1. Please list and discuss the roles played by the concept of new technology as it relates to the decision to build factory #5: Even if sales volume is flat, profits are low, and interest rates are high, why would a firm desire to build factory #5, at least in theory?
2. What is residential construction and sales volume, exactly? How many housing units are built, and sold, in this country in a typical year (before March, 2020)?
3. What are six of the occupations that are involved in this sector of the economy? That is, when there is a 20% drop in this activity, residential construction and sales volume, which workers lose their jobs? Why?
4. What could our government do to help cause a rise in residential construction and sales volume in our economy? Please list and discuss three actions that our government could take, at least in theory. What are the forces that may cause a rise or a drop in this area of the economy in the next 12 to 24 months?
New Plant and Equipment Construction, Residential Construction and Sales Volume: One of the greatest factors influencing the volume of factory (new plant and equipment) construction is the R&D (research and development) of new technology. Of course, WE HAVE TO BUILD THE NEW FACTORY! In our factory #5 example, the R&D AND CONSTRUCTION of Factory #5 may result in a. a dramatic drop in the cost per unit (the cost per pair of shoes, in our hypothetical) and/or b. The introduction of a product that is..... NEW! And IMPROVED!, thus causing a rise in Demand, where, if it captures the imagination of the consumer, we may RAISE THE PRICE and increase profits by a great amount. Let’s say that our price per pair currently is $30 per pair, and our cost per pair currently is $27, for a profit of $3 per pair. If a new method of mass producing shoes that saves on labor costs is “invented”, for lack of a better word, we will want and need to build this new factory. Let’s say that Factory #5 lowers the cost per pair to $21 by using less than half of the workers used by Factory #4. We will build this new factory! $30 per pair minus $21 per pair yields a profit of $9 per pair!!!! BUT WE MUST SELL THOSE NEW SHOES!!! If our rivals are building this factory, and we do not.... We will die. (We have rivals) - VERY few firms are true monopolies. Factory #5 may mass produce TWO million pairs of shoes compared to #4 with one million pairs in yearly output. We may build factory #5, then shut down factory #1... thus resulting in FEWER WORKERS ON OUR PAYROLL... SAD BUT TRUE.....Our sales could be dropping along with our profits. Interest rates may rise. We will still need to build that factory. Especially if the product mass produced by this new factory causes a rise in Demand. YET THERE IS A FINITE SUPPLY OF LOANABLE FUNDS AND EQUITY FINANCING available, thus, we have a tragedy: some firms are doing so well that they wish to expand---but are denied financing. What is the proper role of the government? The Obama Admin. lent money directly to Tesla in order for them to expand in Fremont. This may be called ‘industrial policy’. It worked out well. If not, Obama may have been a one term President, even though he was an excellent leader by any metric. Yet the government could be criticized for ‘playing favorites’ since THERE IS A FINITE SUPPLY OF FUNDING that the government may access. If the ‘new’ Mercedes Benz assembly plant built in Alabama (yes, this is on U.S. soil) represented a new and improved SUV, then why did this German firm build the plant here? On U.S. soil? Cheaper labor (the U.S. workers make less and have fewer benefits than their German counterparts),---incredible, but true...the firm will enjoy lower distribution costs (all those rich people on the east coast of the U.S. will buy our cars), and it is easier to ship them from Alabama than from Germany, while avoiding any possible hikes in tariffs the Trump Admin may levy NOW OR LATER---- do you trust Trump? Are you feeling lucky today? How about the next 20 years? I mean, your buyers are here on the East Coast, and Alabama offered HUGE tax incentives to Daimler (Mercedes Benz) to build the plant in Alabama instead of South Carolina, home to a BMW plant. Alabama had to ‘outbid’ South Carolina for the new factory. Also, the German firm avoids any and all possible labor disruptions by dockworkers in the U.S.---now, and for the next 20 years. We do not care if the firm’s headquarters are in Germany. If they build the factory on U.S. soil, then the expenditure is part of the Total Spending on U.S. goods and services = C+ I+ G+(X-M) equation. More on this later!
In: Economics
16. The price elasticity of demand coefficient measures the magnitude of the proportional (percent) change in the "quantity of demand" for every one-percent change in the price of the good under consideration.
True
False
17. With the passage of time, it is likely that the price elasticity of demand coefficient value will become greater (increase- in absolute value terms).
True
False
18. Helen receives a large raise at work and as a result, begins to buy fewer macaroni and cheese dinners. We can conclude that for Helen, macaroni and cheese is an inferior good and its income elasticity coefficient will be negative (less than zero).
