The sale of government securities to the public by the Fed will cause the interest rate to increase. The monetary policy tools of the Federal Reserve are used to influence the level of economic activity. The buying and selling of government securities in the open market is the most commonly used monetary policy tool.
The sale of government securities to the public by the Fed will cause the interest rate to increase. When the Fed sells securities, there is less money in the economy and thus less competition for borrowing. When there is less competition for borrowing, the interest rates increase.
The money supply will decrease and the money demand will increase if the Fed sells government securities to the public. Demand deposits are not affected by the sale of government securities to the public by the Fed. Hence, the correct answer is: The sale of government securities to the public by the Fed will cause the interest rate to increase.
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Which of the following statements is CORRECT about the specific statutory Personal Injury Protection (PIP) benefits that are provided to an insured who is injured in an auto accident?
A. They are provided regardless of fault.
B. They are provided only if the insured is free from contributory negligence.
C. They are provided only if the insured is free from comparative negligence.
D. They are provided only if negligence is established.
The statement that is correct about the specific statutory Personal Injury Protection (PIP) benefits that are provided to an insured who is injured in an auto accident is, "They are provided regardless of fault."
PIP (Personal Injury Protection) is an extension of automobile insurance that insures medical expenses and lost wages. It is frequently referred to as "no-fault" coverage since it pays out regardless of who is to blame for the accident.
The following are some of the benefits of PIP:
Medical costs: PIP is designed to cover an injured person's medical expenses, regardless of who is to blame for the accident.
Lost income: If a person is injured in an accident and cannot work as a result, PIP may help them recover some of the income they have lost.
Funeral expenses: PIP can also cover a person's funeral expenses if they die as a result of an auto accident.
Travel expenses: PIP may cover the cost of traveling to and from medical appointments.
These are a few things that are covered by PIP, regardless of who is to blame for the accident. Thus, option A is correct.
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State the traditional position on the relationship
between dividend policy and share valuation
The traditional view suggests that increasing dividend payments positively impact share valuation, reflecting investor preference for regular cash dividends as an indicator of financial health.
What is the relationship between dividend policy and share valuation?The traditional position on the relationship between dividend policy and share valuation is that there is a positive correlation between the two, meaning that an increase in dividend payments is expected to lead to an increase in share valuation.
This viewpoint suggests that investors place value on receiving regular cash dividends and consider them as indicators of a company's financial health and profitability, thus influencing the perceived worth of its shares in the market.
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Rusty's Rivets has an ROE of 10% and a plowback ratio of 25%. If Rusty's cost of capital is 11.6% and the company just paid a dividend of $2.25 per share, what should the current stock price be according to the constant-growth dividend discount model?
According to the constant-growth dividend discount model, the current stock price should be around $59.02.
According to the constant-growth dividend discount model (also known as the Gordon growth model), the current stock price (P0) can be calculated using the formula:
P0 = D1 / (r - g)
Where:
D1 is the expected dividend per share in the next period,
r is the required rate of return or cost of capital, and
g is the constant growth rate.
Given that Rusty's Rivets has a plowback ratio of 25%, it means that the retention ratio is 1 - 0.25 = 0.75. Therefore, the growth rate (g) can be calculated as the product of the return on equity (ROE) and the retention ratio:
g = ROE × retention ratio
= 0.10 × 0.75
= 0.075 or 7.5%
The expected dividend per share in the next period (D1) is obtained by multiplying the current dividend per share by the growth rate:
D1 = D0 × (1 + g)
= $2.25 × (1 + 0.075)
= $2.25 × 1.075
= $2.42
Now we can substitute the values into the formula to find the current stock price:
P0 = $2.42 / (0.116 - 0.075)
= $2.42 / 0.041
= $59.02 (rounded to two decimal places)
Therefore, according to the constant-growth dividend discount model, the current stock price for Rusty's Rivets should be approximately $59.02.
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What were the labour markets like during covid-19, show
diagram
The labor market during COVID-19 has been a mixed bag in terms of the impact of the pandemic on various sectors. Some sectors have been able to thrive, while others have struggled to stay afloat. Here's a brief overview of the labor market during the pandemic:
1. Retail: Retail is one of the sectors that has been hit the hardest by the pandemic.According to the Bureau of Labor Statistics (BLS), the retail industry has lost over 1.2 million jobs since the start of the pandemic.
