Answer:
Correct answer:
A. True
Explanation:
When procurement of goods and services is to be made from another country, it is expected that, it should be open and done in full view showing other competitors. This is to prevent fraud, such as the marking up of the price of goods or outright false declaration of the procurement prices.
Which of the following is not true about amortization of Limited-Life Intangibles a. Amortize by systematic charge to expense over useful life. b. Credit asset account or accumulated amortization. c. Useful life should reflect the periods over which the asset will contribute to cash flows. d. Amortization should be cost less residual value. e. IFRS requires companies to assess the residual values and useful lives of intangible assets at least annually. f. None of the above
Answer:
Amortization of Limited-Life Intangibles:
f. None of the above
Explanation:
IFRS requires limited-life intangibles to be systemically amortized throughout their useful lives using either units of activity method or straight-line method. Intangibles are amortized to reduce their values as per use over their lifespan. Amortization is like depreciation, but depreciation is a term used for tangible assets, while amortization is used for intangible assets.
A monopolist faces a
A. a two-tiered demand curve.
B. a perfectly elastic demand curve.
C. the market demand curve.
D. a perfectly inelastic demand curve.
Answer:
C
Explanation:
ane is planning to offer a Groupon for inner tube rentals that she will distribute on hot, sunny, summer days by the river that runs through her town. Based on her past experience with Groupon, she has assigned the following probability distribution to the number of tubes she will rent on a randomly selected day. If Jane would like her expected revenue to be at least $300 per day, what should the Groupon price be? (Round your answer up to the nearest whole dollar amount.)
Probability assigned:|
x 30 60 120 180
P(x) .10 .40 .40 .10
Answer:
Jane
Price of Groupon for a revenue of $300 is:
$3
Explanation:
a) Data and Calculations:
Expected Sales volume:
Number of Tubes x 30 60 120 180
Probability P(x) .10 .40 .40 .10
Expected values 3 24 48 18
Total = 93 tubes
Groupon price = $300/93 = $3.23
b) Jane's price for each Groupon will be the rent revenue per day divided by the expected number of tubes to rent daily. The expected number of tubes is derived by multiplying each expected number of tubes by its probability and then summing up the results.
Fitness Bands Corporation gathered the following information for Job #928: Standard Total Cost Actual Total Cost Direct materials Standard: pints at /pint Actual: pints at /pint What is the direct materials quantity variance?
Question:
standard total cost Actual total cost
Direct material
Standard 2000 pints $3.50/pint $7,000
Actual 2,500 pints $5.00/pint $12,000
Answer:
Materials quantity variance= $1,750 unfavorable
Explanation:
Material quantity variance occurs when the actual quantity used to achieved a given level of output is more or less than the standard quantity.
It is determined by the difference between the actual and standard quantity of material for the actual level of output multiplied by the the standard price
pints
Standard quantity allowed 2,000
Actual quantity used 2,500
Quantity variance 500 unfavorable
Standard price $3.50
Materials quantity variance 1,750 unfavorable
Materials quantity variance= $1,750 unfavorable
Care Foundation is a voluntary health and welfare organization funded by contributions from the general public. In its Statement of Activities, the annual provision for depreciation should:
Question options:
A) Not be included.
B) Be included as an element of support.
C) Be included as an element of changes in fund balances.
D) Be included as an element of expense.
Answer:
D) Be included as an element of expense
Explanation:
Care foundation is a voluntary health and welfare organization funded by contributions from the public and therefore is a non-profit organization. Non profit organizations use statement of activities and not income statements used by for profit organizations in reporting revenue and expenses for the year. In the case of non profit organizations, statement of activities are reported as statement of expenses for the year.
