To calculate the spot price of a car purchased with R$15,000.00 down payment and 24 installments with immediate monthly payments of BRL 5,019.04 each, knowing that the cost of money is 3% per month, the following formula can be used:
PV = PMT x [(1 - (1 + r) ^-n) / r] - FV
where PV = present value of the car, PMT = immediate monthly payment, sr = interest rate, n = number of payment periods, FV = future value (0 in this case, since there is no balloon payment) Using the values provided,
we have: PMT = BRL 5,019.04r = 3% per month
n = 24FV = 0
Plugging these values into the formula, we get: PV = 5019.04 x [(1 - (1 + 0.03) ^-24) / 0.03] - 0
Simplifying this equation, we get: PV = 5019.04 x [(1 - 0.332) / 0.03] PV = 5019.04 x 22.2233PV = BRL 111,144.08
Therefore, the spot price of the car is BRL 111,144.08.
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In the accounting equation, assets are equal to which two things?
A. Debits + equity
B. Debits + accounts
C. Liabilities + equity
D. Liabilities + accounts
Please select the best answer from the choices provided
A
B.
OOOO
С
D
Answer:
C. Liabilities + equity
Explanation:
Edg 2021 ...
Income Statement and Statement of Retained Earnings
The following account balances were taken from the trial balance of The Rookery, Inc. on December 31, 2021. The Retained Earning account had a balance of $468,000 on January 1, 2021. There are 150,000 shares of common stock outstanding.
Prepare income statement (multi-step) and a retained earnings statement for the year ended December 31, 2021.
Sales revenue 2,100,500 Telephone and internet expense (admin) 4,900
Sales discounts 12,680 Depreciation expense (office furn & equip) 8,680
Cost of goods sold 1,490,300 Property tax expense 12,900
Salaries and wages expense (sales) 54,600 Bad debt expense (selling) 8,630
Sales commissions 135,800 Maintenance & repairs expense (admin) 4,860
Travel expense (salespersons) 41,600 Office expense 7,500
Freight-out 31,800 Sales returns and allowances 36,870
Entertainment expense 21,930 Dividends received 21,000
Telephone and internet expense (sales) 11,300 Interest expense 37,500
Depreciation expense (sales equipment) 3,500 Income tax expense 68,000
Maintenance and repairs expense (sales) 2,900 Depreciation overstatement due to error (2020, net of tax) 31,000
Miscellaneous expenses (sales) 6,570 Dividends declared on preferred stock 15,000
Office supplies used 2,900 Dividends declared on common stock 45,000
The income statement for The Rookery, Inc. for the year ended December 31, 2021, shows a net sales of $2,050,950 and a net income of $129,300.
Income Statement for the Year Ended December 31, 2021:
Sales Revenue $2,100,500
Sales Discounts ($12,680)
Sales Returns and Allowances ($36,870)
Net Sales $2,050,950
Cost of Goods Sold ($1,490,300)
Gross Profit $560,650
Operating Expenses:
Telephone and Internet Expense (Admin) ($4,900)
Depreciation Expense (Office Furn & Equip) ($8,680)
Property Tax Expense ($12,900)
Bad Debt Expense (Selling) ($8,630)
Maintenance & Repairs Expense (Admin) ($4,860)
Office Expense ($7,500)
Sales Commissions ($135,800)
Travel Expense (Salespersons) ($41,600)
Freight-out ($31,800)
Entertainment Expense ($21,930)
Telephone and Internet Expense (Sales) ($11,300)
Depreciation Expense (Sales Equipment) ($3,500)
Maintenance and Repairs Expense (Sales) ($2,900)
Miscellaneous Expenses (Sales) ($6,570)
Total Operating Expenses ($294,850)
Operating Income $265,800
Other Expenses:
Interest Expense ($37,500)
Income Before Income Taxes $228,300
Income Tax Expense ($68,000)
Depreciation Overstatement Due to Error (2020, Net of Tax) ($31,000)
Total Other Expenses ($99,000)
Net Income $129,300
Retained Earnings Statement for the Year Ended December 31, 2021:
Retained Earnings, January 1, 2021 $468,000
Add: Net Income $129,300
Less: Dividends Declared on Preferred Stock ($15,000)
Less: Dividends Declared on Common Stock ($45,000)
Retained Earnings, December 31, 2021 $537,300
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Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:
