Answer: Represent a combination of two goods that are affordable
Explanation:
The budget constraint simply represents all the combinations of goods and services which a particular consumer can buy given the current prices of the goods within their given income.
The concepts of budget constraint is used in examining the parameters of the choices of the consumers. It should be noted that any point on the budget constraint simply represents a combination of two goods that are affordable.
Heat Tough Inc. makes heat-proof copper cookware in the United States, and it is looking to distribute its products in Europe. Rather than build and maintain a manufacturing facility in the United Kingdom, the company decides to ship its products directly from its plant in Illinois. What type of entry mode is the company using
Answer: Exporting
Explanation:
Exporting is the cheapest method of entering another market because it does not involve the building or maintenance of any business in the new market and neither does it involve any profit sharing as all the profits go to the company exporting.
With exporting, a company just ships its products to the new market it wants to enter without establishing a presence. Companies there will then buy these goods and sell them. This is what Heat Tough Inc is doing so this must be exporting.
The production possibilities model illustrates an inverse relationship between two goods or services because Group of answer choices of diminishing returns. some goods are more difficult to produce that others. the opportunity cost of producing more of something will rise. production of different types will compete for limited resources.
Answer:
production of different types will compete for limited resources.
Explanation:
The production possibilities curve (PPC) is also known as the production possibilities frontier (PPF) and its a curve which illustrates the maximum (best) combinations of two products that can be produce in an economy if they both depend on these factors;
1. Technology is fixed.
2. Resources are fixed.
Hence, the production possibilities curve represents maximum combinations of products available with fixed resources and technology.
Additionally, the production possibilities curve influences the choice of production used by companies and as such it helps to make the best decision regarding the optimum product mix for a company.
Basically, the production possibilities model illustrates an inverse relationship between two goods or services (an increase in the production of one good or service results in a decrease in the production of another and vice-versa) because production of different types will compete for limited resources.
This ultimately implies that the manufacturing or production of one item (product) is likely to rise or increase provided the production of the other item (product) falls or decreases.
You plan to save $6,500 per year for the next 8 years. After the last deposit, you will keep the money in the account for 6 more years. The account will earn an interest rate of 6.8 percent. How much will there be in the account 14 years from today
Answer:
$98,254.57
Explanation:
Value after 8 years
Future Value of Annuity = P * ((1 + r)^n - 1 ) / r
Future Value of Annuity = 6500 * ((1 + 6.8%)^8 - 1) / (6.8%)
Future Value of Annuity = 6500 * [(1.69266113113-1) / 0.068]
Future Value of Annuity = 6500 * 10.18619
Future Value of Annuity = $66,210.24
Value after 14 years
FV = PV * (1 + r )^n
FV = 66210.26*(1+ 6.8%)^6
FV = 66210.26 * 1.483978
FV = $98,254.57
So, the amount that will be there in the account 14 years from today is $98,254.57.
Grover contracts to sell two tracts of land to Hank. Both parties believe that the two tracts are adjacent, but in fact they are not. Grover is still willing to sell the land, but under these circumstances the deal would adversely affect Hank. The parties belief about the adjacency of the property is:
Answer:
A bilateral mistake
Explanation:
The mistakes of fact
This simply occurs in two forms. They are:
1. bilateral
2. Unilateral
Unilateral mistake of fact
This is simply said to happen if and only when one party is mistaken. This form of mistake of fact makes contract voidable.
Bilateral Mistake of facts
This form of mistake usually involves both parties. It is simply called a mutual mistake. This is also defined as mutual omissions or misunderstanding on simple assumption on which the contract was made.
Of all the promotional tools we looked at, which one is the most effective in getting your attention and interesting you in a product? Conversely, which of the tools is something that has a slim to zero chance of reaching you, much less interesting you?
Answer:
There are basically four tools of promotion namely, Advertisement, public relations, sales promotions, and direct marketing.
Of these, direct marketing will be most effective in capturing my attention while public relations will be less effective to me.
Explanation:
Direct marketing involves establishing direct communication with the potential buyer. It allows for a personal relationship with the buyer. Media such as telemarketing, direct mails, and face-to-face marketing are used to sell the goods. I will be easily convinced because I can easily relate with the person selling the goods and ask questions about the product.