Under GASB, direct expenses are expenses that can be linked to a program, department or activity and therefore can be directly linked to that function. Depreciation is a direct expense for non profit accounts and should be charged as expense for the relevant year based on the function of the capital asset it can be traced to. For example a capital asset that can be linked to a particular function should charge it's depreciation expenses as direct expenses based on its functions
The Greenbriar is an all-equity firm with a total market value of $584,000 and 22,800 shares of stock outstanding. Management is considering issuing $197,000 of debt at an interest rate of 10 percent and using the proceeds on a stock repurchase. Ignore taxes. How many shares will the firm repurchase if it issues the debt securities
Answer:
7,691 stocks
Explanation:
total market value = $584,000
total outstanding stocks = 22,800
price per stock = $584,000 / 22,800 = $25.614 per stock
management can repurchase $197,000 / $25.614 per stock = 7,691.1 = 7,691 stocks
stocks outstanding after repurchase = 22,800 - 7,691 = 15,109 stocks
The Government Accounting Office (GAO) announces deep cuts to social security, Medicare, and welfare programs. Which determinant of aggregate demand causes the change
Answer:
Consumer spending
Explanation:
Consumer spending is the amount that individuals and families spend on final goods and services for personal use and enjoyment in the economy. Contemporary measures of consumer spending include all private purchases of durable goods, durable goods and services. Consumer spending can be thought of as a combination of personal savings, investment cost, and output in the economy.so correct answer is Consumer spendingFlorian just graduated from law school and wants to start his own law firm. It is best for Florian to use a _____ organizational structure.
Answer:
Given that Florian is just starting out and the firm is new, the best organisational structure he can use is the Simple organisational structure.
Explanation:
A simple organisational structure features the CEO in all decision making process. Any new staff would only an extension of his authority.
As the company grow in size, it can become more functional and even adopt a matrix organisational structure. This helps it keep it's size small while making full use of the capabilities of the staff on adhoc projects.
Cheers!
Deming, the proponent of total quality management, argued that management has the responsibility to train employees in new skills.
A. True
B. False
Answer:
Its TRUE
Explanation:
Management should train employees in new skill, where Deming argued that management has the responsibility to train employees in new skills to keep pace with changes in the workplace. In addition, he believed that achieving better quality requires the commitment of everyone in the company.
Conclusions and recommendations are the most widely read sections of any report. Conclusions summarize a nd explain your findings and are the heart of your report. The ability to draw sound conclusions and make clear recommendations from your research is crucial to business success.
When drawing conclusions, make sure you________.
Consider the scenario:
You are making recommendations after researching and writing a report on employee vacation time and job satisfaction. What writing tips should you keep in mind when writing your recommendations?
A. Your recommendations should always be the result of prior logical analysis.
B. Your recommendations should never be in the form of a command.
C. You can combine recommendations and conclusions.
D. You should use words such as maybe and perhaps.
E. You can omit conclusions and move straight to recommendations in short reports.
Answer:
a. When drawing conclusions, make sure you summarize and explain your findings.
b. Tips for writing recommendations:
A. Your recommendations should always be the result of prior logical analysis.
B. Your recommendations should never be in the form of a command.
Explanation:
A good conclusion touches the theme or main topic, summarizes the main points, and connects with the introduction, but with a sense of closure. Conclusions should be sound and logical. Irrelevant conclusions are annoying to the senses. Without a conclusion, the report will sound like one illogical move without clear direction and purpose.
Recommendations should address improvement efforts based on the problem(s) presented in the body of the report.
All of the following statements concerning the characteristics of aggregate planning for services is true except
A. Group of answer choices
B. Demand is difficult to predict
C. Most services can be inventoried
D. Capacity is easy to predict
E. Labor is the most constraining resource
Answer: D. Capacity is easy to predict
Explanation:
Aggregate planning for services involves organising the business areas of companies engaging in service provision or operation companies that also provide a service.
It is generally held that demand is difficult to predict and most services can be inventoried. It is also held that labor is the most constraining resource.
However, capacity in aggregate planning for services is not easy to predict. This is because services are not standadized and are instead varied and mostly unique. Therefore knowing the capacity to give to a service becomes hard to predict.
