Important Vocab

Based on the vocab & videos in Chapter 8 complete the following:

What is GDP?

• Currency value of all _____________ goods and services produced

_________________ in a given period

• Total income of a nation
• Measure of nation‟s economic well-being
• Measure of a nation‟s ______________________ from one period to the next
• Most commonly calculated via ____________________

Four components of GDP expenditures

• Consumption: $ amount of goods and services purchased by__________________
  • ONLY counts goods produced in the _____________
  • Examples: __________________________________

• Investment: $ amount spent by business on productive resources and purchases of _________ by consumers! - New machines, new factories, research
  • ____________________________ also counts

• Government: $ amount spent ____________________provided goods and services
  • Example: ______________________________________

• Net exports = _______________________________

Exports: ________________________________________

Imports:________________________________________

GDP = _____ + _____ + _____ + _____

What’s NOT included in GDP?

• Intermediate goods            ¨ Financial transactions
• Used goods            ¨ Household production
• Underground production (black    ¨ Transfer payments market)           

What GDP does not tell us:

• Does not measure ___________________
• Does not measure non-monetary output or transactions (e.g., barter, household activities) ¨ Does not take into account desirable externalities, such as ________________

_________________________________

• Does not measure social well-being
• Correlates to standard of living but is _______________________________

*NOTE: I don't really know what subject this would be considered. It's from my business law class.

Outsourcing specialized operational tasks has become a common practice. When outsourcing involves the transfer of personal information, issues of security and privacy are raised. Customers may consent to the collection of personal data without realizing that their information could be shared with another company located halfway around the world and subject to different disclosure and protection rules. In recognition of international privacy concerns, the Organization for Economic Co-operation and Development (OECD) created guidelines to enhance privacy protection during trans-border data exchanges. Guideline 10 suggests that personal data should not be used or disclosed without the consent of the owner or authority of law.

Canadian outsourcing to the United States has become even more controversial since the enactment of the USA PATRIOT Act.15 This legislation allows US law-enforcement officials to obtain personal records or information from any source in the country without the data owner knowing. As a result, there have been several Canadian challenges of personal data outsourcing to the United States. In B.C.G.E.U. v. British Columbia (Minister of Health), union members argued that the Ministry of Health was violating patients’ rights to privacy under section 7 of the Charter by outsourcing physician billing data that contained personal patient information to a private U.S. company.16 The BC Supreme Court disagreed, holding that as long as the contractual arrangement authorized under the Canada Health Act ensured that a reasonable expectation of privacy was protected, the practice was acceptable. Since then BC., Nova Scotia, and Alberta passed legislation that restricts public (not private) sector trans-border outsourcing.17

The Privacy Commissioner rejected a similar complaint against the Canadian Imperial Bank of Commerce. The bank outsourced the processing of credit card transactions to an American company. The specific confidentiality and security contained in the outsourcing agreement were approved by the Office of the Superintendent of Financial Institutions, and this satisfied the Commissioner. Both decisions turned on the specific terms of the outsourcing agreement and prior regulatory approval of the terms.

When considering sending sensitive information across the border and outsourcing to American firms, businesses should:

• Undertake a security analysis of the American company prior to contracting;

• Inform the affected customer data owner;

• Include specific confidentiality, security, and reporting provisions in the outsourcing agreement;

• Seek regulatory approval of the agreement, if available; and

• Regularly audit the privacy practices of the outsourcing company.

Increased privacy concerns can be anticipated as the transnational public cloud computing industry replaces user owned software, desks, and laptops as the primary custodians of personal information. “By 2017, enterprise spending on cloud computing will amount to a projected $235.1 billion, triple the $78.2 billion spent in 2011. ….(in 2014) global business spending for infrastructure and services related to

the cloud will reach an estimated $174.2 billion, up 20 percent from the amount spent in 2013.”

Question (1): Are there certain types of information that should remain within Canadian borders? If Canadian data is at greater risk of disclosure when transferred to the United States, why not ban all public and private outsourcing to the United States? Discuss.

Question (2): How can personal information be protected when stored on a transnational cloud server?