Public relations refers to ways the company formally promotes its image to maintain its customer base. Press release is a measure employed by these companies. I will not be captivated by this because of the formality involved. I believe that through these measures, the company only lets out information they will like you t know.
what are the four characteristics of bussiness negotiation
Answer: ability to express thoughts precisely
integrity is the most important characteristics
having a listening skill
voluntary communication where no one is forced to have this negotiation
Explanation:
If a firm has a cash cycle of 30 days and an operating cycle of 64 days, what is its average payment period
Answer: 34 days
Explanation:
The average payment period is a measure that is used to show the time the firm takes on average to pay its creditors.
The formula is:
Cash cycle = Operating cycle - Average payment period
30 = 64 - APP
APP + 30 = 64
APP = 64 - 30
APP = 34 days
Assume the marginal tax rate is 10% for the first $20,000 of taxable income, 25% for taxable income from $20,001 to $50,000, and 35% for taxable income above $50,000. If Mr. Smith had taxable income of $80,000, how much tax does he owe
Answer:
the tax amount is $20,000
Explanation:
The computation of the tax amount is given below:
= 10% of $20,000 + ($50,000 - $20,001) × 25% + ($80,000 - $50,000) × 35%
= $2,000 + $7,499.75 + $10,500
= $19,999.75
= $20,000
hence, the tax amount is $20,000
The same should be considered and relevant too
Job enlargement tends to deter an employee's development because:_________
a. it is so time-consuming.
b. means adding new challenges and responsibilities to an employee's current job.
c. means moving the position up the organizational hierarchy.
d. refers to hiring more people for the same job category.
Answer:
b. means adding new challenges and responsibilities to an employee's current job.
Explanation:
Job enlargement refers to rise in the scope of the job via extending the range with respective to the duties and responsibilities of the job normally at the similar level. It means it added the different kind of activities at the similar level and the same is to be added in the existing job
So here the fear in the employee development is that they need to add the new challenges and responsibilities
Therefore the option b is correct
Listed below in alphabetical order are the balance sheet items of Nolan Company at December 31, 2022
Accounts payable Accounts receivable Buildings Cash Common stock Equipment Land Retained earnings $11,000 15.000 65,000 11.000 80.000 10,000 31.000 41.000
Prepare a balance sheet and include a complete heading.
Answer and Explanation:
The preparation of the balance sheet is presented below:
Assets
cash $11,000
account receivable $15,000
equipment $10,000
buidlings $65,000
land $31,000
Total assets $132,000
Liabilities and stockholder equity
Account payable $11000
common stock $80,000
retained earnings $41,000
Total Liabilities and stockholder equity $132,000
According to the FTC's historical guidelines for mergers, would the FTC approve a merger between two firms that would result in an HHI of 1,025 after the merger?
A.Yes, the FTC would ignore the merger and allow it to go through.
B. Maybe. The FTC would scrutinize the merger and make a case-by-case decision.
C. No, the FTC would probably challenge the merger.
Answer:
B. Maybe. The FTC would scrutinize the merger and make a case-by-case decision.
Explanation:
If we considered the historical guidelines of FTC for the merger purpose so may be FTC could permit the merger between the two firms that could result in HHI of 1,025 after the merger as the merger represent the moderal level of the concentration in the market area so here FTC should analyzes the merger with cash to cash basis
Therefore the option b is correct
A company has already incurred $7,200 of costs in producing 6,000 units of Product XY. Product XY can be sold as is for $31 per unit. Instead, the company could incur further processing costs of $10 per unit and sell the resulting product for $35 per unit. Should the company sell Product XY as is or process it further
Answer: Sell as is or lose $36,000
Explanation:
If the company sells as is, they could sell at a price of $31 per unit.
If they process further and sell at $35, they would incur a cost of $10 per unit which leaves them with profit of:
= 35 - 10
= $25
This is lower than the selling price if they sell as is and will therefore give a loss of:
= (31 - 25) * 6,000 units
=- $36,000
Company should sell as is so as not to lose $36,000
Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $6,300 for direct materials, $8,600 for direct labor, and $5,848 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $4,300 for direct materials and $5,400 for direct labor.
Required:
Calculate the overhead cost be added to Job W at year-end.