Petrus Framing's cost formula for its supplies cost is $2,300 per month plus $6 per frame. For the month of March, the company planned for activity of 861 frames, but the actual level of activity was 856 frames. The actual supplies cost for the month was $7,790. The activity variance for supplies cost in March would be closest to:
Answer:
$30 Favorable
Explanation:
Calculation for the activity variance for supplies cost in March
Using this formula
Activity variance = (Actual units - Budgeted units) * Variable cost
Where,
Actual units=856
Budgeted units=861
Variable cost=$6
Let plug in the formula
Activity variance=(856-861) * $6
Activity variance=5*$6
Activity variance=$30 Favorable
Therefore the activity variance for supplies cost in March would be closest to: $30 Favorable
Ý nghĩa lý luận và thực tiễn của tiểu luận
Answer:
talk in English man
please foll and sorry
As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have been provided with the following data: D 0 = $0.80; P 0 = $22.50; and g = 8.00% (constant). Based on the DCF approach, what is the cost of common from reinvested earnings?
Answer:
The cost of common equity from reinvested earnings is 11.84%
Explanation:
The constant growth model of DDM or DCF approach is used to calculate the price of a stock today whose dividends are expected to grow at a constant rate forever. The model values the stock based on the present value of the expected future dividends form the stock.
The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
P0 is price todayD0 is the dividend todayr is the cost of equityg is the growth rate in dividendsPlugging in the available values for all the variables, we can calculate the r or cost of common equity to be,
22.5 = 0.8 * (1+0.08) / (r - 0.08)
22.5 * (r - 0.08) = 0.864
22.5r - 1.8 = 0.864
22.5r = 0.864 + 1.8
r = 2.664 / 22.5
r = 0.1184 or 11.84%
Which is the first step toward initiating efficient and effective international business negotiations:
Answer: Selecting an appropriate negotiation team
Explanation:
The first step toward initiating efficient and effective international business negotiations is selecting an appropriate negotiation team.
When an appropriate negotiation team has been selected to negotiate on behalf of a particular company, negotiation becomes easier and are more feasible and both parties can agree on a particular stance.
Quick Company's lease payments are made at the end of each period. Quick's liability for a capital lease will be reduced periodically by the minimum lease payment, adjusted by:
Question:
Quick Company’s lease payments are made at the end of each period. Quick’s liability for a capital lease will be reduced periodically by the
A. Minimum lease payment.
B. Minimum lease payment plus the amortization of the related asset.
C. Minimum lease payment less the amortization of the related asset.
D. Minimum lease payment less the portion of the minimum lease payment allocable to interest.
Answer:
The correct choice is D.
Explanation:
The present value of the minimum lease payments is the lease payable. The total amount of lease payable is diminished by the percentage of the lease payment chargeable to the lease owed.
This amount is the lease payment minus the interest on the payment. Therefore, the liability is reduced by the minimum lease paid in each period minus the portion of the payment allocable to interest.
Cheers!
Denver Company, a calendar year corporation, had the following actual income before income tax expense and estimated effective annual income tax rates for the first two quarters in year x8: quarter income before tax estimated tax rate first $100k 30% second $140k 24% Denver's income tax expense in its interim income statement for the second quarter should be:
Answer:
Denver Company
Income Tax Expense for the second quarter:
Pre-tax quarter income = $140,000
Estimated tax rate = 24%
Tax Expense = $140,000 x 24%
= $33,600
Explanation:
a) Data:
Quarter income before tax estimated tax rate
first $100k 30%
second $140k 24%
b) Denver's quarter second income tax expense is the product of the pretax income for the second quarter and the estimated income tax rate for the quarter. The resulting calculation shows the estimated income tax expense that has to be settled by Denver. If it is not settled in the quarter second period, it has to be carried forward to the next quarter as a liability under the heading, Income Tax Payable.