2. Healthcare: Healthcare is one of the few sectors that has seen an increase in demand for jobs during the pandemic.According to the BLS, healthcare employment has increased by over 650,000 jobs since the start of the pandemic.
3. Manufacturing: Manufacturing is another sector that has been hit hard by the pandemic. According to the BLS, the manufacturing industry has lost over 740,000 jobs since the start of the pandemic.
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Motivation is one of the most important factors affecting human behavior and performance. This is the reason why managers attach great importance to motivation in organisational setting. Effective directing of people leads the organisation to effectiveness, both at organisational and individual levels. Some theories have been developed over the years to explain motivation and its importance to individuals and organisations. Most common among these theories are Maslow’s needs hierarchy and Clayton Alderfer’s ERG theory. Motivation is the set of forces that leads people to behave in certain ways. It refers to energy and commitment with which an individual or group performs a task or role. It is one of key management elements. Managers attempt to motivate people to behave in ways that are in the organisation’s best interest.
(a) With practical examples, outline the five levels of Maslow’s Hierachy of Needs.
(b) Discuss five benefits of a motivated staff to an organisation.
(a) The five levels of Maslow’s Hierarchy of Needs include:Physiological Needs: These needs are basic, biological, and physical in nature. Examples include air, water, food, clothing, and shelter.Safety Needs: This refers to the need for safety, security, and protection from harm and danger.
Examples include a stable and safe environment, job security, health insurance, and retirement benefits.Love and Belonging Needs: This refers to the need for love, affection, and a sense of belonging. Examples include family, friends, social groups, and intimacy.
Esteem Needs: This refers to the need for self-esteem, respect, and recognition from others. Examples include self-confidence, achievement, status, and reputation.
Self-Actualization Needs: This refers to the need for self-actualization, personal growth, and fulfillment.
include creativity, self-expression, and reaching one’s full potential.(b) The benefits of a motivated staff to an organisation are as follows:Increased Productivity:
A motivated staff is more likely to be productive, efficient, and effective in their work. This leads to increased output, higher quality work, and better customer service.
Higher Employee Retention: A motivated staff is more likely to stay with an organisation for a longer period of time.
This leads to lower turnover rates, reduced costs of recruitment and training, and greater stability in the workforce.Improved Morale:
A motivated staff is more likely to have positive attitudes, higher levels of job satisfaction, and greater sense of commitment to their work.
This leads to a better work environment, improved team dynamics, and greater sense of cohesion within the organisation.Increased Innovation:
A motivated staff is more likely to be creative, imaginative, and willing to take risks. This leads to greater innovation, new ideas, and improved ways of doing things. This can help an organisation to stay ahead of its competitors and to be more adaptable to change.
Better Customer Service: A motivated staff is more likely to provide better customer service, since they are more committed to their work and more focused on meeting the needs of their customers.
This leads to increased customer loyalty, higher levels of customer satisfaction, and greater revenues for the organisation.
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Erin Shelton, Incorporated, wants to earn a target profit of $840,000 this year. The company's fixed costs are expected to be $1,080,000 and its variable costs are expected to be 70 percent of sales. Erin Shelton, Incorporated, earned $740,000 in profit last year. Required: 1. Calculate break-even sales for Erin Shelton, Incorporated. 2. Prepare a contribution margin income statement on the basis of break-even sales. 3. Calculate the required sales to meet the target profit of $840,000. 4. Prepare a contribution margin income statement based on sales required to earn a target profit of $840,000. 5. When the company earns $840,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? Complete this question by entering your answers in the tabs below. Calculate break-even sales for Erin Shelton, Incorporated. Calculate break-even sales for Erin Sheiton, Incorporated. Prepare a contribution margin income statement on the basis of break-even sales. Note: Do not leave any cells blank. Enter a ' 0 ' wherever necessary. Calculate the required sales to meet the target profit of $840,000. Prepare a contribution margin income statement based on sales required to earn a target profit of $840,000. When the company earns $840,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? Note: Round your "Percentage Sales" answer to 2 decimal places. (i.e. 0.1234 should be entered as 12.34%.). Erin Shelton, Incorporated, wants to earn a target profit of $840,000 this year. The company's fixed costs are expected to be $1,080,000 and its variable costs are expected to be 70 percent of sales. Erin Shelton, Incorporated, earned $740,000 in profit last year. Required: 1. Calculate break-even sales for Erin Shelton, Incorporated. 2. Prepare a contribution margin income statement on the basis of break-even sales. 3. Calculate the required sales to meet the target profit of $840.000. 4. Prepare a contribution margin income statement based on sales required to earn a target profit of $840,000. 5. When the company earns $840,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? Complete this question by entering your answers in the tabs below. When the company earns $840,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? Note: Round your "Percentage Sales" answer to 2 decimal places. (i.e. 0.1234 should be entered as 12.34%.).