Answer:
Allocated MOH= $3,672
Explanation:
Giving the following information:
Job V:
DM= $6,300
DL= $8,600
Overhead= $5,848
Job W:
DM= $4,300
DL= $5,400
First, we need to calculate the predetermined overhead rate based on Job V:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
5,848 = Estimated manufacturing overhead rate*8,600
Estimated manufacturing overhead rate= 5,848/8,600
Estimated manufacturing overhead rate= $0.68
Now, the allocated overhead to Job W:
Allocated MOH= 0.68*5,400
Allocated MOH= $3,672
Materials Variances Krumple Inc. produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.5 ounces of aluminum per can. During the month of April, 300,000 cans were produced using 1,240,000 ounces of aluminum. The actual cost of aluminum was $0.18 per ounce and the standard price was $0.08 per ounce. There are no beginning or ending inventories of aluminum. Required: Calculate the materials price and usage variances using the columnar and formula approaches. Enter amounts as positive numbers and select Favorable or Unfavorable. Materials Price Variance$fill in the blank 1 Material Usage Variance$fill in the blank 3
Solution :
Variance Calculations Result
Direct material 0.08(300,000 x 4.5 - 1,240,000) 8,800 favorable
usage variance
Direct material 1,240,000 x (0.08 - 0.18) 124,000 unfavorable
price variance
The standard quantity = actual production x standard quantity per unit
= 300,000 x 4.5
= 1,350,000
Various shareholders' equity topics; comprehensive
Part A
In late 2010, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 5,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2011, 3,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2, all 1,000,000 shares of preferred stock are issued at $20 per share.
Required:
1. Prepare journal entries to record these transactions.
2. Prepare the shareholders' equity section of the Nicklaus balance sheet as of March 31, 2011. (Assume net income for the first quarter 2011 was $1,000,000.)
Part B
During 2011, the Nicklaus Corporation participated in three treasury stock transactions:
a. On June 30, 2011, the corporation reacquires 200,000 shares for the treasury at a price of $12 per share.
b. On July 31, 2011, 50,000 treasury shares are reissued at $15 per share.
c. On September 30, 2011, 50,000 treasury shares are reissued at $10 per share.
Required:
1. Prepare journal entries to record these transactions.
2. Prepare the Nicklaus Corporation shareholders' equity section as it would appear in a balance sheet prepared at September 30, 2011. (Assume net income for the second and third quarter was $3,000,000.)
Part C
On October 1, 2011, Nicklaus Corporation receives permission to replace its $1 par value common stock (5,000,000 shares authorized, 3,000,000 shares issued, and 2,900,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation.
On November 1, 2011, the Nicklaus Corporation declares a $.05 per share cash dividend on common stock and a $.25 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2011, to shareholders of record on November 15, 2011.
On December 2, 2011, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2011, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $10 per share. The dividend will result in 58,000 (.01 × 5,800,000) additional shares being issued to shareholders.
Required:
1. Prepare journal entries to record the declaration and payment of these stock and cash dividends.
2. Prepare the December 31, 2011, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $2,500,000.)
3. Prepare a statement of shareholders' equity for Nicklaus Corporation for 2011.
Answer:
good question. Wait for the answer
Explanation:
Duval Co. issues four-year bonds with a $100,000 par value
on January 1, 2019, at a price of $95,952. The annual contract rate is 7%, and interest is paid semiannually on June 30 and December 31.
1. Prepare a straight-line amortization table like Exhibit 14.7 for these bonds.
2. Prepare journal entries to record the first two interest payments.
3. Prepare the journal entry for maturity of the bonds on December 31, 2022 (assume semiannual interest is already recorded).
Answer:
Duval Co.
Journal Entries to record the first two interest payments:
June 30, 2019:
Debit Interest expense $4,006
Credit Cash payment $3,500
Credit Amortization of discounts $506
To record the first interest payment.
December 31, 2019:
Debit Interest expense $4,006
Credit Cash payment $3,500
Credit Amortization of discounts $506
To record the second interest payment.
December 31, 2022:
Debit Bonds Payable $100,000
Credit Cash $100,000
To record the payment on maturity of the bonds.