One of the world's most-recognizable franchisers is McDonald's. Advantages of franchising in global markets include:
Answer: d. forgoing the development costs and risks associated with opening up a foreign market.
Explanation:
Franchising is a way of expanding a business by allowing another company to sell the products of the expanding company and pay them for it.
It works by the Expanding company (franchisor) providing their skills, technical know-how and allowing the franchisee to use their image rights to sell products.
This is a cheap way of expanding in foreign markets because the franchisor does not have to spend money starting up in that country and developing a business from scratch. It can simply license another company that is already there to sell for it thereby avoiding risks of setting up anew in a foreign market.
You put up $40 at the beginning of the year for an investment. The value of the investment grows 5% and you earn a dividend of $4.50. Your HPR was ____. A. 5.0% B. 4.5% C. 11.3% D. 16.3%
Answer:
16.3%
Explanation:
$40 was put at the beginning of the year for an investment
The investment grows by 5%
= 5/100
= 0.05
The dividend is $4.50
The first step is to calculate the dividend yield
= $4.50/40
= 0.1125
Therefore, the HPR can be calculated as follows
= 0.1125+0.05
= 0.163×100
= 16.3%
Hence the HPR was 16.3%
Discount-Mart issues $18 million in bonds on January 1, 2021. The bonds have a eight-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 01/01/2021 $ 16,180,939 06/30/2021 $ 900,000 $ 970,856 $ 70,856 16,251,795 12/31/2021 900,000 975,108 75,108 16,326,903 06/30/2022 900,000 979,614 79,614 16,406,517 12/31/2022 900,000 984,391 84,391 16,490,908 What is the carrying value of the bonds as of December 31, 2022
Answer:
Discount-Mart
The carrying value of the bonds as of December 31, 2022 is:
$16,490,908
Explanation:
a) Data and Calculations:
Bonds issued = $18 million
Date of issue = Jan. 1, 2021
Bond term = 8 years
Interest payable on June 30 and December 31 each year.
b) Partial bond amortization schedule for the bonds:
Date Cash Paid Interest Expense Increase in Carrying Value
Carrying Value
01/01/2021 $ 16,180,939
06/30/2021 $ 900,000 $ 970,856 $ 70,856 16,251,795
12/31/2021 900,000 975,108 75,108 16,326,903
06/30/2022 900,000 979,614 79,614 16,406,517
12/31/2022 900,000 984,391 84,391 16,490,908
b) The carrying value of the bond is the net amount between the par value of $18 million and the unamortized premium or discount. It is this value that is reported on the balance sheet.
Under the allowance method, when writing off an account receivable, the journal entry to record the write-off includes a credit to:
Answer: credit to Accounts Receivable
Explanation:
Accounts Receivable is the payment that a particular company will get from the customers who have bought the company's product or services on credit.
Under the allowance method, when writing off an account receivable, the journal entry to record the write-off includes a credit to account receivables.
Time Warner shares have a market capitalization of billion. The company is expected to pay a dividend of per share and each share trades for . The growth rate in dividends is expected to be % per year. Also, Time Warner has billion of debt that trades with a yield to maturity of %. If the firm's tax rate is %, compute the WACC?
Complete Question:
Time Warner shares have a market capitalization of $50 billion. The company is expected to pay a dividend of $0.30 per share and each share trades for $30. The growth rate in dividends is expected to be 7% per year. Also, Time Warner has $15 billion of debt that trades with a yield to maturity of 8%. If the firm's tax rate is 30%, what is the WACC?
Answer:
7.5%
Explanation:
We can calculate WACC using the following formula:
WACC = Ke * MV of Equity / (MV of Equity + MV of Debt) + Kd * MV of Debt / (MV of Equity + MV of Debt)
Here:
Market Value of Equity is $50 billion
Market Value of Debt is $15 billion
Ke is % (Step 1)
Kd is 8%
By putting values, we have:
WACC = 8.07% * $50 Billion / ($50 Billion + $15 Billion) + 8% * $50 Billion / ($50 Billion + $15 Billion)
WACC = 7.5%
Step 1: Calculate Ke
We can calculate Ke using the following formula:
Ke = Do * (1 + g) / P + g
Here
Do is the dividend per share which is $0.3
g is the growth rate which is 7%
And
P is the market value of share which is $30 per share.