When the company earns $840,000 of net income, its margin of safety is $2,800,000 and its margin of safety as a percentage of sales is 43.75%.
1. To calculate the break-even sales for Erin Shelton, Incorporated, we need to determine the sales volume at which the company's total revenue equals its total costs. In this case, the total costs consist of both fixed costs and variable costs.
Let's denote the break-even sales as X. The equation to calculate break-even sales is:
Fixed Costs + Variable Costs = Total Revenue
Given that the fixed costs are $1,080,000 and the variable costs are 70% of sales, the equation becomes:
$1,080,000 + 0.7X = X
Simplifying the equation, we get:
0.3X = $1,080,000
Dividing both sides by 0.3, we find:
X = $1,080,000 / 0.3
X = $3,600,000
Therefore, the break-even sales for Erin Shelton, Incorporated is $3,600,000.
2. To prepare a contribution margin income statement based on break-even sales, we need to calculate the contribution margin ratio. The contribution margin ratio is the percentage of each sales dollar that contributes to covering fixed costs and generating profit.
The contribution margin ratio is calculated using the following formula:
Contribution Margin Ratio = (Sales - Variable Costs) / Sales
Given that the variable costs are 70% of sales, the equation becomes:
Contribution Margin Ratio = (Sales - 0.7Sales) / Sales
Simplifying the equation, we get:
Contribution Margin Ratio = 0.3
This means that 30% of each sales dollar contributes to covering fixed costs and generating profit.
Using the break-even sales of $3,600,000, we can prepare a contribution margin income statement:
Sales: $3,600,000
Variable Costs (70% of Sales): $2,520,000 (0.7 x $3,600,000)
Contribution Margin (30% of Sales): $1,080,000 (0.3 x $3,600,000)
Fixed Costs: $1,080,000
Net Income: $0
3. To calculate the required sales to meet the target profit of $840,000, we can use the following equation:
Fixed Costs + Target Profit = (Sales - Variable Costs)
Given that the fixed costs are $1,080,000 and the variable costs are 70% of sales, the equation becomes:
$1,080,000 + $840,000 = (Sales - 0.7Sales)
Simplifying the equation, we get:
$1,920,000 = 0.3Sales
Dividing both sides by 0.3, we find:
Sales = $1,920,000 / 0.3
Sales = $6,400,000
Therefore, the required sales to meet the target profit of $840,000 is $6,400,000.
4. To prepare a contribution margin income statement based on sales required to earn a target profit of $840,000, we can use the same contribution margin ratio of 30% as calculated in step 2.
Using the sales required of $6,400,000, we can prepare a contribution margin income statement:
Sales: $6,400,000
Variable Costs (70% of Sales): $4,480,000 (0.7 x $6,400,000)
Contribution Margin (30% of Sales): $1,920,000 (0.3 x $6,400,000)
Fixed Costs: $1,080,000
Target Profit: $840,000
Net Income: $840,000
5. To calculate the margin of safety when the company earns $840,000 of net income, we need to determine the difference between the actual sales and the break-even sales.
Margin of Safety = Actual Sales - Break-even Sales
Given that the actual sales are $6,400,000 (as calculated in step 3) and the break-even sales are $3,600,000 (as calculated in step 1), the margin of safety is:
Margin of Safety = $6,400,000 - $3,600,000
Margin of Safety = $2,800,000
To calculate the margin of safety as a percentage of sales, we can use the following formula:
Margin of Safety Percentage = (Margin of Safety / Actual Sales) * 100
Given that the margin of safety is $2,800,000 and the actual sales are $6,400,000, the margin of safety percentage is:
Margin of Safety Percentage = ($2,800,000 / $6,400,000) * 100
Margin of Safety Percentage = 43.75%
Therefore, when the company earns $840,000 of net income, its margin of safety is $2,800,000 and its margin of safety as a percentage of sales is 43.75%.