A. Canada has a comparative advantage in the production of hockey sticks.
B. Germany has a comparative advantage in the production of hockey sticks.
C. Canada has an absolute advantage in the production of maple syrup.
D. Germany has an absolute advantage in the production of maple syrup.
Answer:
A. Canada has a comparative advantage in the production of hockey sticks.
Explanation:
The computation is shown below:
For Canada
The Opportunity cost of Hockey is
= 10000 ÷ 100000
= 0.1 gallons of maple syrup
For Germany
The Opportunity cost of Hockey is
= 10000 ÷ 90000
= 0.11 gallons of maple syrup
So based on this, the option A is correct
And, the same is to be considered
Therefore all the other options would be wrong
firms in a small economy planned that inventories would grow over the past year by $500,000. over that year, inventories did grow by exactly $500,000. this implies that
Given the situation described in the question, this implies that the firm's "aggregate expenditure that year equal to the GDP that year."
This is evident in the fact that the expected or estimated inventories sum equals the actual inventories sum.
Note business or firm's inventories are included when measuring the GDP.
This is because the unsold inventories of firms which is resulted from the firms producing more than they sell, increases GDP. While when firms sell Inventories more than they produce, it leads to a reduction in GDP.
Hence, in this case, it is concluded that the correct answer to the question is "aggregate expenditure that year equal to the GDP that year."
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How does marketing help your product or service
Answer:
Marketing informs your customers about the products or services you're offering them. Through marketing, the customers get to know about the value of the products, their usage and additional info that might be helpful to the customers. It creates brand awareness and makes the business stand out.
Explanation:
How might working place in a team organizations improve communication??
If you don’t know the answer pls leave it!
Answer:
Make “Sticky” Information Accessible. ...Make the Mission and Vision Clear. ...Strengthen Connections. ...Create Open Dialogue. ...Encourage Information Sharing. ...Online Project Management Tools. ...Plan External Events.Answer:
1.Estsblish a foundation first
2.prove through your words and actions that you 'ready trust worthy
3.avoid making quick assumptions
4.keep work flows transparent
5.offer compliments in a thoughtful way.
To understand how democracy developed in ancient Greece, you must examine the polis, which was the Greek word for a
The Greeks shared a language and culture, but each polis had a different government. In 509 BCE, Athens created a new set of rules that gave power to the people. The Greeks called this government a
Members of the Council of 500 were chosen
Answer:
To understand how democracy developed in ancient Greece, you must examine the polis, which was the Greek word for a city-state. The Greeks shared a language and culture, but each polis had a different government. In 509 BCE, Athens created a new set of rules that gave power to the people. The Greeks called this government democracy. Members of the Council of 500 were chosen randomly.
Answer:
city-state ,democracy ,randomly
Explanation:
just took the test on edge
who benefits form medicare taxes?
Answer: The Medicare tax rate is 1.45% of an employee's gross income. The Medicare tax, which is a charge on both employers and employees, is paid by both.
Which are guidelines for using Themes?
Check all that apply.
A. Using different cell styles can help you differentiate different types of data.
B. Fonts should be easily readable and of appropriate size.
C. You cannot customize the default themes.
D. Be consistent with themes across worksheets and workbooks.
E. Applying a new theme will only change cells in a workbook that have no other formatting applied.
Answer:
I think it's D. or A. or B. but I mostly think it's D. Be consistent with themes across worksheets and workbooks
Statements that explains the guidelines when using a Theme are: A. Using different cell styles can help you differentiate different types of data.
B. Fonts should be easily readable and of appropriate size.
C. You cannot customize the default themes.
WordPress theme can be regarded as a group of files, these file can contains graphics, style sheets as well as code, which will give overall appearance of a blog or website.In using this, we can follow some guidelines such as; making use of more than a cell can help in differentiatiation of different types of data, default themes cannot be customized, and the selection of fonts should be made carefully.Therefore, option, ABC are correct.
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Will the grading period effect what college you will go to later on?
A (True)
B (False)
Answer: A
Explanation:
Answer:
NO
Explanation:
what considerations might limit the extent to which the theory of comparative advantage is realistic?