Explanation:
a) Data and Calculations:
Face value of bonds = $100,000
Price of the bonds = $95,952
Discounts = $4,048
Period of bonds = 4 years
Coupon rate = 7%
Semi-annual amortization of discounts = $506 ($4,048/8)
June 30:
Cash payment = $3,500 ($100,000 * 3.5%)
Amortization of discounts $506
Interest expense = $4,006
December 31:
Cash payment = $3,500 ($100,000 * 3.5%)
Amortization of discounts $506
Interest expense = $4,006
If the State of California raised the average state consumer sales tax rate from 9.25 percent to 15 percent, then this sales tax will have its heavist impact on and raise the marginal cost curves for California businesses.
a. True
b. False
Answer: False
Explanation:
Consumer sales tax is not charged to businesses but rather to the customers through a business. The tax would therefore increase the prices of goods and services for consumers and not the businesses.
The businesses would therefore not see their marginal cost curves increase. They could still be affected however, by Californians demanding less goods and services because it is now more expensive for them on account of the new sales tax.
What happens in the foreign exchange market when a surplus of dollars exists? When there is a surplus of dollars in the foreign exchange market, _______.
Answer:
prices will decrease
Explanation:
The forex market is balanced when there exists when the quantity supply of any currency is equal to the quantity demanded. If the market has a surplus or shortages the rates will adjust accordingly.Suppose you purchase a $1,000 TIPS on January 1, 2021. The bond carries a fixed coupon of 1 percent. Over the first two years, semiannual inflation is 4 percent, 1 percent, 2 percent, and 3 percent, respectively. For each six-month period, calculate the accrued principal and coupon payment.
Answer:
FOR THE FIRST SIX-MONTH PERIOD
Accrued principal = $1,040
Coupon payment = $5.20
FOR THE SECOND SIX-MONTH PERIOD
Accrued principal = $1,050.40
Coupon payment = $5.25
FOR THE THIRD SIX-MONTH PERIOD
Accrued principal = $1,071.41
Coupon payment = $5.36
FOR THE FOURTH SIX-MONTH PERIOD
Accrued principal = $1,103.55
Coupon payment = $5.52
Explanation:
These can be calculated using the following formulae:
Accrued principal = Amount or previous accrued principal * (100% + inflation rate) ...........(1)
Coupon payment = Accrued principal * (Fixed coupon rate * (6 months / 12 months))............(2)
Therefore, we have:
FOR THE FIRST SIX-MONTH PERIOD
Accrued principal = $1,000 * (100% + 4%) = $1,040
Coupon payment = $1,040 * (1% * (6 / 12)) = $5.20
FOR THE SECOND SIX-MONTH PERIOD
Accrued principal = $1,040 * (100% + 1%) = $1,050.40
Coupon payment = $1,050.40 * (1% * (6 / 12)) = $5.25
FOR THE THIRD SIX-MONTH PERIOD
Accrued principal = $1,050.40 * (100% + 2%) = $1,071.41
Coupon payment = $1,071.41 * (1% * (6 / 12)) = $5.36
FOR THE FOURTH SIX-MONTH PERIOD
Accrued principal = $1,071.41 * (100% + 3%) = $1,103.55
Coupon payment = $1,103.55 * (1% * (6 / 12)) = $5.52
Corris Co. accumulates the following data concerning a mixed cost, using miles as the activity level. Miles Driven Total Cost January 10,000 $17,000 February 8,000 13,500 March 9,000 14,400 April 7,000 12,500 Compute the variable and fixed cost elements using the high-low method. (Round variable cost to 2 decimal places, e.g. 15.25.)
Answer:
Results are below.
Explanation:
Giving the following information:
Miles Driven Total Cost
January 10,000 $17,000
February 8,000 13,500
March 9,000 14,400
April 7,000 12,500
To calculate the variable cost per unit and the total fixed cost, we need to use the following formula:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (17,000 - 12,500) / (10,000 - 7,000)
Variable cost per unit= $1.5
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 17,000 - (1.5*10,000)
Fixed costs= $2,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 12,500 - (1.5*7,000)
Fixed costs= $2,000
Vortex Company operates a retail store with two departments. Information about those departments follows:
Department A Department B
Sales $832,000 $448,000
Cost of goods sold 410,000 291,200
Direct expenses:
Salaries 117,000 86,000
Insurance 13,500 10,900
Utilities 21,000 25,500
Depreciation 18,000 13,500
Maintenance 6,400 5,200
The company also incurred the following indirect costs.