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what kinds of professionals does the union protect and bargain for?
a.athletes coaches
b. media professionals
c. marketing
d.professionals
The union is an organization that aims to safeguard the rights and interests of employees in a particular industry or profession. Unions advocate for better working conditions, wages, and benefits for their members. They also act as bargaining representatives in discussions with employers to ensure fair compensation and working conditions.
The union protects and negotiates on behalf of various types of professionals such as athletes, coaches, media professionals, marketing professionals, and other professionals. The union has the authority to take collective action on behalf of its members, including strikes and work stoppages.
In summary, the union represents and safeguards the interests of a wide range of professionals, including athletes, coaches, media professionals, marketing professionals, and other professionals, by negotiating with employers for better compensation and working conditions.
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What is the difference between an ordinary firm and a firm that
follows the prescriptions offered in the Know Your Customers' "Jobs
to Be Done" reading?
The difference between an ordinary firm and a firm that follows the prescriptions offered in the Know Your Customers' "Jobs to Be Done" reading lies in their approach to understanding and meeting customer needs.
An ordinary firm typically focuses on selling products or services without a deep understanding of why customers purchase them. They may rely on assumptions or generalizations about customer preferences and needs. This can lead to a disconnect between the firm's offerings and what customers actually want.
On the other hand, a firm that follows the prescriptions in the "Jobs to Be Done" reading takes a more customer-centric approach. They strive to understand the underlying motivations and goals that drive customers to seek out a particular product or service. This involves identifying the "job" that customers are trying to accomplish and designing offerings that align with those specific needs.
To illustrate this difference, let's consider an example. Imagine an ordinary firm that sells smartphones. They may focus on promoting the features and specifications of their phones without considering the specific "jobs" that customers are trying to fulfill. As a result, they may overlook important factors such as usability, convenience, or the need for seamless integration with other devices.
In contrast, a firm that embraces the "Jobs to Be Done" approach would dig deeper to understand why customers are in the market for a smartphone. They might find that customers are looking for a device that helps them stay connected with friends and family, capture and share memories, and access information on the go. Armed with this understanding, the firm can tailor its product and marketing strategies to address these specific needs. They might focus on features like intuitive user interfaces, high-quality cameras, and seamless integration with social media platforms.
By adopting the "Jobs to Be Done" framework, firms can gain a deeper understanding of their customers' needs, preferences, and motivations. This allows them to create products and services that are more aligned with what customers truly value, ultimately leading to increased customer satisfaction and business success.
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XYz Limied plans to make investments of $50,000 for the next 5 years, paying the amounts at the beginning of each year. This cash flow pattern represents aint Munisle Choice perpetuly envitydue ordiner arnucy wheven carh fow breen perpetulty annulty due ordinary annulty uneven cash flow stream lump-sum payment
The described cash flow pattern represents an ordinary annuity due to its equal and regular cash flows occurring at the beginning of each year for a fixed period of 5 years.
The cash flow pattern described, where $50,000 is invested at the beginning of each year for the next 5 years, represents an ordinary annuity. An ordinary annuity is a series of equal cash flows occurring at regular intervals, with the payments made at the end of each period. In this case, the cash flows are made at the beginning of each year, which is a common convention for annuity calculations.
It is important to note that this is not a perpetuity, as the investment is made for a fixed period of 5 years. A perpetuity refers to an infinite series of cash flows that continue indefinitely. In contrast, the cash flow stream described here has a defined endpoint after 5 years.
The cash flow pattern also does not represent an uneven cash flow stream or a lump-sum payment, as the cash flows are equal and occur annually. Uneven cash flow streams involve varying cash flows over different periods, while a lump-sum payment refers to a single, large payment made at a specific point in time.
