Investment = L FV = $66,485.49 Make this investment? No
Investment = M FV = $59,400 Make this investment? No
Investment = P FV = $77,318.37 Make this investment? Yes
Explanation:
Investment = L
Interest rate and method = 5% compound interest
Expected Future Value, FV = PV (1 + r)^n
FV = 45000 (1 + 0.05)^8
FV = 45000 * (1.05)^8
FV = 45000 * 1.477455 = $66,485.49
Make this investment? Yes / No
Investment = M
Interest rate and method = 4% simple interest
Expected Future Value, FV = PV + (PV * r * n)
FV = 45000 + (45000 * 0.04 * 8)
FV = 45000 + 14400 = $59,400
Make this investment? Yes / No
Investment = P
Interest rate and method = 7% compound interest
Expected Future Value, FV = PV (1 + r)^n
FV = 45000 (1 + 0.07)^8
FV = 45000 * (1.07)^8
FV = 45000 * 1.718186 = $77,318.37
Make this investment? Yes / No
Since she can only make one investment during the eight-year investment period, Laura should invest in investment P
Compound interest is calculated using the equation FV = PV imes (1 + r)^n, and simple interest is calculated using the equation FV = PV + (PV imes r imes n). Compound interest allows for earning interest on any interest earned in prior periods. The future value based on compound interest can exceed the future value based on simple interest.
The equation that represents the calculation of a future value (FV) using compound interest is: FV = PV imes (1 + r)^n.
The equation that represents the calculation of a future value (FV) using simple interest is: FV = PV + (PV imes r imes n).
The statement that the process of earning compound interest allows a depositor or investor to earn interest on any interest earned in prior periods is true.
The statement that after the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest is false.
The statement that all other factors being equal, both the simple interest and compound interest methods will accrue the same amount of earned interest by the end of the first year is true.
To determine whether Laura should invest in each of the investments, we need more information about the specific investment alternatives (L, M, and P) and their annual interest rates.
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Assets 2016
Cash and securities $2,145
Accounts receivable 8,970
Inventories 12,480
Total current assets $23,595
Net plant and equipment $15,405
Total assets $39,000
Liabilities and Equity Accounts payable $7,410
Accruals 4,290
Notes payable 5,460
Total current liabilities $17,160
Long-term bonds $7,800
Total liabilities $24,960
Common stock $5,460
Retained earnings 8,580
Total common equity $14,040
Total liabilities and equity $39,000
Income Statement (Millions of $) 2016
Net sales $58,500
Operating costs except depreciation 54,698
Depreciation 1,024
Earnings before interest and taxes (EBIT) $2,779
Less interest 829
Earnings before taxes (EBT) $1,950
Taxes 683
Net income $1,268
Other data: Shares outstanding (millions) 500.00
Common dividends (millions of $) $443.63
Int rate on notes payable & L-T bonds 6.25%Federal plus state income tax rate 35%Year-end stock price $23.77A. What is the firm's current ratio?B. What is the firm's quick ratio?C. What is the firm's days sales outstanding? Assume a 365-day year for this calculation.D. What is the firm's total assets turnover?E. What is the firm's inventory turnover ratio?F. What is the firm's TIE?G. What is the firm's debt/assets ratio?H. What is the firm's ROA?I. What is the firm's ROE?
Answer:
A. 1.375
B. 0.648
C. 77.87 days
D. 1.5 times
E. 4.69 times
F. 3.35 times
G. 34 %
H. 4.63 %
I. 23.22%
Explanation:
A. What is the firm's current ratio
current ratio = current assets / current liabilities
= $23,595 / $17,160
= 1.375
B. What is the firm's quick ratio
quick ratio = (current assets - inventory) / current liabilities
= ($23,595 - $12,480) / $17,160
= 0.648
C. What is the firm's days sales outstanding Assume a 365-day year for this calculation.
days sales outstanding = Inventory / (Sales / 365)
= $12,480 / ($58,500 /365)
= 77.87 days
D. What is the firm's total assets turnover
total assets turnover = Sales / Total Assets
= $58,500 / $39,000
= 1.5 times
E. What is the firm's inventory turnover ratio?
inventory turnover ratio = Sales / Inventory
= $58,500 / $12,480
= 4.69 times
F. What is the firm's TIE?
Total Interest Expense (TIE) = Earnings before interest and taxes (EBIT) / Total Interest Expense
= $2,779 / $829
= 3.35 times
G. What is the firm's debt/assets ratio?
debt/assets ratio = Total Debt / Total Assets × 100
= ($5,460 + $ $7,800) / $39,000 × 100
= 34 %
H. What is the firm's ROA?
Return on Assets (ROA) = Earnings Before Interest After Tax (EBIAT) / Total Assets × 100
= ($1,268 + ($829 × 65%)) / $39,000 × 100
= 4.63 %
I. What is the firm's ROE?
Return on Equity (ROE) = Net Income / Total Shareholders Funds
= $1,268 / $5,460 × 100
= 23.22%
The current ratio is 1.37, the quick ratio is 0.65, and the days sales outstanding is 56.15.
