A large portion of US oil production comes from hydraulic fracturing (fracking). Production from fracked wells quickly declines, requiring constant drilling of new wells and installation of associated pipelines to keep production at current high levels. Assume that the Trump Administration carries out the threat to levy steep tariffs on imported steel. Companies that supply pipe to the oil industry for wells and pipelines see steep price increases for steel and have to raise their prices. Fill in the table below and explain the effects on U.S. and global oil markets.
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shifts to the right |
shifts to the left |
stays the same |
|
U.S. demand curve for oil |
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U.S. supply curve for oil |
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Rest of world demand for oil |
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Rest of world supply of oil |
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Total world demand curve for oil |
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Total world supply curve for oil |
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rise(s) |
fall(s) |
change(s) little |
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World oil prices |
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U.S. oil prices |
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World oil consumption |
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U.S. oil consumption |
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U.S. oil net exports |
Explain your answers.
In: Economics
If the demand for loanable funds shifts to the left and the supply of loanable funds shifts to the right, then the real interest rate rises.
Select one:
True
False
Question text
In the open economy macroeconomic model of the U.S. economy, national savings is equal to the difference between domestic investment and net capital outflow.
Select one:
True
False
Suppose residents of the United States desired to decrease their purchases of foreign assets. Ceteris paribus, the real exchange rate would decrease and the quantity of dollars exchanged in the market for foreign-currency exchange would decrease.
Select one:
True
False
Question text
Suppose that the U.S. imposes an import quota on cars and trucks. The import quota makes the real exchange rate of the U.S. dollar depreciate and the real interest rate in the United States decreases.
Select one:
True
False
Question text
A U.S. corporation borrows funds to build a factory in the U.S. and a factory in China. Borrowing for factories in both locations is included in the U.S. demand for loanable funds.
Select one:
True
False
In: Economics
The following table shows the number of people, in thousands, in the United States with and without health insurance in 2015. They are categorized by their household incomes.
a. What percentage of the U.S. population in 2015 did not have health insurance?
b. What percentage of the U.S. population in 2015 lived in households earning $100,000 or more?
c. What percentage of the U.S. population in 2015 did not have health insurance and lived in households earning less than $25,000?
d. What percentage of the U.S. population in 2015 did not have health insurance or lived in households earning less than $25,000?
e. What percentage of the U.S. population in 2015 did not have health insurance, given they lived in a household earning less than $25,000?
f. What percentage of the U.S. population in 2015 lived in a household earning less than $25,000, given they did not have health insurance?
| Household Income | Insured | Uninsured | |
| Less than $25,000 | 52989 | 7833 | |
| $25,000 to $49,999 | 64279 | 8263 | |
| $50,000 to $74,999 | 58121 | 5542 | |
| $75,000 to $99,999 | 42303 | 3530 | |
| $100,000 or more | 106372 | 4482 | |
In: Statistics and Probability
The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, some in the popular press have claimed that the increased trade deficit resulted from a decline in the quality of U.S. products relative to foreign products.
Assume that U.S. products did decline in relative quality during the 1980s.
1. This caused net exports at any given exchange rate to (decrease or increase)? .
2. Indicate the effect of this shift in net exports on the U.S. market for foreign exchange.
3. According to this model, which of the following statements are true as a result of the quality change? Check all that apply.
-There is no change in the real interest rate.
-The real exchange rate increases.
-The trade balance increases.
-Net capital outflow is unchanged.
4. True or False: The claim that some people made in the popular press is consistent with the model in this chapter.
5. True or False: The change in the real exchange rate that resulted from the decline in the quality of U.S. products may increase our standard of living.
In: Economics
Show the following transactions that should be recorded in U.S. BoP using double-entry accounting system:
A.) Newmont Mining—a U.S. mining concern—exports $400 million worth of copper to China and is paid in the form of a payment drawn on a U.S. bank
B.) Dupont expands its plastics manufacturing capacity in its Polish plant by investing $250 million financed by a dollar bond issue in London (United Kingdom
C.) The U.S. government provides food assistance to Sudanese refugees in the amount of $25 million worth of flour.
D.) Cathay Pacific, the Hong Kong–based airline, purchases five Boeing Dreamliners in 2013 for $750 million. The U.S. Export-Import Bank provides a seven-year loan for the full amount of the purchase with no interest or principal payments due in 2013. Explain how the transaction would be recorded by the U.S. balance of payments.
E.) Assume that France decides to write off €10 billion of debt to Morocco. What would be the impact of debt forgiveness on 1. France’s balance of payments and 2. Morocco’s balance of payments?
In: Economics
Assume that the spot exchange rate between U.S. Dollar and Chinese Yuan is $1 = 6.90 yuans
In: Accounting
Company is considering adding a new line to its product mix, and
the capital budgeting analysis is being conducted by a MBA student.
The production line would be set up in unused space (Market Value
Zero) in Sugar Land’ main plant. Total cost of the machine is
$350,000. The machinery has an economic life of 4 years and will be
depreciated using MACRS for 3-year property class. The machine will
have a salvage value of $35,000 after 4 years.