True
False
19. Cross-price elasticity of demand is measured as: Ec = percentage change in the quantity demanded of one good / percentage change in the price of a related good.
True
False
20. "Normal goods" are goods that people choose to purchase more of as their income increases.
True
False
21. The Coase Theorem argued
All of these points are argued in the Coase Theorem
In situations where the Coase Conditions are met, it does not matter which party receives the property right, the socially optimal solution will emerge.
Private solutions to externality problems are not always possible, implying a role for government in solving complex issues.
If there are no or minimal barriers to negotiation and if property rights are fully specified, interested parties will bargain privately to correct externalities.
22. Income elasticity of demand coefficients are always positive in value.
True
False
23. If a firm 'decreases' the price of a good along the elastic range of their demand curve then total revenue will 'decrease'.
True
False
24. A firm should increase the price of goods along the inelastic range of their demand curve as this will increase total revenue.
True
False
25. If a firm identifies that it's product has an Elasticity of Demand value equal to -9.1 then it should increase the price of the good in the market to assure maximum revenue is earned.
True
False
26. The larger the number of "substitutes" for a good in the marketplace the greater the responsiveness to a price change and the elasticity of demand would be more "elastic."
True
False
27. The greater the degree of "necessity" in acquiring a good the greater the degree of inelasticity in demand.
True
False
28. When the change in the quantity of demand for a good is relatively small compared to the change in price (being relatively large) then the price elasticity of demand is relatively elastic.
True
False
29. Generally, demand becomes more elastic over time.
True
False
30. Changes in the degree of price elasticity of demand along the demand curve have no impact on the total revenue of the firm.
True
False
31. The "tragedy of the commons" suggests that "common ownership" instead of "private ownership" of property leads to overuse of the resource under consideration and resource depletion follows: (for example pasture land held in common instead of privately).
True
False
32. Private property rights give the owner the ability to exercise control over a resource.
True
False
33. A good that is both rival and exclusive is called a
an externality good
a public good
an open access good
a private good
a quasi-private good
34. The lighthouse may not have been built by private firms due to
All of these would result in the lighthouse not being built, ceteris paribus.
The "free rider problem."
Such a good (or service) would be more consistent with characteristics of "public goods" than "private goods."
Lack of exclusion.
35. An externality is BEST understood as
any cost or benefit of a transaction that is not accounted for in the market price, not internalized
a benefit of a transaction that is enjoyed by a third party
a cost or benefit that arises when market price changes
the external revenue generated by a firm
a cost of a transaction that is borne by a third party
36. Which of the following would not be considered a "negative externality?"
measles vaccinations
long rap music at 2 a.m. in the apartment next door to you and you have to be at work by 8:00 a.m.
air and water pollution
an Alaskan oil spill
traffic congestion
37. A. Pigou suggested that a way to correct for "negative externalities" was to
tax the supply side of the industry
deregulate the industry in terms of pollution standards
subsidize the supply side of the industry
clearly assign property rights
38. The Ronald Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of
any type of market failure
negative externalities as long as transaction costs are small and property rights are assigned
positive externalities as long as transaction costs are small and property rights are assigned
negative externalities as long as transaction cost are great and property rights are assigned
39. Give the Price Elasticity of Demand Equation: (Q2-Q1) / [(Q2 + Q 1) / 2] / (P2 - P 1) / [(P2 + P1) / 2]. If at a price of $11.00 the quantity of demand is for 10 units and at the price of $10.00 the quantity of demand is for 20 units, then the "Price Elasticity of Demand coefficient value is ( in absolute value terms):
7
4
2.5
11.5
1.5
40. It is generally believed that markets do a good job handling the problems of externalities.
True
False
In: Economics
5. In Year 6, a donor gives $112.000 to a private not-for-profit entity to enable it to buy a new bus for transportation purposes. Near the end of Year 7. this money is used for the stipulated purpose. The donor made no provisions about the accounting for this acquisition. Which of the following is true about the statement of activities for Year 7?
a. Net assets without donor restrictions increased by $112,000.
b. Net assets with donor restrictions did not change.
c. Net assets without donor restrictions did not change.
d. Net assets with donor restrictions goes up by $112,000 and also down by $112.000
6. In Year 6, a donor gives $112,000 to a private not-for-profit entity to enable it to pay the salary of a new doctor to be hired by the organization. Near the end of Year 7, this money is used for the stipulated purpose. Which of the following is true about the statement of activities for Year 7？
a. Net assets with donor restrictions increased by $112,000.
b. Net assets with donor restrictions did not change.
c. Net assets without donor restrictions goes up by $112.000 and also down by $112.000
d. Net assets with donor restrictions goes up by $112.000 and also down by $112.000.