Ke = $30 * (1 + 7%) / $30 + 7% = 8.07%
Question 2 Which of the following are wholesale and which are retail? (a)Large-scale deposits made by firms at negotiated rates of interest. .............................retail / wholesale (c)Deposits in savings accounts in high street banks. ......................................................retail / wholesale (b)Loans made by high street banks at published ratesof interest. ..................................retail / wholesale (d)Deposits in savings accounts in building societies .......................................................retail / wholesale (e)Large-scale loans to industry syndicated through several banks. ................................retail / wholesale
Answer:
Wholesale banking refers to banking services sold to large clients, such as other banks, other financial institutions, government agencies, large corporations, and real estate developers. It is the opposite of retail banking, which focuses on individual clients and small businesses. Wholesale banking services include currency conversion, working capital financing, large trade transactions, mergers and acquisitions, consultancy, and underwriting, among other services
A market economy is regulated by the interactions between which two things?
Answer:
b is the answer
Explanation:
producers and consumers
Explain how to use the decision trees and Monte Carlo analysis for quantifying risk. Give an example of how you would use each technique on an IT project.
Answer:
The answer is below
Explanation:
Decision Tree Analysis is a form or type of quantitative risk assessment tool and techniques that involves a diagram that indicates the significances of choosing one or other alternatives.
In other words, the purpose of the tool is to assist you to select between several courses of action.
For example, lines are drawn towards the right for each possible solution, and then the solution is written along the line. Then evaluation of each alternative can be easily considered.
On the other hand, Monte Carlo Analysis is also a form or type of quantitative risk assessment tools and techniques that utilizes optimistic, most probable, and cynical estimates to infer the total project cost and project completion dates.
For example, an estimate of the probability of completing a project at a cost of $100M can be carried out using Monte Carlo Analysis
x
A company is considering expanding their production capabilities with a new machine that costs $38,000 and has a projected lifespan of 8 years . They estimate the increased production will provide a constant $5,000 per year of additional income . Money can earn 1.7% per year, compounded continuously . Should the company buy the machine
Answer:
the company should not buy the machine.
Explanation:
Given that:
cost of the new machine = $38000
lifespan = 8 years
constant income = 5,000
Interest = 1.7%
no of days = 365
The value of earning at the time of buying can be calculated as follows:
[tex]= \dfrac{5000}{(1+ \dfrac{1.7}{100})^8}+ \dfrac{5000}{(1+ \dfrac{1.7}{100})^7}+\dfrac{5000}{(1+ \dfrac{1.7}{100})^6}+...+ \dfrac{5000}{(1+ \dfrac{1.7}{100})^0}[/tex]
[tex]= 5000 \begin {pmatrix} \dfrac{1}{(1.017)^8}+ \dfrac{1}{(1.017)^8}+\dfrac{1}{(1.017)^6}+...+ 1} \end {pmatrix}[/tex]
Sum of a Geometric progression [tex]S=a \dfrac{(r^n -1)}{(r-1)}[/tex]
[tex]S=(\dfrac{1}{1.017})^8 \dfrac{((1.017)^9 -1)}{(1.017-1)}[/tex]
[tex]S= \dfrac{((1.017)^9 -1)}{ (1.017)^8(0.017)}[/tex]
S = 8.4211
The value of earning at the time of buying = (5000 × 8.4211)-$5000
The value of earning at the time of buying = $42105.5 -$5000
The value of earning at the time of buying = $37105.5
The Machine price = $38000
If the value - Machine price > 0, then the company should buy the machine
∴
= $ 37105.5 - $38000
= -$ 894.5
Since the value is negative which is less than zero, then the company should not buy the machine.