A. The current ratio is calculated by dividing total current assets by total current liabilities:
Current Ratio = Total Current Assets / Total Current Liabilities
Current Ratio = $23,595 / $17,160
Current Ratio = 1.37
B. The quick ratio, also known as the acid-test ratio, is calculated by dividing quick assets by total current liabilities:
Quick Ratio = (Cash and Securities + Accounts Receivable) / Total Current Liabilities
Quick Ratio = ($2,145 + $8,970) / $17,160
Quick Ratio = 0.65
C. The days sales outstanding measures how long it takes for a company to collect its accounts receivable:
Days Sales Outstanding = Accounts Receivable / (Net Sales / 365)
Days Sales Outstanding = $8,970 / ($58,500 / 365)
Days Sales Outstanding = 56.15
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Answer:
Pederson enterprise would realize $8,000 incremental income by accepting the special Oder.
Explanation:
Pederson Enterprise
Incremental revenue (8,000 ×$14)
$112,000
Incremental variable costs ($12 ×8,000). (96,000)
Incremental shipping costs
($1×8,000) (8,000)
Incremental profit if special order accepted. $8,000
Pederson enterprise would realize $8,000 incremental income by accepting the special Oder as shown in the table above.
Answer:
The correct answer is: comparative advantage.
Explanation:
In Business, comparative advantage is an advantage that a company has over its competitors. The strategy relies on the company being able to produce at a lower comparative cost. This is achieved by lowering production costs or by introducing more efficient manufacturing strategies.
In Canada's case, the reopening of Voisey's Bay mine implies an opportunity to lower the costs of the commercialization of nickel since there will be more of that resource available for extraction.
Canada, being a significant nickel producer with the reopening of Voisey's Bay mine, is said to have a comparative advantage. This term refers to a country's ability to produce goods at lower opportunity costs compared to others, which allows Canada to efficiently produce and export nickel.
Canada's position as the world's second-largest producer of nickel, paired with the reopening of the Voisey's Bay mine, equips Canada with what is known as a comparative advantage in the global nickel market. A comparative advantage refers to a country's ability to produce a certain good or service at lower opportunity cost than its trading partners. In this case, due to the vast resources of nickel-bearing ore at Voisey's Bay, Canada has a cost advantage, which enables Canada to produce and export nickel more efficiently than other countries.
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Suppose that Spain and Germany consider trading shoes and jeans with each other. Spain can gain from specialization and trade as long as it receives more than ------ of jeans for each pair of shoes it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than--------- of shoes for each pair of jeans it exports to Spain.
Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of jeans) would allow both Germany and Spain to gain from trade?
4 pairs of jeans per pair of shoes, 1 pair of jeans per pair of shoes, 6 pairs of jeans per pair of shoes, 2 pairs of jeans per pair of shoes
Answer:
By comparing the opportunity cost of producing shoes in the two countries, you can tell that SPAIN has a comparative advantage in the production of shoes and GERMANY has a comparative advantage in the production of jeans.
Suppose that Spain and Germany consider trading shoes and jeans with each other. Spain can gain from specialization and trade as long as it receives more than 3 PAIRS of jeans for each pair of shoes it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than ¹/₁₁ PAIR of shoes for each pair of jeans it exports to Spain.
Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of jeans) would allow both Germany and Spain to gain from trade?
Explanation:
Opportunity costs refer to the extra costs or benefits lost resulting from choosing one investment or activity over another alternative. In this case, if Spain specializes in the production of shoes, it will not produce jeans anymore. The opposite would happen to Germany.
Answer:
The maximum amount that could be paid for the antique pitcher is $13.93 as shown by the workings in the explanation section below.
Explanation:
Since the maximum price that could be charged for the antique pitcher is $17,the most that could be paid in purchasing it, is given by the below formula:
selling price * 100% / (100% + Markup%)
=$17*100%/(100%+22%)
=$13.93
From the foregoing analysis,the markup in dollar terms is $17-$13.93=$3.07 which represents 22% of the cost price of the antique pitcher.
A bond is an 'I owe you' note where the lender (the investor) lends capital to the borrower (the issuing entity) in return for a bond and gets paid back the face value plus interest at a predetermined rate. Legacy in this case has issued $570,000 worth of bonds with an 8.5% interest rate for four years, selling them at a rate of $508,050 when the current market rate is 12%. The price of a bond is influenced by current market rates.
The subject of the question pertains to bonds, which are part of the financial market. A bond is an 'I owe you' note that an investor buys in exchange for lending capital to an entity, like a corporation or government. In this scenario, Legacy is issuing bonds of $570,000 with an 8.5% interest rate for four years, that pay on a semiannual basis. These bonds are sold at $508,050 when the market rate is 12%.
When buying a bond, an investor becomes the lender and the issuing entity becomes a borrower who agrees to pay back the face value of the bond at maturity, plus an agreed-upon interest rate. As mentioned above, the bond has a coupon rate, usually semi-annual, and a maturity date when the borrower will pay back its face value and last interest payment. By these parameters of face value, interest rate, and maturity date, a buyer can calculate a bond's present value. This value may not be the same as the bond's face value.
If you consider a market rate now at 12%, you know that you could invest $964 in an alternative investment and receive $1,080 a year from now; or $964(1 + 0.12) = $1080. This means you would not pay more than $964 for the original $1,000 bond. Therefore, the price of a bond is influenced by the current market rate.
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A bond is an "I owe you" note that an investor receives in exchange for money. Legacy issued bonds at a price lower than the face value due to higher market interest rates.
In financial terms, a bond is an "I owe you" note that an investor receives in exchange for money. The bond has a face value, a coupon rate, and a maturity date. Combining these elements and market interest rates, a buyer can compute a bond's present value. Legacy issued $570,000 of 8.5%, four-year bonds at $508,050 when the market rate is 12%. This means that the present value of the bonds is less than the face value because the market rate is higher than the coupon rate.
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