 2017. Najera uses the periodic method for inventory.
Date Description Quantity Unit Cost or Selling Price
June1 Beginning inventory 38 $42
June4 Purchase 135 $46
June10 Sale 108 $70
June11 Sale return 12 $70
June18 Purchase 58 $48
June18 Purchase return 9 $48
June25 Sale 64 $75
June28 Purchase 33 $52
Required:
Calculate cost per unit.
Answer:
$46.56
Explanation:
Calculation to determine the cost per unit.
Units Units Cost Total cost
June1 Beginning inventory 38* $42 =$1,596
June4 Purchase 135 *$46=$6,210
June18 Purchase 58 *$48=$2,784
June18 Purchase return (9) *$48=($432)
June28 Purchase 33 *$52=$1,716
Total= 255 $11,874
Now let calculate the cost per unit using this formula
Weighted average cost per unit=Costs of goods sold for sale/Units available for sales
Let plug in the formula
Weighted average cost per unit=$11,874/255
Weighted average cost per unit=$46.56
Therefore the cost per unit is $46.56
The Power Tool Division of ABC Hardware sells one product, Jig Saw, and has the following data for the second quarter: Units of output 1,200 units Price per unit $ 150 Variable cost per unit 90 Total fixed costs 48,000 Required: Determine the following: 1. Quarterly operating profit when 1,200 units are sold. 2. Break-even volume in units. 3. Contribution margin ratio. 4. Break-even volume in sales dollars. 5. Sales dollars and units needed to generate an operating profit of $57,000. 6. Number of units sold that would produce an operating profit of 15% of sales dollars. 7.
Answer:
Results are below.
Explanation:
A)
We need to determine the profit when 1,200 units are sold:
Operating profit= total contribution margin - fixed costs
Operating profit= 1,200*(150 - 90) - 48,000
Operating profit= $24,000
B)
To calculate the break-even point in units, we need to use the following formulas:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 48,000 / (150 - 90)
Break-even point in units= 800 units
C)
Now, the contribution margin ratio:
Contribution margin ratio= (150 - 90) / 150
ontribution margin ratio= 0.4
D)
To calculate the break-even point in dollars, we need to use the following formulas:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 48,000/0.4
Break-even point (dollars)= $120,000
E)
Desired profit= $57,000
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (48,000 + 57,000) / 60
Break-even point in units= 1,750
Break-even point (dollars)= (fixed costs + desired profit) / contribution margin ratio
Break-even point (dollars)= 105,000 / 0.4
Break-even point (dollars)= $262,500
F)
Desired profit= 15%
Number of units to be sold= Break-even point*1.15
Number of units to be sold= 800*1.15
Number of units to be sold= 920
Which of the following statements is TRUE with regard to the use of a plantwide predetermined overhead rate (PPOHR) compared to the use of individual departmental predetermined overhead rates (DPOHRs)?
a. PPOHRs are based on outdated activity and will never be accurate for application of overhead.
b. PPOHRs are often simplistic and do not account for the best cost driver for each department.
c. DPOHRs are better for estimating costs across departments when the same allocation base is used.
d. DPOHRs are often allocated based on estimated activity for each job.
Answer:
c. DPOHRs are better for estimating costs across departments when the same allocation base is used.
Explanation:
In the case when the predetermined overhead rate of plantwide would be compared with the predetermined overhead rate of the individual department so the predetermined overhead rate of the individual department would be considered better for predicting the cost at the time when similar allocation base should be applied
Therefore the option c is correct
An MNC considers establishing a two-year project in New Zealand with a $30 million initial investment. The firm's cost of capital is 12 percent. The required rate of return on this project is 18 percent. The project is expected to generate cash flows of NZ$12 million in Year 1 and NZ$30 million in Year 2, excluding the salvage value. Assume no taxes and a stable exchange rate of $.60 per NZ$ over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value
Answer:
NZ$25 million
Explanation:
Assuming salvage value = X
Cash flow in year 1 = 12 million*0.60 = $7.2 million
Cash flow in year 2 = 30 million*0.60 = $18 million
Note: At break-even salvage value, Net Present Value = 0
So, Initial cost = Present value of inflow (Sum of inflow*PV factor)
Initial cost = 7.2(PV 18%, 1 year) + 18(PV 18%, 2 years) + X(PV 18%, 2 years)
30 = 7.2*0.847 + 18*0.718 + X*0.718
30 = 19.02 + X*0.718
X*0.718 = 30 - 19.02
X*0.718 = 10.98
X = 10.98/0.718
X = 15.292479
X = $15.29
Stable exchange rate of $.60 per NZ$ over the next two years.
Break-even salvage value = 15.29/0.60
Break-even salvage value = NZ$25.4833
Break-even salvage value = NZ$25 million
Use the information below to answer the following questions. Currency per U.S. $ Australia dollar 1.2377 6-months forward 1.2356 Japan Yen 100.3300 6-months forward 100.0500 U.K. Pound .6792 6-months forward .6781 Suppose interest rate parity holds, and the current six month risk-free rate in the United States is 5 percent. Use the approximate interest rate parity equation to answer the following questions. a. What must the six-month risk-free rate be in Australia
Answer:
Missing word "a. What must the six-month risk-free rate be in Japan"
a. Spot rate = 1 US $ = 1.2377 Aus.dollar
Forward rate = 1 US $ = 1.2356 Aus.dollar
1.2356 = (1 + i Ad)
1.2377 (1 + 0.05)
0.9983 * (1.05) = 1 + i.Ad
1.048215 = 1 + i.Ad
i.Ad = 1.048215 - 1
i.Ad = 0.048215
i.Ad = 4.82%
b. Spot rate = 1 US $ = 100.3300 Japan Yen
Forward rate = 1 US $ = 100.0500 Japan Yen
100.0500 = (1 + i Ad)
100.3300 (1 + 0.05)
0.9972 * (1.05) = 1 + i.Ad
1.04706 = 1 + i.Ad
i.Ad = 1.04706 - 1
i.Ad = 0.04706
i.Ad = 4.71%