According to Duffy-Deno (2003), when the price of broadband access capacity (the amount of information one can send over an Internet connection) increases 10%, commercial customers buy about 3.8% less capacity. What is the elasticity of demand for broadband access capacity for firms? Is demand at the current price inelastic?

Answers

Answer 1

Answer:

Answer:

-Price elasticity of demand (PED )= 0.38

-The PED is less than one, therefore the demand is price inelastic.

Explanation:

Price elasticity of demand (PED) is the degree of responsiveness of quantity demanded to a unit change in the price of the product all other things being equal. This index measures the corresponding magnitude by which quantity demand will increase, for example, if the price reduces by a given %.

Price elasticity of demand Index is interpreted as follows:

if PED greater than 1, product is elastic

if PED less that 1, product is inelastic

PED is very useful in pricing policy. For example, a product that is price elastic will accrue more revenue if the seller reduces its price and vice versa

The price elasticity of demand for a product can be computed as follows:

PED = % change in qty DD/ % change in price

So we can compute the PED for Duffy-Deno as follows:

PED = 3.8%/10%

The PED is less than one, therefore the demand is price inelastic.

Answer 2

Answer:

Final answer:

The elasticity of demand for broadband access capacity for firms is -0.38. Because the absolute value is less than 1, the demand is considered inelastic.

Explanation:

Elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price of broadband access increased by 10% and the quantity demanded decreased by 3.8%. This gives an elasticity of -3.8% / 10% = -0.38. Demand is considered inelastic if the absolute value is less than 1. Hence, the demand for broadband access capacity for firms is inelastic.

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Parr Hardware Store had net credit sales of $6.5mil and cost of goods sold of $5mil for the year. The Accounts Receivable balances at the beginning and end of the year were $600k and $700k, respectively. The receivables turnover was

Answers

Answer:

Accounts Receivables Turnover Ratio = $(6,500,000)/(650,000)$ = 10 times.

Explanation:

Accounts Receivables Turnover ratio = $(Net \:Credit \: Sales)/(Average \: Receivables)$

Here Net Credit Sales = $6.5 million

Accounts Receivables Opening Balance = $600,000

Accounts Receivables Closing Balance = $700,000

Average Accounts Receivable Balance = $(600,000 \:+ 700,000)/(2) = 650,000$

Accounts Receivables Turnover Ratio = $(6,500,000)/(650,000)$ = 10 times.

This shows that accounts receivables are on an average 1/10th of credit sales.

Final Answer

Accounts Receivables Turnover Ratio = $(6,500,000)/(650,000)$ = 10 times.

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Answers

Answer:

The correct answer is: Dumping.

Explanation:

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Answers

The knowledge on basic principles of accounting may be useful for a Medical officer Manager because it allows him to better understand the flow of the business from the transaction to people handling skills during normal business activities. These make it easier for him to get acquainted with what is to be dealt with during normal business talks.

ABC will purchase a machine that will cost $2,575,000. Required modifications will cost $375,000. ABC will need to invest $75,000 for additional inventory. The machine has an IRS approved useful life of 7 years; it is presumed to have no salvage value. ABC plans to depreciate the machine by using the straight-line method. The machine is expected to increase ABC's sales revenues by $1,890,000 per year; operating costs excluding depreciation are estimated at $454,600 per year. Assume that the firm's tax rate is 40%. What is the annual operating cash flow?

Answers

Answer:

The Annual Operating Cash Flow is $1,029,811.43

Explanation:

Initial Investment = Cost of Machine + Modification Cost

Initial Investment = $2,575,000 + $375,000

Initial Investment = $2,950,000

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Depreciation per year = (Initial Investment - Salvage Value) / Useful Life

Depreciation per year = ($2,950,000 - $0) / 7

Depreciation per year = $421,428.57

Annual Operating Cash Flow = (Sales – Operating Costs) * (1 – Tax Rate) + Tax Rate * Depreciation

Annual Operating Cash Flow = ($1,890,000 - $454,600) * (1 - 0.40) + 0.40 * $421,428.571

Annual Operating Cash Flow = $1,435,400 * 0.60 + 0.40 * $421,428.571

Annual Operating Cash Flow = $1,029,811.4284

Annual Operating Cash Flow = $1,029,811.43

Final answer:

The annual operating cash flow for ABC after considering costs related to the machine investment, increased sales, and taxes, is $1,034,097.

Explanation:

To compute the annual operating cash flow, we first add up the total cost of the machine. This includes the purchase price of the machine which is $2,575,000, the cost of modifications which is $375,000, and the additional inventory investment of $75,000. This gives a total investment cost of $3,025,000. Given that this will be depreciated straight-line over 7 years with no salvage value, the annual depreciation expense will be $3,025,000 / 7 = $432,143.

The machine is expected to increase ABC's sales revenues by $1,890,000 per year, but will also increase operating costs excluding depreciation by $454,600. Therefore, the total annual income before tax would be the increased sales ($1,890,000) minus the increased costs ($454,600) and the depreciation ($432,143), which equals $1,003,257.

As ABC's tax rate is 40%, the annual tax payable will be: $1,003,257 * 0.4 = $401,303. The annual income after tax is then $1,003,257 - $401,303 = $601,954. Finally, we must remember to add back the depreciation (as it is a non-cash item) to get to EBIT. This gives us a final operating cash flow of $601,954 + $432,143 = $1,034,097.

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