The theory of comparative advantage is a key concept in international trade that suggests countries should specialize in producing goods and services in which they have a lower opportunity cost. While the theory is widely accepted, there are several considerations that may limit its realism.
1. Transportation costs: The theory assumes that there are no costs associated with moving goods between countries. In reality, transportation costs can significantly impact trade patterns and make it less advantageous for countries to specialize in certain products.
2. Resource availability: The theory assumes that countries have unlimited access to resources required for production. However, the availability of resources such as labor, capital, and natural resources can vary among countries, affecting their ability to specialize in certain industries.
3. Market imperfections: The theory assumes perfect competition and efficient markets. In reality, markets are often imperfect, with barriers to trade, government interventions, and monopolies, which can limit the extent to which countries can fully benefit from specialization.
4. Technology and innovation: The theory assumes that technology is fixed and doesn't change over time. However, technological advancements can alter comparative advantages, rendering some industries obsolete and creating new opportunities.
5. Externalities and environmental concerns: The theory doesn't consider the environmental impact of production or the social costs associated with it. In reality, countries may choose to limit certain industries due to environmental concerns or the negative externalities they produce.
In summary, while the theory of comparative advantage provides valuable insights into international trade, real-world limitations such as transportation costs, resource availability, market imperfections, technological advancements, and externalities need to be considered to understand its realistic application.
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The theory of comparative advantage is a key concept in international trade that suggests countries should specialize in producing goods and services in which they have a lower opportunity cost. While the theory is widely accepted, there are several considerations that may limit its realism.
1. Transportation costs: The theory assumes that there are no costs associated with moving goods between countries. In reality, transportation costs can significantly impact trade patterns and make it less advantageous for countries to specialize in certain products.
2. Resource availability: The theory assumes that countries have unlimited access to resources required for production. However, the availability of resources such as labor, capital, and natural resources can vary among countries, affecting their ability to specialize in certain industries.
3. Market imperfections: The theory assumes perfect competition and efficient markets. In reality, markets are often imperfect, with barriers to trade, government interventions, and monopolies, which can limit the extent to which countries can fully benefit from specialization.
4. Technology and innovation: The theory assumes that technology is fixed and doesn't change over time. However, technological advancements can alter comparative advantages, rendering some industries obsolete and creating new opportunities.
5. Externalities and environmental concerns: The theory doesn't consider the environmental impact of production or the social costs associated with it. In reality, countries may choose to limit certain industries due to environmental concerns or the negative externalities they produce.
In summary, while the theory of comparative advantage provides valuable insights into international trade, real-world limitations such as transportation costs, resource availability, market imperfections, technological advancements, and externalities need to be considered to understand its realistic application.
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The concept of limited liability
Answer: Function, The function of the concept of limited liability is to provide the owners of businesses a way to protect their personal assets. For example, if a business is sued, the person seeking compensation cannot go after the personal property of the business' owners.
Types The concept of limited liability gives rise to a variety of different types of business organizations.These include corporations and limited liability companies, all of which are created by the laws of each of the 50 states.
Significance The concept of limited liability plays a significant role in commerce. Absent the concept of limited liability, individuals would shy away from investing in businesses of any type. The vast majority of individuals would not want to put their personal property at risk by becoming involved in a business enterprise.
Features The concept of limited liability restricts the amount of money a person risks to what she invests in a business enterprise
Exception Protections normally associated with the concept of limited liability can be set aside in certain situations. For example, if a business owner co-mingles personal and business assets -- in a common bank account, for example -- an individual with a claim against the business likely can seek compensation from some, if not all, of the business owner's personal assets.
Expert Assistance A business owner facing a situation in which another individual or business makes a claim against the business should seek legal assistance. A qualified attorney not only protects the interests of the business but works to ensure that the owner's personal assets do not end up in jeopardy.
Explanation:
How many people were employed in 2017? Table 6.1 Working Age Population Labor Force Unemployed 2017 200 million 150 million 5 million 2018 225 million 165 million 15 million 2019 275 million 200 million 35 million
We can estimate that approximately 145 million people were employed in the year 2017.