Blades, Inc. Case Decisions to Use International Financial Markets As a financial analyst for Blades, Inc., you are reasonably satisfied with Blades’ current setup of exporting “Speedos” (roller blades) to Thailand. Due to the unique arrangement with Blades’ primary customer in Thailand, forecasting the revenue to be generated there is a relatively easy task. Specifically, your customer has agreed to purchase 180,000 pairs of Speedos annually, for a period of 3 years, at a price of THB4,594 per pair. The current direct quotation of the dollar-baht exchange rate is $.024. The cost of goods sold incurred in Thailand (due to imports of the rubber and plastic components from Thailand) runs at approximately THB2,871 per pair of Speedos, but Blades currently only imports materials sufficient to manufacture about 72,000 pairs of Speedos. Blades’ primary reasons for using a Thai supplier are the high quality of the components and the low cost, which has been facilitated by a continuing depreciation of the Thai baht against the U.S. dollar. If the dollar cost of buying components becomes more expensive in Thailand than in the United States, Blades is contemplating providing its U.S. supplier with the additional business. Your plan is quite simple; Blades is currently using its Thai-denominated revenues to cover the cost of goods sold incurred there. During the last year, excess revenue was converted to U.S. dollars at the prevailing exchange rate. Although your cost of goods sold is not fixed contractually as the Thai revenues are, you expect them to remain relatively constant in the near future. Consequently, the baht-denominated cash inflows are fairly predictable each year because the Thai customer has committed to the purchase of 180,000 pairs of Speedos at a fixed price. The excess dollar revenue resulting from the conversion of baht is used either to support the U.S. production of Speedos if needed or to invest in the United States. Specifically, the revenues are used to cover cost of goods sold in the U.S. manufacturing plant, located in Omaha, Nebraska. Ben Holt, Blades’ CFO, notices that Thailand’s interest rates are approximately 15 percent (versus 8 percent in the United States). You interpret the high interest rates in Thailand as an indication of the uncertainty resulting from Thailand’s unstable economy. Holt asks you to assess the feasibility of investing Blades’ excess funds from Thailand operations in Thailand at an interest rate of 15 percent. After you express your opposition to his plan, Holt asks you to detail the reasons in a detailed report.

1.)Construct a spreadsheet to compare the cash flows resulting from two plans. Under the first plan, net baht-denominated cash flows (received today) will be invested in Thailand at 15 percent for a 1-year period, after which the baht will be converted to dollars. The expected spot rate for the baht in 1 year is about $.022 (Ben Holt’s plan). Under the second plan, net baht-denominated cash flows are converted to dollars immediately and invested in the United States for 1 year at 8 percent. For this question, assume that all baht-denominated cash flows are due today. Does Holt’s plan seem superior in terms of dollar cash flows available after 1 year? Compare the choice of investing the funds versus using the funds to provide needed financing to the firm.

James, Kinkaid, the owner of the Kinkaid Company was convinced by Douglas Shaw, one of his employees, that a fellow worker, Dick Miller, had been stealing money from the company. During a break in the company's conference room, Kinkaid fired Miller in front of other workers, accused him of stealing from the company, searched through his briefcase over his objections, and finally forcibly escorted him to his office to await the arrival of the police, which he had his assistant summon. Miller was indicted for embezzlement but subsequently was acquitted upon establishing his innocence. What rights, if any, does Miller have against Kinkaid? Please discuss.

2. Sandra Davis was a worker in a New York hotel owned by the Royal Crown International Hotel Co. One day, Henry Lambert, the manager of the hotel support team, gathered all the workers and told them that a great deal of theft had taken place within the hotel. He warned the assembled workers that unless someone confessed or revealed the name of the responsible person, he would start to fire all the workers according to seniority. When no one volunteered the information he was seeking, Lambert fired Sandra Davis, a single parent of three small children. Ms Davis became very upset, began to cry, sustained emotional distress, mental anguish, and loss of wages and earnings.

Ms. Davis sued the Royal Crown International Hotel Co and Henry Lambert alleging that the defendants acted recklessly and outrageously, intending to cause emotional distress and anguish. The defendants argued that damages for emotional distress are not recoverable unless physical injury occurs as a result of the distress. Will Davis be successful on her complaint? Please explain.

3. Fred Banyon, the owner of a rural property, has a place on his land where he piles trash. The pile has been there for three months. Carl, a neighbor of the adjoining property, without Fred's consent or knowledge, threw his trash onto the trash pile. Fred discovered what Carl had done and sued. What tort, if any, has Carl committed? Please explain.

James, Kinkaid, the owner of the Kinkaid Company was convinced by Douglas Shaw, one of his employees, that a fellow worker, Dick Miller, had been stealing money from the company. During a break in the company's conference room, Kinkaid fired Miller in front of other workers, accused him of stealing from the company, searched through his brief case over his objections, and finally forcibly escorted him to his office to await the arrival of the police, which he had his assistant summon. Miller was indicted for embezzlement but subsequently was acquitted upon establishing his innocence. What rights, if any, does Miller have against Kinkaid? Please discuss.