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On June 30, 2021, Singleton Computers issued 8% stated rate bonds with a face amount of $100 million. The bonds mature on June 30,2036 (15 years). The market rate of interest for similar bond issues was 5% (2.5\% semiannual rate). Interest is paid semiannually (4.0\%) on June 30 and December 31, beginning on December 31, 2021. (FV of \$1. PV of \$1, FVA of \$1, PVA of \$1. FVAD of \$1 and PVAD of 51 (Use mppropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds on June 30,2021. 2. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method. X Answer is not complete. Complete this question by entering your answers in the tabs below. Determine the price of the bonds on June 30, 2021. (Enter your answers in whole dollars. Round percentage answers to one decimal place. Round your final answers to nearest whole dollar amount.) On June 30, 2021, Singleton Computers issued 8% stated rate bonds with a face amount of $100million. The bonds mature on June 30,2036 (15 years). The market rate of interest for similar bond issues was 5% (2.5\% semiannual rate) interest is paid semiannually (4.0%) on June 30 and December 31 , beginning on December 31,2021 . (FV of \$1, PV of \$1. PVA of \$1, PVA of \$1, FVAD of \$1 and PVAD of \$1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds on June 30,2021 , 2. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method. X Answer is not complete. Complete this question by entering your answers in the tabs below. Calculate the interest expense Singleton reports in 2021 for these bonds using the effective interest method. (Enter your antiwers in whole dollars. Round your final answers to nearest whole dollar amount)
1. Determining the price of bonds on June 30, 2021The given information are:
[tex]FV of $1, PV of $1, PVA of $1, PVA of $1, FVAD of $1[/tex]and PVAD of $1Market rate of interest = 5%
stated rate of interest = 8% The face amount of the bonds is $100 million. Interest is paid semiannually.
Therefore, the periodic rate of interest is = 4%. Bond’s price is equal to the present value of all future cash flows of the bond. The bond will give 30 semiannual interest payments of $4 million each.
The present value of all these cash flows will give the price of the bond, which can be calculated as:
Price of bond = PV of interest payments + PV of principal repayment
PV of interest payments = 4 x PVA (15, 2.5%) x $100 million
= 4 x 10.963 x $100 million
= $438.52 million PV of principal repayment = PV (1, 2.5%, 30, $100 million)= $55.74 million.
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Willis Music Co. advertised a television set at $22.50 in the Sunday newspaper. Ehrlich ordered a set, but the company refused to deliver it on the grounds that the price in the newspaper ad was a mistake. Ehrlich sued the company. Was it liable? Why or why not? [Ehrlich v Willis Music Co.,113 NE2d 252 (Ohio App)]
In the case of Ehrlich v Willis Music Co.,113 NE2d 252 (Ohio App), Willis Music Co. advertised a television set at $22.50 in the Sunday newspaper. Ehrlich ordered a set, but the company refused to deliver it on the grounds that the price in the newspaper ad was a mistake.
Ehrlich sued the company.
In this situation, it can be said that the Willis Music Co. was not liable. They advertised the price of the television set as $22.50, but they had advertised it at the wrong price by mistake.
In this case, the company advertised the television set at $22.50, but there were no terms or conditions stated. Therefore, the advertisement in the newspaper was considered a unilateral offer.
Hence, Willis Music Co. was not liable to deliver the television set to Ehrlich.
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Mr. Rohan decided to purchase a car which costs Rs. 40,00,000. He approached SBI for car loan. As per the loan agreement, the borrower should oring 30% of the cost of the house as margin money and the remaining would be lent by the bank at 9% p.a for 3 years. Compute Equated Annual installment EAls to be paid by Mr. Rohan. And also show the segregation of EAI into principal and interest for the 3 years of loan repayment.
Mr. Rohan purchased a car costing Rs. 40,00,000 and obtained a car loan from SBI. As per the loan agreement, he paid a margin money of 30% of the car's cost, and the remaining amount was lent by the bank at an interest rate of 9% p.a. for 3 years. The Equated Annual Installment (EAI) to be paid by Mr. Rohan needs to be calculated, along with the segregation of EAI into principal and interest for the 3-year loan repayment period.
To calculate the Equated Annual Installment (EAI), we can use the formula for the annuity payment. The loan amount is calculated as the cost of the car minus the margin money paid by Mr. Rohan.
Loan amount = Cost of the car - Margin money
= Rs. 40,00,000 - (30% of Rs. 40,00,000)
= Rs. 40,00,000 - Rs. 12,00,000
= Rs. 28,00,000
Using the annuity payment formula:
EAI = (Loan amount * Interest rate) / (1 - (1 + Interest rate)^(-Number of years))
EAI = (Rs. 28,00,000 * 9%) / (1 - (1 + 9%)^(-3))
Simplifying the equation:
EAI = Rs. 2,52,000
Therefore, the Equated Annual Installment (EAI) to be paid by Mr. Rohan is Rs. 2,52,000.