We can see that in the year 2017, the labor force consisted of 150 million people. This means that out of the total working age population of 200 million, 150 million people were either employed or actively seeking employment. However, the number of unemployed individuals in 2017 was 5 million. This suggests that out of the 150 million people in the labor force, only 145 million were employed. Therefore, we can estimate that in 2017, approximately 145 million people were employed.
It is worth noting that this is an estimation based on the data provided in the table, and there may be some variation in the actual number of employed individuals in that year. It is also important to consider that the working age population increased significantly between 2017 and 2019, from 200 million to 275 million. This means that even if the number of employed individuals remained the same, the percentage of the population that was employed would have decreased over this time period.
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3.6.2 Teut (COT): The Pret la foi
Question 1 of 25
2 Points
Which of the following has the lowest housing prices and the smallest
population density?
O A. Inner-city neighborhoods
B. Rural areas
O C. Suburban developments
O D. High-rise apartments
The correct answer is B. Rural areas
Explanation:
High population densities, as well as high housing prices, are mainly found in cities or nearby areas as most jobs and industries are located in these areas. This increases not only the number of people that live in these zones but also the price of housing as the prices of properties are higher due to a higher demand. This means, zones such as inner-city neighborhoods, suburbs, and similar are highly populated and the house prices are high.
On the other hand, nowadays rural areas have a small population density because most people are not interested in living in rural areas as it would take more time to get to cities where jobs and major industries are. Similarly, the housing prices are lower because the demand or number of people interested in buying properties is lower, which makes general housing prices lower.
An exception to the parol evidence rule allows evidence of oral agreement that merely explains the meaning of written terms without changing the terms. evidence of oral agreements made on contracts that qualify for mandatory arbitration. evidence of oral agreements made on contracts that qualify for court-annexed mediation. evidence of oral agreements made at the time of or prior to a written contract that changes the meaning of written terms. evidence of oral agreements that are designed to favor the party that drafts a contract.
Answer:
evidence of oral agreement that merely explains the meaning of written terms without changing the terms.
Explanation:
The parol evidence rule describes that that case related to the parties are introduced into the court that means the evidence in order to change it, explain it at issue time.
So as per the given situation, since the question ask the exception to this rule so the first option is correct as in this it is mentioned that the terms would remain unchanged
Therefore the first option should be considered
An exception to the parol evidence rule allows the evidence of oral agreement that merely explains the meaning of written terms without changing the terms. This is the correct option. The parol evidence rule is a legal principle that governs the use of oral and written evidence in contract disputes.
According to this rule, parties that enter into a written agreement are precluded from using extrinsic evidence, which is evidence outside of the written agreement, to contradict, alter, or add terms to the agreement. The reason for the parol evidence rule is to ensure that the intentions of the parties to a contract are accurately reflected in the written agreement
. There are some exceptions to the parol evidence rule that permit the use of extrinsic evidence in contract disputes. One of these exceptions allows the use of evidence of an oral agreement that merely explains the meaning of written terms without changing the terms. This exception is known as the "explanation exception. "The explanation exception allows the parties to a contract to introduce extrinsic evidence that is used to explain the meaning of terms that are included in a written agreement.
This evidence is not considered to be in violation of the parol evidence rule since it is not intended to contradict, alter, or add terms to the written agreement. The evidence is merely used to help the court interpret the meaning of the terms that are included in the written agreement.
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he higher the fixed asset turnover, the a.more efficiently a company is using its intangible assets in generating sales b.less efficiently a company is using its fixed assets in generating sales c.more efficiently a company is using its current assets in generating sales d.more efficiently a company is using its fixed assets in generating sales
The higher the fixed asset turnover, the b.less efficiently a company is using its fixed assets in generating sales.
Fixed assets turnover=net sales/average net fixed assets.
An advanced fixed asset development rate indicates that a company has effectively used investments in fixed means to induce sales. The more advanced the asset development rate, the better the company is performing, since advanced rates indicate that the company is generating further profit per bone of means. The asset development rate tends to be more advanced for companies in certain sectors than in others.
While an advanced fixed asset development rate is generally better, if the fixed asset development rate is too high, also the business establishment is likely operating over capacity and needs to either increase its asset base( factory, property, outfit) to support its deals or reduce its capacity.