7. The governing board of a private not-for-profit entity votes to set $400,000 in cash aside in an investment fund so that this money and future interest will be available in five years, when a new building is scheduled for construction. Which of the following is not true?
a. The investments are reported on the statement of financial position as net assets without donor restrictions,
b. The acquisition of the investments is not reported on the statement of activities.
c. Board-designated funds will appear in the net asset section of the week of not as net assets with donor restrictions
d. Income earned by these investments appears on the statement of activities under the out donor restrictions.
8. A private not-for-profit entity receives three large cash donations .
One gift of $70,000 is restricted by the down so that it cannot be spent for four years .
One gift of $90,000 is restricted to pay the salaries of the entity's workers .
One gift of $120.000 must be held forever with the income to be used to provide food for tid families. In the current yeas, income of $10,000 was carved but not spen.
What is the increase in the current year in wet assets with donor restrictions
a. $190,000 b. $210,000 C. $280,000 d. $290,000
9. A private not-for-profit university changes student tuition of $1 million for the current year. Finan cial aid grants total $220,000. The school also receives a $100,000 grant restricted for faculty sala ries. Of that amount, $30,000 is spent appropriately this year. In preparing a statement of activities, which of the following is not true?
a. Net assets without donor restrictions should show an increase of $30,000 for net assets reclassified
b. Net assets without donor restrictions should report revenue of $1 million
c. Net assets without donor restrictions should report expenses of $30.000
d. Net assets without donor restrictions should report a direct reduction of $220.000 in reporting the tuition revenue.
10. Which of the following statements about the reporting of functional expenses is not true!
a. A statement of functional expenses is now required of all private not-for-profit entities. b. Functional expenses are divided between program services and supporting services. c. Functional expenses can be reported as a footnote rather than as a separate statement of func tional expenses.
d. Functional expenses can be reported within the statement of activities rather than as a separate statement of functional expenses.
11. A private not-for-profit entity has the following expenses for the current year.
Research to cure disease $60,000
Fundraising costs 70,000
Work to help individuals with disabilities .... 40,000
Administrative salaries... 90,000
How should the not-for-profit entity report these costs?
a. Program service expenses of $100,000 and supporting service expenses of $160,000
b. Program service expenses of $160,000 and supporting service expenses of $100,000
c. Program service expenses of $170,000 and supporting service expenses of $90,000
d. Program service expenses of $190,000 and supporting service expenses of $70,000
12. A private not-for-profit entity spends $100,000 to send a mailing that solicits donations and pro- vides educational and other information about the charity. Which of the following is true?
a. No part of the $100,000 can be reported as a program service expense.
b. Some part of the $100,000 must be reported as a program service expense.
c. No authoritative guidance exists, so the entity can allocate the cost as it believes best.
d. Under certain circumstances, the entity should allocate a portion of the $100,000 to program service expenses.
13. A private not-for-profit entity sends a mailing to all of its current and former members regardless of whether they have ever donated money or not. The mailing has a total cost of $22,000. It asks for monetary contributions to help achieve the charity's stated mission. In addition, 80 percent of the mailed material is educational in nature, providing information about the entity's goals. Which of the following is true?
a.Some part of the $22000 should be reported as a program service cost because of the educational materials included.
b.No part of the $22000 should be reported as a program service cost because there is no specific call to action.
C. No part of the $22000 should be reported as a program service cost because the mailing was sent to both current and former members regardless of their donation history.
d.Some part of the $22000 should be reported as a program service cost because more than 50 percent of the material was educational in nature.
In: Accounting
A 30-year-old woman, Isabel Yang, was brought into the emegency room. she had been dining in a restaurant, and while eating dessert she noticed the following symptoms. initially there was a tingling sensation that affected her mouth and lips, but then spread to the faced neck. then the tingling spread down her arms and legs, to the fingers and toes.
at the hospital Isabel reported numbness of the areas that previously tingled and had difficulty walking in a coordinated fashion. she was asked to describe the meal she had just eaten and stated that she had shrimp cocktail as and appetizer, followed b salad, steak, and baked potatoe and green beans, and apple pie and coffee for dessert. Isabel had no history of allergic response to shellfish. her superficial reflexes were almost absent, and her deep reflexes were markedly hypoactive. an extracellular electrode was placed in Isabel's ulnar nerve. then the palmer surface of her little finger was scraped with the physician's fingernail in a way that would normally be painful to the patient. the patient could not feel this stimulus, and no action potentials were detected in the ulnar nerve. when an intracellular microelectrode was placed on a sensory nerve fiber in the ulnar nerve, the resting membrane potential was found to be near -70 mV (normal). when an action potential was evoked by repeated vigorous scraping of the skin of the little finger as described earlier, the action potential was slower to rise and of shorter amplitude than that expected from measurements in normal individuals. the duration of the action potential was normal.