Salaries $29,000
Insurance 6,600
Depreciation 14,800
Office expenses 40,000
Indirect costs are allocated as follows: salaries on the basis of sales; insurance and depreciation on the basis of square footage; and office expenses on the basis of number of employees. Additional information about the departments follows.
Department Square footage Number of employees
A 29,400 66
B 12,600 44
Required:
a. Determine the departmental contribution to overhead and the departmental net income for department A and Department B.
b. Should Department B be eliminated?
Answer:
Vortex Company
Department A Department B
a. Contribution margin $246,100 $15,700
Net income $188,270 ($16,870)
b. Department B should not be eliminated unless the indirect costs allocated to it can be eliminated as well.
Explanation:
a) Data and Calculations:
Department A Department B
Sales $832,000 $448,000
Cost of goods sold 410,000 291,200
Gross profit $422,000 $156,800
Direct expenses:
Salaries 117,000 86,000
Insurance 13,500 10,900
Utilities 21,000 25,500
Depreciation 18,000 13,500
Maintenance 6,400 5,200
Total direct expenses $175,900 $141,100
Contribution margin $246,100 $15,700
Total indirect expenses 57,830 32,570
Net income $188,270 ($16,870)
Department Square footage Number of employees
A 29,400 66
B 12,600 44
Total 42,000 110
Indirect Costs: Costs Rates Department A Department B
Salaries $29,000 $0.02266 $18,850 $10,150 ($448/$1,280)
Insurance 6,600 $0.15714 4,620 1,980
Depreciation 14,800 $0.35238 10,360 4,440
Office expenses 40,000 $363.64 24,000 16,000
Total costs $90,400 $57,830 $32,570
Martin Corporation’s (a C corporation) bookkeeper told the owner that she could not have all the tax information ready for the accountant immediately after the tax year end of June 30. She was having surgery and asked if the tax return could be postponed. The accountant’s answer should be:
Answer:
Yes, we can request an extension until the following April 15
Explanation:
In general, there is a room for automatic extension of 6 months for
a corporation to file its income tax return so far appropriate form (7004) has been filed by the corporation, and
estimated unpaid tax liability is been paid before date of the return is due. It should be noted that until tax year 2026, Until June 30 fiscal-year which is tax year 2026 there is duration of 7 months given to the corporation. Though there could be rovoking of the extension by The IRS at any time. tax return of Martin will be due under normall condition by September 15, but since extension comes in it will be due April 15.
Critics argue that the WTO single-mindedly promotes trade at the expense of the environment. Therefore trade--or more broadly, globalization--needs to slow down, What is you view on the relationship between trade and the environment
Answer:
WTO sands up for sustainable development, that is conserving resources and avoiding wastes.
Explanation:
Due to the rise in demand for food and supplies, there has been increasing in the large amount of trade of goods and services. Hence the impact of the trade is visible on the environment. The world trade organization is thus trying to remind us about the impacts of globalization and thus need to slow down in terms of the use of natural resources.A property title search firm is contemplating using online software to increase the productivity of the researcher performing the search. Currently, an average of 64 minutes is needed to do a title search. The researcher cost is $1.70 per minute. Clients are charged a fee of $410. Company A’s software would reduce the average search time by 20 minutes, at a cost of $3.50 per search. Company B’s software would reduce the average search time by 21 minutes at a cost of $5.50 per search.
a. Calculate the productivity in terms of revenue per dollar of input.
b. Which option would have the highest productivity in terms of revenue per dollar of input?
a) Company A
b) Company B
c) Current
Answer:
a. Productivity in terms of revenue per dollar input:
Cost = Average time taken * Cost per minute + additional cost per search
Current cost = 64 * 1.70 = $108.80
Company A cost = (64 - 20 mins) * 1.70 + 3.50 = $78.30
Company B cost = (64 - 21) * 1.70 + 5.50 = $78.60
Productivity = Client fee / Cost
Current productivity
= 410 / 108.80
= $3.77
Company A
= 410 / 78.30
= $5.24
Company B
= 410 / 78.60
= $5.22
b. Company A is best.