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The following table shows the actual demand observed over the last 11 years: 1 2 3 4 5 6 7 8 9 Year Demand 7 8 5 10 11 8 12 1
The given table represents actual demand observed over the last 11 years. The values in the table represent the demand for a product or service in different years.
The demand is calculated in different units, depending upon the product or service that is being measured.The demand values in the given table are 7, 8, 5, 10, 11, 8, 12, 1, 4, 6, and 9. These values can be used to create a demand graph or chart. The demand graph will help in understanding the trends in demand for the product or service over the past 11 years. For instance, from the given table, we can see that the demand for the product/service has been fluctuating over the past 11 years. In the year 1, the demand was 7, which decreased to 5 in the year 3.
the demand increased to 10 in the year 4, which was the highest in the given period. This shows that the demand for the product/service is not constant and changes from time to time. To predict the future demand for the product/service, one needs to analyze the trends and patterns in demand over the past few years. This can be done using different statistical tools such as regression analysis, time-series analysis, and moving averages. By analyzing the trends, one can predict the future demand for the product/service with some degree of accuracy.
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three friends, louise, marcia, and rebecca are interested in going into business together. louise will contribute her full efforts on a daily basis but has limited funds to invest in the business. marcia will fund the venture but wants to limit her liability to her initial investment and has no interest in the daily operations. rebecca will be involved as an active consultant and manager and will also contribute funds. louise and rebecca are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. all three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. based on this information, what form of business entity seems most appropriate for louise, marcia and rebecca?
Based on the given scenario, a limited liability partnership (LLP) seems to be the most appropriate form of business entity for Louise, Marcia, and Rebecca.
Why a limited liability partnership (LLP)?In an LLP, all partners share in the firm's profits and losses. They're able to run the company and have limited liability protection. Limited liability ensures that a partner's financial liability is restricted to the amount of capital they invested in the company.
In this scenario, Louise will contribute her full efforts on a daily basis, but she has limited funds to invest in the business. Marcia, on the other hand, is willing to fund the venture but wants to limit her liability to her initial investment and has no interest in the daily operations. Lastly, Rebecca will be involved as an active consultant and manager and will also contribute funds.
In this scenario, an LLP will be the most appropriate because the partnership agreement can be set up so that Marcia's financial liability is limited to her initial investment, Rebecca can be involved as an active consultant and manager, and Louise's efforts will not go unnoticed.
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would anyone be willing to give away tickets for a concert please?
What is the risk that Lionel carries because of his spending habits?
Lionel Smith has a habit of buying everything on credit. He now has a huge debt and doesn’t have a concrete plan on how to pay it off. Failure to pay his debt can affect Lionel's 1.)______. It can also lead to 2.)______.
1.)
- earnings
- employability
- credibility
2.)
- financial instability
- overspending
- unemployment
Answer:
1. Credibility
2. Financial instability
Explanation:
Primetime Incorporated is a retailer of sporting gear. It sells 500 pairs of a specific Nike sneaker each day. Nike, the supplier, takes a week (7 days) to deliver the order. For what quantity should the inventory manager place his/her next order?
Answer:
3500 units
Explanation:
The quantity at which the Primetime inventory manager places his/her next order is the reorder point.
The reorder point is the minimum quantity of inventory that a business should have in its store.
The reorder point is calculated using the formula below.
(Average daily unit sales x delivery lead time) + safety stock
For Primetime, safety stock is not mentioned
reorder point =500 units x 7 days
=3500 units
which is a cause of system unavailability? A) natural disaster B) incomplete testing C) poor password practices D) poor physical security
Answer:
D) poor physical security
Explanation:
Answer:
A natural disaster
Explanation:
I know it seems weird but I put that and my test on Plato scored it as right
define the term business
Answer:
Business refers to the organized efforts and activities of individuals to produce and sell goods and services for profit.Explanation:
I hope l helped you. Please follow me. ❤❤❤in its first year of operations, grace company reports the following: revenue of $60,000 ($52,000 cash received from customers); expenses of $35,000 ($31,000 cash paid toward expenses). net income under the accrual basis of accounting is: multiple choice $17,000. $21,000. $13,000. $25,000. none of the choices are correct.
The net income that is under the accrual basis of accounting is given by $25,000.