1. what can be concluded from the failure to elicit action potential in the ulnar nerve by vigorous scraping of the skin of the little finger
2. what can be concluded from the gross neurologic symptoms and findings taken together
3. what can be concluded from the findings that the resting membrane potential in the sensory fibers in the ulnar nerve is near normal.
4. what might explain the finding that the action potential in the sensory fiber in the ulnar nerve is slow to rise and of smaller amplitude than normal.
5. why is the action potential in the sensory fiber of normal duration
6. what may be the cause of Isabel's difficulties
7. how should Isabel's care be managed, and what is her prognosis
In: Computer Science
principles of corporate finance chapter 9
1. Suppose a firm uses its company cost of capital to evaluate all projects. Will it underestimate or overestimate the value of high-risk projects?
2. A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company’s common stock is .5. What is the company cost of capital? What is the after-tax WACC, assuming that the company pays tax at a 35% rate?
4. Define the following terms: a. Cost of debt b. Cost of equity c. After-tax WACC d. Equity beta e. Asset beta f. Pure-play comparable g. Certainty equivalent
5. Asset betas EZCUBE Corp. is 50% financed with long-term bonds and 50% with common equity. The debt securities have a beta of .15. The company’s equity beta is 1.25. What is EZCUBE’s asset beta?
9. True or false?
a. The company cost of capital is the correct discount rate for all projects because the high risks of some projects are offset by the low risk of other projects.
b. Distant cash flows are riskier than near-term cash flows. Therefore long-term projects require higher risk-adjusted discount rates.
c. Adding fudge factors to discount rates undervalues long-lived projects compared with quick-payoff projects.
10. A project has a forecasted cash flow of $110 in year 1 and $121 in year 2. The interest rate is 5%, the estimated risk premium on the market is 10%, and the project has a beta of .5. If you use a constant risk-adjusted discount rate, what is a. The PV of the project? b. The certainty-equivalent cash flow in year 1 and year 2? c. The ratio of the certainty-equivalent cash flows to the expected cash flows in years 1 and 2?
12. Nero Violins has the following capital structure:
| security | beat | total market value(sillions) |
| debt | 0 | 100 |
| preferred stock | 0.2 | 40 |
| common stock | 1.2 | 299 |
a. What is the firm’s asset beta? (Hint: What is the beta of a
portfolio of all the firm’s securities?) b. Assume that the CAPM is
correct. What discount rate should Nero set for investments that
expand the scale of its operations without changing its asset beta?
Assume a risk-free interest rate of 5% and a market risk premium of
6%.
16. What types of firms need to estimate industry asset betas? How would such a firm make the estimate? Describe the process step by step.
17. Binomial Tree Farm’s financing includes $5 million of bank loans. Its common equity is shown in Binomial’s Annual Report at $6.67 million. It has 500,000 shares of common stock outstanding, which trade on the Wichita Stock Exchange at $18 per share. What debt ratio should Binomial use to calculate its WACC or asset beta? Explain.
In: Finance
Dark Ltd acquired a taxi business on 1 January 2018 for $1,600,000. The value of the assets of the business at that date, based on fair value less cost to disposal, were as follows:
Office building 1,000,000
Taxi vehicles 480,000
Taxi license 120,000
Trade receivables (net) 40,000
Cash 20,000
Trade payables 80,000
The taxi business was considered to be a cash-generating unit after
the acquisition. The estimated useful life of all taxi vehicles was
5 years and that of the office building was 10 years from 1 January
2018. St raightline depreciation was used by Dark Ltd for all of
its tangible assets. All tangible assets were assumed to have zero
residual value.