The company should not buy the machine since it earns a negative NPV of $894.25.
Data and Calculations:
Cost of machine in present value = $38,000
Projected lifespan = 8 years
Additional annual income = $5,000
Compound interest rate = 1.7%
Present value annuity factor for 1.7% for 8 years = 0.13475
Present value of annual income = $37,105.75 ($5,000/0.13475)
Net present value = -$894.25 ($38,000 - $37,105.75)
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Firm A has set an MSRP of MXN 25 for its product, and the average discount to distributors is 30%. What is revenue on 40 million units
Answer: 700 million
Explanation:
From the question, we are informed that Firm A has set an MSRP of MXN 25 for its product, and the average discount to distributors is 30%.
The revenue on 40 million units will be calculated as:
= (40,000,000 × 25) × (100% - 30%)
= 1,000,000,000 × 70%
= 1,000,000,000 × 0.7
= 700,000,000
The answer is 700 million.
The revenue on 40 million units is 700,000,000.
The calculation is as follows:
= (40,000,000 × 25) × (100% - 30%)
= 1,000,000,000 × 70%
= 1,000,000,000 × 0.7
= 700,000,000
Therefore we can conclude that The revenue on 40 million units is 700,000,000.
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An all-equity firm is considering the following projects:
Project Beta IRR
W .85 8.9%
X .92 10.8
Y 1.09 12.8
Z 1.35 13.3
The T-bill rate is 4 percent, and the expected return on the market is 11 percent.
a. Which projects have a higher expected return than the firm's 11 percent cost of capital?
b. Which projects should be accepted?
c. Which projects would be incorrectly accepted or rejected if the firm's overall cost of capital were used as a hurdle rate?
Answer:
Projects Y and Z
b. Projects W and Z
c. Projects W and Y
Explanation:
CAPM equation : Expected return = Risk free rate + Beta x (Expected market return - Risk free rate)
W = 4% + [0.85 x (11% - 4%)] = 9.95%
X = 4% + (0.92 x 7%) = 10.44%
Y = 4% + (1.09 x 7%) = 11.63%
Z = 4% + (1.35 x 7%) = 13.45%
Projects Y and Z have an expected return greater than 11%
b. Projects W and Z should be accepted because its expected return is higher than the IRR
c. Project W would be incorrectly rejected because the expected rate of return is less than the overall cost of capital (i.e. 9.95 is less than 11). But its expected rate of return is greater than the IRR
Y would be incorrectly accepted because its expected rate of return is greater than the overall cost of capital but its expected rate of return is less than the IRR
Funday Park competes with Fun World by providing a variety of rides.
Funday sells tickets at $85 per person as a one-day entrance fee.
Variable costs are $17 per person and fixed costs are $428,400 per month.
Required:
1. Supposed Funday Park cuts its ticket price from $85 to $68 to increase the number of tickets sold. Compute the new breakeven point in tickets and in sales dollars.
a. The new breakeven point in tickets is? _
b. The new breakeven point in sales dollars is? $_
2. Ignore the information in question 1. Instead assume that Funday Park increases the variable cost from $17 to $34 per ticket. Compute the new breakeven point in tickets and in sales dollars.
a. The new breakeven point in tickets is?
b. The new breakeven point in sales dollars is? $_
3. Ignore questions 1 and 2. Supposed Funday Park reduces fixed costs from $428,400 per month to $319,600 per month. Compute the new breakeven point in tickets and in sales dollars.
a. The new breakeven point in tickets is?
b. The new breakeven point in sales dollars is? $_
4. Ignore information in questions 1 - 3. If Funday Park expects to sell 6,400 tickets, compute the margin of safety in tickets and in sales dollars.
a.
- = Margin of safety in units
- =
b.