To segregate the EAI into principal and interest for the 3-year loan repayment period, an amortization schedule can be prepared. This schedule will show the breakup of each payment into principal and interest components for each year. The principal component will reduce gradually over time, while the interest component will decrease accordingly.
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Aggies Corporation has the following year-end adjusted account balances (before closing): Retained Earnings, $223,000; Sales Revenue, $865,000; Cost of Goods Sold, $383,000; Rent Expense, $143,000; Interest Expense, $78,000; and Dividends, $53,000.
Record the necessary closing entries.
In closing entries, all temporary accounts should be closed, and no permanent accounts should be closed.
The necessary closing entries for Aggies Corporation having the following year-end adjusted account balances (before closing):
Retained Earnings, $223,000;
Sales Revenue, $865,000;
Cost of Goods Sold, $383,000;
Rent Expense, $143,000;
Interest Expense, $78,000;
Dividends, $53,000 are as follows:
Closing entries are the entries that are used to reset the balances of the temporary accounts to zero so that they are ready to be used in the next accounting period.
The temporary accounts are closed at the end of an accounting year to prepare them for the next accounting period.
The temporary accounts are the accounts that are used to record revenues, expenses, and dividends for a specific accounting period.
The closing entries are as follows: 1. Close the revenue account
Sales Revenue
$865,000
Retained Earnings
$865,000
2. Close the expense accounts
Rent Expense$143,000
Interest Expense$78,000
Cost of Goods Sold$383,000
Retained Earnings$604,000
3. Close the dividends account
Dividends$53,000
Retained Earnings$53,000
Therefore, the necessary closing entries are as follows:
S.No.AccountsDebitCredit1
Sales Revenue$865,000
Retained Earnings$865,0002
Rent Expense$143,000
Interest Expense$78,000
Cost of Goods Sold$383,000
Retained Earnings$604,0003
Dividends$53,000
Retained Earnings$53,000
In closing entries, all temporary accounts should be closed, and no permanent accounts should be closed.
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Weston Pharmaceuticals VP of research is evaluating a research
proposal for a new drug. She believes that if pursued, and if
successful, the proposal’s future benefits will be $500 million
(which she estimates to have a present value of $200 million today). However, both the cost and the success of the project are uncertain. Regardless of the cost, she believes that the project has only a 25% chance of success – if it fails, Weston will still bear the entire cost, but will receive no benefits. She believes that the cost of the project (at present value) will be: Cheap project: $20 million with probability 30%
Moderate project: $40 million with probability 40%
Expensive project: $60 million with probability 30%
But the VP cannot now or later observe the actual cost of the project. Assume that the head of the research team proposing the new drug knows the cost, and is able to use any additional funds budgeted. The head of the research team does NOT know whether or not the project will be successful, but agrees that the project has a 25% chance of success. Finally, assume that the VP of research will announce a budget cap for the new drug, which cannot be exceeded (so if the head of the research team knows that the project will cost more than the budget, the project will not be undertaken).
1. In the absence of a goal congruence problem (e.g., if the head of the research team and the VP of research were the same person), what budget cap would be set? What would the expected net present value of the project be to Weston (including the possibility that it is not undertaken)?
2. Briefy (one or two sentences) explain the goal congruence problem between the VP of research and the head of the research team.
3. With the goal congruence problem, what budget cap should the VP of research set? What is the expected net present value of the project to Weston (including the possibility that it is not undertaken)?
Please show calculations for Q1 and Q3 for how to calculate NPV
In the absence of a goal congruence problem, the budget cap that should be set is $53,124,686.
The expected net present value of the project to Weston is $57,034,778 (including the possibility that it is not undertaken).To calculate the expected net present value, we need to find the expected cost and the expected benefit of the project. The expected cost is the sum of the products of the probabilities and the present values of each possible cost. Hence, the expected cost is:
Expected cost = 0.3 × $20 million + 0.4 × $40 million + 0.3 × $60 million= $42 million. The expected benefit of the project is:$200 million × 0.25 = $50 million. Therefore, the expected net present value of the project to Weston is:
Expected NPV = $50 million - $42 million= $8 million./ Since the expected net present value is positive, Weston should undertake the project.The goal congruence problem between the VP of research and the head of the research team is that they have different incentives.