On 1 February 2018, this cash-generating unit had two taxi vehicles
stolen. The fair value less cost to disposal of these taxi vehicles
was $120,000. As a result of this, Dark Ltd wanted to recognize an
impairment loss of $180,000 (inclusive of the stolen vehicles) due
to the decline in the value in use of the cash-generating unit. The
market price of the office building was $1,050,000 on 1 February
2018.
a Determine the goodwill acquired on 1 January 2018.
b Prepare accounting journal entries to record the impairment of the cash-generating unit on 1 February 2018. Show your workings.
c Should the following be classified as held for sale or discontin ued operations? Explain your rationale in detail.
i Dark Ltd is committed to a plan to sell its staff quarters and has engaged a property agent to locate a buyer. Dark Ltd's employees will use the staff quarters until the completion of the new staff quarters in six months' time. The old staff quarters can be transferred to the buyer when all employees move out.
ii Dark Ltd has been using two factories to manufacture traditional light bulbs. An increasing demand for LED lights has caused a significant drop in sales of the light bulbs. Dark Ltd has decid ed to move all the production facilities to one of the factories but keep the empty factory in the hope that the demand for traditional light bulbs may go back up in the near future.
In: Accounting
ACY Limited (“ACY”) conducted a trading business in Region ONE (“the Region”). The information below is noted for the year ended 31 December 2019 (“the year”):
The Equipment
On 1 April 2019, ACY purchased an equipment at a cost of $30,000, with an estimated useful life of five years and a residual value approximate to zero. This was used in the company’s head office. Cost model and straight-line depreciation method were adopted. The purchase of equipment was recorded by ACY on the same date.
Near the end of December 2019, an accident occurred in the head office, leading to the partial damage of the equipment. Technician inspected the equipment and determined that its productivity has permanently deteriorated due to the physical damage occurred. This was estimated that the equipment could be resold to the market for $18,000; while its value-in-use was around $20,000 as at 31 December 2019.
The Bonds Payable
On 1 January 2019, ACY issued a 10% bond with face value of $30,000 at par, due in 2025. The first interest payment is on 1 January 2020. The issue of bond was recorded immediately
Tax Rules in the Region
A standard income tax rate of 10% is charged for all taxable income, net of deductible expenses, for business (i.e. corporate taxpayers) in the Region. Normally, accounting income/(expense) is taxable/(tax-deductible) when recognised in the period, except for:
(a) The local tax laws allow 100% tax deduction for the costs of all types of office equipment and machines in the year of purchase. This shall be the only tax deduction available related to these equipment and machines, regardless of the corporate taxpayer’s subsequent accounting treatments on these assets.
(b) As a matter of the Region’s tax policy, tax deduction for interest expenses is available only to those arising from bank borrowing. Any other interest expenses, including those from the issue of notes and bonds in any circumstances, are not allowed for tax deduction.
In 2019, ACY recorded an operating profit of $330,000. However, the company has not yet recognized any depreciation, impairment loss, interest, and income tax expense for the year.
Required:
(i) Advise as to whether any impairment loss shall be recognized in respect of the equipment for the year.
(ii) Prepare all the adjusting entries required for the year.
In: Accounting
Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales: Monthly sales in units 5,000 8,000 10,000 Cost of food sold $10,000 $16,000 $20,000 Wages and fringe benefits 4,200 4,320 4,400 Fees paid delivery help 1,100 1,760 2,200 Rent on building 1,800 1,800 1,800 Depreciation on equipment 700 700 700 Utilities 300 360 400 Supplies (soap, floor wax, etc.) 200 260 300 Administrative costs 1,200 1,200 1,200 Total $19,500 $26,400 $31,000 (a) Identify each cost as being variable, fixed, or mixed. Cost of food sold Answer
Wages and fringe benefits
Answer Fees paid delivery help Answer
Rent on building Answer
Depreciation on equipment Answer
Utilities Answer
Supplies (soap, floor wax, etc.) Answer
Administrative costs Answer
(b) Use the high-low method to develop a schedule identifying the amount of each cost that is fixed per month or variable per unit. Total the amounts under each category to develop an equation for total monthly costs. Round variable cost answers to two decimal places. Fixed Costs Variable Costs Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Administrative costs Total costs equation
(c) Predict total costs for a monthly sales volume of 9,100 units
In: Accounting
Reflect on the concepts and differences between benefit, marginal benefit, cost, and marginal cost. We have applied these ideas to several scenarios: tax rates, how many employees should a firm hire, and how many years of education should an individual pursuit. Outside of the examples we have discussed, describe an application of the ideas of marginal benefit/cost to a situation in your personal or professional life. Clearly explain the difference between total benefit and marginal benefit and total cost and marginal cost in the context of your example.
In: Finance