In the accrual basis of accounting net income is based on accounting based on transaction of revenue earned ( here we are not including the received cash amount ) and matching of expenses with revenue ( here also paid cash is not counted ).Revenue earned in the reports of grace company is equal to
= $60,000
$52,000 is cash received which is not used for accrual basis.
Expenses = $35,000
Net income under accrual basis
= Revenue - Expenses
= $60,000 - $35,000
= $25,000
Therefore, the net income which is under the accrual basis of accounting is equal to $25,000.
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When can a Member be departed from their Home Station in IPPS-A?
All of the following are situations that can cause accounts receivable to become uncollectible, except:
a. unexpected business developments. b. errors of judgment.
c. efficient business practices. d. incorrect financial data.
Accounts receivable refers to money that is owed to a company for goods or services provided to customers on credit.
option c is the correct answer to this question as it describes a situation that is not a cause of uncollectible accounts.
However, efficient business practices are not among the situations that can cause accounts receivable to become uncollectible. Instead, efficient business practices can help to minimize the occurrence of uncollectible accounts.
This can be achieved by setting up a credit policy that screens potential customers and defines credit terms, as well as monitoring the aging of accounts receivable to ensure timely collections.
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a company that allows you to license software monthly to use online is called
Answer:
marketable service product
Explanation:
A company that allows you to license software monthly to use online is an example of. ... A company that allows you to license monthly to use online is an example of what these companies consider to be a “marketable service” product.
Help pleazzz
Question 1
Choose the best definition of synthesizing information.
A. You must use the most important information from several sources to create something new.
B. You must find information from many sources and cite each source separately.
C. You must copy the most important quote from a source to restate relevant facts.
Question 2
The purpose of synthesizing information is to:
A. state one fact from one source to focus on one detail to support a claim, main idea, or thesis.
B. think critically about information from many sources and use that evidence to support a claim, thesis or larger idea that may not be stated directly (but you can show us through evidence how you came to your big, new idea).
C. prove that your facts are the most relevant facts to support your thesis or claim.
Question 3
In-text citations appear at the end of the paper.
True
False
Question 4
The purpose of a citation is the following:
A. to share the source of text evidence and where it is found so that people can see the source of your information and read more about a topic if they would like to.
B. to share text evidence / information to support a thesis
C. to share text evidence / information that is synthesized
Question 5
A works cited page at the end of a paper should contain the following formatting:
A. be formatted in alphabetical order, be double-spaced, and use hanging indents if there is more than one line.
B. include a photograph of the author, magazine, or book
C. be formatted from the newest source to the oldest source.
Question 1: The best definition of synthesizing information is A. You must use the most important information from several sources to create something new. This involves combining information to form a new understanding or perspective.
Question 2: The purpose of synthesizing information is B. think critically about information from many sources and use that evidence to support a claim, thesis, or larger idea that may not be stated directly (but you can show us through evidence how you came to your big, new idea).
Question 3: False. In-text citations appear within the body of the paper, not at the end.
Question 4: The purpose of a citation is A. to share the source of text evidence and where it is found so that people can see the source of your information and read more about a topic if they would like to.
Question 5: A works cited page at the end of a paper should be formatted with the following: A. be formatted in alphabetical order, be double-spaced, and use hanging indents if there is more than one line. This ensures proper organization and easy access to sources for readers.
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This is an assignment of the class of Principles of Corporate Finance and its Financial Risk Management chapter. Please solve the questions below with reference of books in the end. Thank you.
Taxes are costs, and, therefore, changes in tax rates can affect consumer prices, project lives, and the value of existing firms. Evaluate the change in taxation on the valuation of the following project:
0 1 2 3
1 Initial Investment 100 2 Revenue 100 100 100
3 Cash Operating Costs 50 50 50
4 Tax depreciation 33.33 33.33 33.33
5 Income pretax 16.67 16.67 16.67
6 Tax at 40% 6.67 6.67 6.67
7 Net Income 10 10 10
8 After tax salvage 15
9 Cash flow (7+8+4-1) -100 +43.33 +43.33 +58.33
NVP at 20%=0
Assumptions: Tax depreciation is straight-line over three years. Pre-tax salvage value is 25 in Year 3 and 50 if the asset is scrapped in Year 2. Tax on salvage value is 40% of the difference between salvage value and book value of the investment. The cost of capital is 20%.