The new line will generate Sales of 1,750 units per year for 4
years and the variable cost per unit is $110 in the first year.
Each unit can be sold for $210 in the first year. The sales price
and variable cost are expected to increase by 3% per year due to
inflation. Further, to handle the new line, the firm’s net working
capital would have to increase by $30,000 at time zero (No change
in NWC in years 1 through 3 and the NWC will be recouped in year
4). The firm’s tax rate is 40% and its weighted average cost of
capital is 11%.
**** Estimate the after tax salvage cash flow
*******Estimate the net cash flow of this project
Year zero
Year 1
Year 2
Year 3
Year 4
Estimate the NPV, IRR, MIRR, and profitability Index of the
project.
In: Finance
Litapi Fisheries has just finished registering with Patents and Company Registration Authority (PACRA) as a Supplier of Fish to Hotels, Boarding Schools, Colleges and Universities amongst other intended clients. The Supplying Company has been organized into Marketing, Procurement, Accounts, sales, Human Resource and IT Departments. The Chief Executive Officer (CEO) of the company has decided to start with rented office premises in the town center of Mongu town, his single light truck as the only start up transport. The IT department is supposed to maintain the IT infrastructure on which all the other departments store their information and also provide the electronic marketing support for the marketing department. In the last five years, the region which is their major source of fish has experienced droughts and floods. The fish storage facilities which have been gotten by loan from the local Radian Stores are new and use AC power which is often loadshaded, at times for longer periods.
a) The human Resource department has just hired you as their inaugural Business Continuity Manger and tasked you to come up with Business Continuity Management System specific to this company. Discuss the said Business Continuity Management System, clearly highlighting the Mitigation and Continuity Strategies.
b) Use PDCA process approach to show how this fishing company can improve its management operations.
In: Economics
|
Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2016 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 40% in all years. Any tax effects should be adjusted through the deferred tax liability account. |
| a. |
Fleming Home Products introduced a new line of commercial awnings in 2015 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 3% of sales. Sales of the awnings in 2015 were $4,400,000. Accordingly, warranty expense and a warranty liability of $132,000 were recorded in 2015. In late 2016, the company’s claims experience was evaluated and it was determined that claims were far fewer than expected: 2% of sales rather than 3%. Sales of the awnings in 2016 were $4,900,000 and warranty expenditures in 2016 totaled $111,475. |
| b. |
On December 30, 2012, Rival Industries acquired its office
building at a cost of $1,180,000. It was depreciated on a
straight-line basis assuming a useful life of 40 years and no
salvage value. However, plans were finalized in 2016 to relocate
the company headquarters at the end of 2020. The vacated office
building will have a salvage value at that time of
$790,000. |
| c. |
Hobbs-Barto Merchandising, Inc., changed inventory cost methods to LIFO from FIFO at the end of 2016 for both financial statement and income tax purposes. Under FIFO, the inventory at January 1, 2016, is $780,000. |
| d. |
At the beginning of 2013, the Hoffman Group purchased office equipment at a cost of $429,000. Its useful life was estimated to be 10 years with no salvage value. The equipment was depreciated by the sum-of-the-years’-digits method. On January 1, 2016, the company changed to the straight-line method. |
| e. |
In November 2014, the State of Minnesota filed suit against Huggins Manufacturing Company, seeking penalties for violations of clean air laws. When the financial statements were issued in 2015, Huggins had not reached a settlement with state authorities, but legal counsel advised Huggins that it was probable the company would have to pay $290,000 in penalties. Accordingly, the following entry was recorded: |
| Loss—litigation | 290,000 | |
| Liability—litigation | 290,000 | |
|
Late in 2016, a settlement was reached with state authorities to pay a total of $449,000 in penalties. |
| f. |
At the beginning of 2016, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net earnings by $544,000. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2016 related to the situation described. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1 Record journal entry as a direct result of the change. 2 Record adjusting entry for change in warranty. 3 Record journal entry as a direct result of the change. 4 Record adjusting entry for depreciation. 5 Record journal entry as a direct result of the change. 6 Record the adjusting entry for change in inventory cost method. 7 Record journal entry as a direct result of the change. 8 Record adjusting entry for depreciation. 9 Record journal entry as a direct result of the change. 10 Record the adjusting entry for revision of liability. 11 Record journal entry as a direct result of the change. 12 Record the adjusting entry for change in depreciation method from sum-of-the-years’-digits method to straight-line method. |
In: Accounting
2. A multinational company has three subsidiaries located in the United States, Switzerland, and Great Britain. The company recently set up a multilateral netting center to help manage its foreign exchange exposure. Listed below are the average monthly invoices sent from each country to each of the other subsidiaries with which it does business. Calculate the net flows that will occur as a result of the new netting system. The company uses the U.S. dollar as the common referencing currency.
Existing Exchange Rates:
Swiss franc (SF) = $0.13
Pound sterling (PS) = $1.45
United States to Switzerland $100
United States to Great Britain $250
Switzerland to United States SF300
Switzerland to Great Britain SF150
Great Britain to Switzerland PS200
Great Britain to United States PS100
In: Finance