- = Margin of safety in dollars
- =
5. Ignore information in questions 1 - 4. If Funday Park expects to sell 6,400 tickets, compute the operating leverage. Estimate the operating income if sales increase by 20%.
a.
/ = Degree of operating leverage
/ =
b. Estimate the new operating income if total sales increase by 20%?
The estimated operating income will be? $
Answer:
1. Supposed Funday Park cuts its ticket price from $85 to $68 to increase the number of tickets sold. Compute the new break even point in tickets and in sales dollars.
a. The new break even point in tickets is?
= $428,400 / ($68 - $17) = 8,400 tickets
b. The new break even point in sales dollars is?
8,400 x $68 = $571,200
2. Ignore the information in question 1. Instead assume that Funday Park increases the variable cost from $17 to $34 per ticket. Compute the new break even point in tickets and in sales dollars.
a. The new break even point in tickets is?
= $428,400 / ($85 - $34) = 8,400 tickets
b. The new break even point in sales dollars is?
8,400 x $85 = $714,000
3. Ignore questions 1 and 2. Supposed Funday Park reduces fixed costs from $428,400 per month to $319,600 per month. Compute the new break even point in tickets and in sales dollars.
a. The new break even point in tickets is?
= $319,600 / ($85 - $17) = 4,7400 tickets
b. The new break even point in sales dollars is?
4,700 x $85 = $399,500
4. Ignore information in questions 1 - 3. If Funday Park expects to sell 6,400 tickets, compute the margin of safety in tickets and in sales dollars.
break even point = $428,400 / ($85 - $17) = 6,300
a. Margin of safety in units = (6,400 - 6,300) / 6,400 = 1.56%
b. Margin of safety in dollars = ($544,000 - $535,500) / $544,000 = 1.56%
5. Ignore information in questions 1 - 4. If Funday Park expects to sell 6,400 tickets, compute the operating leverage. Estimate the operating income if sales increase by 20%.
EBIT₀ = [6,400 x ($85 -$17)] - $428,400 = $435,200 - $428,400 = $6,800
EBIT₁ = [7,680 x ($85 -$17)] - $428,400 = $522,240 - $428,400 = $93,840
% change in EBIT = ($93,840 - $6,800) / $6,800 = 12.8 x 100 = 1280%
a. Degree of operating leverage = 1280% / 20% = 64
b. Estimate the new operating income if total sales increase by 20%?
The estimated operating income will be $93,840
UPS, a delivery services company, has a beta of , and Wal-Mart has a beta of The risk-free rate of interest is and the market risk premium is %. What is the expected return on a portfolio with 40% of its money in UPS and the balance in Wal-Mart?
The question is incomplete as it does not contain values. The following is the complete question.
UPS, a delivery services company, has a beta of 1.2, and Wal-mart has a beta of 0.8. The risk-free rate of interest is 4% and the market risk premium is 7%. What is the expected return a portfolio with 40% of its money in UPS and the balance in Wal-Mart?
Answer:
The expected return of the portfolio is Portfolio r = 0.1072 or 10.72%
Explanation:
The expected return of a portfolio is the weighted average of the individual stocks' expected returns that form up the portfolio.
The formula for portfolio's expected return is as follows,
Portfolio r = wA * rA + wB * rB + ... + wN * rN
Where,
w is the weight of each stock in the portfolior is the expected return of each stockTo calculate the expected return of the portfolio, we will first calculate the expected return of UPS and Wal Mart using the CAPM equation.
The formula for expected return under CAPM is,
r = rRF + Beta * rpM
Where,
rRF is the risk free raterpM is the risk premium of marketr UPS = 0.04 + 1.2 * 0.07
r UPS = 0.124 or 12.4%
r Wal Mart = 0.04 + 0.8 * 0.07
r Wal Mart = 0.096 or 9.6%
Portfolio r = 0.4 * 0.124 + 0.6 * 0.096
Portfolio r = 0.1072 or 10.72%