Entry for Uncollectible Accounts
Outlaw Bike Co. is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31 and a historical analysis of the percentage of uncollectible accounts in each age category are given below.
Estimated Uncollectible Estimated Uncollectible
Age Interval Balance Accounts Percent Accounts Amount
Not past due $780,000 1/2% $3,900
1-30 days past due 85,800 2 1,716
31-60 days past due 39,000 9 3,510
61-90 days past due 28,100 16 4,496
91-180 days past due 20,300 41 8,323
Over 180 days past due 14,800 65 9,620
Total $968,000 $31,565
Assume that the allowance for doubtful accounts for Outlaw Bike Co. had a debit balance of $5,680 as of December 31. Journalize the adjusting entry for uncollectible accounts as of December 31.
Answer:
Date Account title and Explanation Debit Credit
31 Dec Bad Debts Expense $37,245
Allowance for doubtful debts $37,245
($31,565 + $5,680)
(To record the adjustment entry)
Aspen Technologies has the following budget data:
Estimated direct labor hours 8,200 Estimated direct labor dollars $64,200 Estimated factory overhead costs $170,100
If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is:_______.
a. $24.89
b. $20.74
c. $31.12
d. $16.60
Answer:
Overhead rate = $20.74
Explanation:
Below is the given values:
Given the direct labor hours = 8200
Direct labor dollars = $64200
Factory overhead costs =$170100
Use below formula to find the overhead rate.
overhead rate = Overhead cost / Direct labor hours
Now plug the values in formula:
Overhead rate = 170100 / 8200
Overhead rate = $20.74
A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the recognized loss on the trade is
Answer:
1,500
Explanation:
The fixed assets cost is $41,000
The accumulated depreciationn is $36,500
Similar assets was priced at $36,000
Trade in allowance is $3000
Therefore the recognised law on trade can be calculated as follows
41,000-36,500-3,000
= 1,500
What is the answer to this question? B or C?
Answer:B
Explanation: everything had a code of ethics.
You are considering an investment project with an internal rate of return of 8.7 percent, a net present value of $393, and a payback period of 2.44 years. Which one of the following is correct given this information?
A. The discount rate used to compute the net present value is equal to the Internal rate of return.
B. The discounted payback period will be less than 2.44 years.
C. The required payback period must be greater than 2.44 years.
D. The discount rate used in computing the net present value was less than 8.7 percent.
E. This project should be rejected based on the net present value.
Answer:
Hence the correct option is d) The discount rate used in computing the net present value was less than 8.7 percent.
Explanation:
As the discount rate increases, the present value decreases, and also at IRR the present value is zero, thus the answer is:-
d) The discount rate used in computing the net present value was less than 8.7 percent
Answer:
D). The discount rate used in computing the net present value was less than 8.7 percent.
Explanation:
'Net Present Value' is described as the 'difference that exists between existing values of cash inflows, as well as, cash outflows for a particular time period.' This assists in evaluating the profitability of an investment and make worthy decisions regarding investment.
As per the details provided, the discount rate considered for estimating the Net Present Value of the investment had been lesser than 8.7% which shows that the Net Present Value in positive i.e. $ 393. However, the investment project is not beneficial at all rather it may cause losses because the required return rate is 9.5% which is actually lesser and therefore, the project would prove incompetent and it must be rejected at once. Thus, option D is the correct answer.
Both Bond Sam and Bond Dave have 8 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 18 years to maturity. If interest rates suddenly rise by 5 percent, what is the percentage change in the price of Bond Sam
Answer: -12.1%
Explanation:
Bond Sam was priced at Par which means it could have been priced at $1,000 and its yield was the same as the coupon rate of 8%.
If interest rates rise by 5%, the yield becomes:
= 8% + 5%
= 13%
Price of bond is attached:
Yield = 13% /2 = 6.5% per semiannual period
Coupon = 8% * 1,000 * 0.5 = $40 per semi annual period
Period till maturity = 3 * 2 = 6 semiannual periods
Price = $878.97
Percentage change in price:
= (878.97 - 1,000) / 1,000 * 100%
= -12.1%