2. Sandra Davis was a worker in a New York hotel owned by the Royal Crown International Hotel Co. One day, Henry Lambert, the manager of the hotel support team, gathered all the workers and told them that a great deal of theft had taken place within the hotel. He warned the assembled workers that unless someone confessed or revealed the name of the responsible person, he would start to fire all the workers according to seniority. When no one volunteered the information he was seeking, Lambert fired Sandra Davis, a single parent of three small children. Ms Davis became very upset, began to cry, sustained emotional distress, mental anguish, and loss of wages and earnings.

Ms. Davis sued the Royal Crown International Hotel Co and Henry Lambert alleging that the defendants acted recklessly and outrageously, intending to cause emotional distress and anguish. The defendants argued that damages for emotional distress are not recoverable unless physical injury occurs as a result of the distress. Will Davis be successful on her complaint? Please explain.

3. Fred Banyon, the owner of a rural property, has a place on his land where he piles trash. The pile has been there for three months. Carl, a neighbor of the adjoining property, without Fred's consent or knowledge, threw his trash onto the trash pile. Fred discovered what Carl had done and sued. What tort, if any, has Carl committed? Please explain.

1. The Public Good Problem A national park that costs MC = 80 dollars to provide to society has been privatized and handed over to a private firm; the firm is mandated to price at marginal cost. There are two types of consumers, a group of high demand consumers (group A) that have an aggregate demand function equal to MB = 100 – Q, and a low demand group of consumers (group B) with aggregate demand equal to MB = 50 – Q, where Q is thousands of acres.

A. How many acres will be provided by the firm when pricing at MC, assuming that the low-demand group will free-ride on the high-demand group?

B. What is the aggregate demand curve for the national park? (Hint: the aggregate demand curve for a public good is the vertical aggregation of the individual demand curves.)

C. Calculate the aggregate consumer surplus for the two types of consumers when the firm prices at MC. (Hint: in this case, the group B is free riding, and they can gain extra consumer surplus)

D. If the national park is provided by the government, how many acres SHOULD be provided?

Springfield Acting Co. is a professional actor training group that trains stage actors and is headquartered in Los Angeles. The CEO of the company, Milhouse Van Houton, is considering expanding and opening an office in New York City but he just received an interesting business opportunity in the San Francisco area to partner with a movie production company located there. Milhouse knows he can only accept one of these opportunities at the current time. He has already purchased his non-refundable ticket to New York, but his hotel reservation is still cancelable. The cost of each trip is outlined below.

Required:

1. What are the relevant costs of each trip?
2. What is the incremental cost?
3. Without considering qualitative factors (thus use numbers to analyze), which alternative should Milhouse choose? Why?
4. What are two qualitative factors that Milhouse might consider?

Park Corporation is planning to issue bonds with a face value of $2,400,000 and a coupon rate of 9 percent. The bonds mature in 10 years and pay interest semiannually every June 30 and December 31. All of the bonds were sold on January 1 of this year. Park uses the effective-interest amortization method and also uses a premium account. Assume an annual market rate of interest of 7.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Required:

1. Prepare the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

   
    
2. Prepare the journal entry to record the interest payment on June 30 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answer to whole dollars.)

3. How will Park present its bonds on its June 30 balance sheet? (Round your final answer to whole dollars.)

1. The Public Good Problem

A national park that costs MC = 80 dollars to provide to society has been

privatized and handed over to a private firm; the firm is mandated to price at

marginal cost. There are two types of consumers, a group of high demand

consumers (group A) that have an aggregate demand function equal to MB = 100 –

Q, and a low demand group of consumers (group B) with aggregate demand equal to

MB = 50 – Q, where Q is thousands of acres.

1. How many acres will be provided by the firm when pricing at MC, assuming that the low-demand group will free-ride on the high-demand group?

2. What is the aggregate demand curve for the national park? (Hint: the aggregate demand curve for a public good is the vertical aggregation of the individual demand curves.)

3. Calculate the aggregate consumer surplus for the two types of consumers when the firm prices at M (Hint: in this case, the group B is free riding, and they can gain extra consumer surplus)

4. If the national park is provided by the government, how many acres SHOULD be provided?

1. Assume that a national park has recently allowed people to drive all terrain vehicles on trails throughout the park. These vehicles create noise that scare the park’s wildlife lessening the quality of visits for other park enthusiasts.   You are asked to conduct a study to show the change in the park’s value.

a) What specific valuation method should you use?

b) How would you use that method?

c) What are some problems that might results from your use of that method?

2. In order to increase economic activity a city proposes to allow diesel powered delivery vehicles to operate in residential neighborhoods.   Diesel exhaust contains soot which is a major cause of asthma and other respiratory ailments leading to a decrease in the quality of life in these neighborhoods.   A neighborhood group opposed to this proposal hires you to conduct a valuation study to show the decrease in the quality of life.  

a) What specific valuation method should you use?

b) How would you use that method?

c) What are some problems that might results from your use of that method?