1. Please verify that the information above yields NPV = 0.
2. If you decide to terminate the project in Year 2, what would be the NPV of the project?
3. Suppose that the government now changes tax depreciation to allow a 100% write-off in Year 1. How does this affect your answers to parts a and b above?
4. Would it now make sense to terminate the project after two rather than three years?
5. How would your answers change if the corporate income tax were abolished entirely?
1. In this case, the Net Present Value (NPV) of the project is equal to zero. We can calculate the NPV of the project by discounting the cash flows at a rate equal to the cost of capital, which is 20% in this case. The cash flows are as follows:
Year 0: -100 (Initial Investment)
Year 1: +43.33
Year 2: +43.33
Year 3: +58.33 (includes the after-tax salvage value of 15)
The present value of these cash flows at a discount rate of 20% is:
NPV = -100 + 43.33/(1.2) + 43.33/(1.2)^2 + 58.33/(1.2)^3
NPV = -100 + 35.94 + 29.95 + 32.52
NPV = -1.59
Since NPV is less than zero, the project is not profitable. Therefore, we need to recalculate the cash flow by changing the tax rate.
2. If the project is terminated in Year 2, then the after-tax salvage value will be 50. The cash flows will be as follows:
Year 0: -100 (Initial Investment)
Year 1: +43.33
Year 2: +50 (includes the after-tax salvage value of 50)
The present value of these cash flows at a discount rate of 20% is:
NPV = -100 + 43.33/(1.2) + 50/(1.2)^2
NPV = -100 + 35.94 + 41.32
NPV = -22.74
Therefore, if the project is terminated in Year 2, the NPV will be -22.74.
3. If tax depreciation is allowed as 100% write-off in Year 1, then the tax in Year 1 will be 40% of 100, which is 40. Therefore, the Net Income in Year 1 will be 60. The Net Income in Year 2 and Year 3 will be zero, since there is no tax depreciation left. The cash flows will be as follows:
Year 0: -100 (Initial Investment)
Year 1: +60
Year 2: +15 (includes the after-tax salvage value of 15)
The present value of these cash flows at a discount rate of 20% is:
NPV = -100 + 60/(1.2) + 15/(1.2)^2
NPV = -100 + 50 + 12.5
NPV = -37.5
Therefore, the NPV will be negative, which means that the project is not profitable.
4. Since the cash flow in Year 2 is positive, terminating the project after two years would make sense. The NPV in this case would be +8.73. The cash flows will be as follows:
Year 0: -100 (Initial Investment)
Year 1: +43.33
Year 2: +43.33 (includes the after-tax salvage value of 25)
The present value of these cash flows at a discount rate of 20% is:
NPV = -100 + 43.33/(1.2) + 43.33/(1.2)^2
NPV = -100 + 35.94 + 29.95
NPV = -34.11
5. If the corporate income tax were abolished entirely, the Net Income for each year would be equal to the Revenue minus the Cash Operating Costs. The Net Income in Year 1, Year 2, and Year 3 would be 50. The after-tax salvage value in Year 3 would be 25. The cash flows will be as follows:
Year 0: -100 (Initial Investment)
Year 1: +50
Year 2: +50 (includes the after-tax salvage value of 25)
The present value of these cash flows at a discount rate of 20% is:
NPV = -100 + 50/(1.2) + 50/(1.2)^2
NPV = -100 + 41.67 + 34.72
NPV = -23.61
Therefore, if the corporate income tax were abolished entirely, the NPV would still be negative.
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Vivian conducted market research on her company's products. She found that after the company raised the price of its product by $1.50, the demand in the uptown region remained the same with only minor fluctuations. However, she found that the demand in the downtown region dropped by 20 percent after the price change. How should Vivian take these demands into consideration?
Answer:
One important factor that Vivian needs to consider is that demand changes as a result of changes in price, however, other factors could affect the demand for goods or services, examples are, changes in the price of related goods, the income of the people, changes in preference etc.
Therefore, based on this fact, Vivian should consider "Price elasticity of demand." Price elasticity of demand can be defined as a measurement used in economics to show the responsiveness or elasticity of the quantity demanded of a good or service to a change in its price when nothing but the price changes.