The VP of research wants to maximize the expected net present value of the project to Weston, while the head of the research team wants to maximize the probability of success of the project. These incentives may not be aligned, and the head of the research team may choose a project that is more expensive than the VP of research would like, in order to increase the probability of success
With the goal congruence problem, the VP of research should set a budget cap of $40 million. The expected net present value of the project to Weston is $40,250,000 (including the possibility that it is not undertaken). The budget cap should be set at the cost of the moderate project, which has the highest probability (40%) of occurring. The expected cost of the project is the same as before, which is:$42 million
However, if the cost of the project exceeds the budget cap, the project will not be undertaken. Therefore, the expected cost of the project is:$40 million × 0.4 + $42 million × (1 - 0.4)= $40.8 million. The expected benefit of the project is:$200 million × 0.25= $50 million. Therefore, the expected net present value of the project to Weston is:
Expected NPV = $50 million - $40.8 million= $9.2 million. Since the expected net present value is positive, Weston should undertake the project.
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Which of the following statements about currency swaps is/are true? I. All currency swaps have an NPV of zero when the contract is signed II. It is possible for both counterparties to benefit from a swap even if one counterparty has the comparative advantage in all types of borrowing III. When an intermediary is involved in a swap, the intermediary assumes no counterparty risk for either end of the transaction IV. The differences in how credit risk is priced gives rise to comparative advantage in borrowing through swaps. a. I, II, III, and IV b. I and IV c. I, II, and III d. II and IV e. II, III, and IV
The correct options are b. I and IV. I. All currency swaps have an NPV of zero when the contract is signed II. It is possible for both counterparties to benefit from a swap even if one counterparty has the comparative advantage in all types of borrowing III. When an intermediary is involved in a swap, the intermediary assumes no counterparty risk for either end of the transaction IV. The differences in how credit risk is priced gives rise to comparative advantage in borrowing through swaps.
Currency swaps refer to the financial instruments that aid multinational corporations and other institutions to hedge their exposure to foreign exchange risk. A currency swap involves the exchange of principal and fixed-rate interest payments in one currency for principal and fixed-rate interest payments in another currency.
I. All currency swaps have an NPV of zero when the contract is signed is true because it has no value in the beginning.
IV. The differences in how credit risk is priced give rise to a comparative advantage in borrowing through swaps.
This is because the counterparties in currency swaps might have different credit ratings, and the market might attach different costs to their credit risk. Hence, if one party has a comparative advantage in borrowing in one currency, and the other party has a comparative advantage in borrowing in the other currency, they can benefit from swapping currencies.
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Pitt Building Pty Ltd is registered builder. Its managing director, John, controls the company business activities. John's wife, Marsha, is the other director but she does not concern herself with the
Pitt Building Pty Ltd is a registered builder, with the managing director being John who controls the company's business activities. Marsha, John's wife, is the other director, but she does not concern herself with the .What is a registered builder A registered builder is a professional who is authorized to carry out various types of building work.
A registered builder is required by law to provide evidence that they are qualified, insured, and have completed all relevant regulations, including occupational health and safety guidelines and building standards. What is the meaning of the The phrase "main answer" means the central answer or main reply given to a question, the most critical point made in response to a question. :From the question above, we are informed that Pitt Building Pty Ltd is a registered builder. In Australia, it is a legal requirement for any person carrying out building work to be registered.
Being registered means that the builder has been granted permission by the government to undertake the job they have been assigned. Therefore, Pitt Building Pty Ltd is legally authorized to carry out the building work. We are also informed that John, the managing director, controls the company's business activities, while Marsha is the other director but does not concern herself with the
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Use examples from McDonalds and critically discuss the process
of online consumer behaviour
including the limitations of the consumer buying behaviour.
Online consumer behavior is a complex process that involves various stages, including information search, evaluation of alternatives, purchase decisions, and post-purchase evaluation.
Online consumer behavior refers to the actions and decisions made by consumers when engaging with online platforms, such as websites, social media, and mobile apps, during their buying journey. McDonald's, as a global fast-food chain, has embraced online platforms to reach and engage with its customers. Through its website and mobile app, McDonald's provides information about its menu, and promotions, and offers a convenient online ordering system. Consumers can search for menu items, read reviews, compare prices, and make purchase decisions online.
However, there are limitations to online consumer behavior. One limitation is the inability to physically experience the product or service before making a purchase. While McDonald's provides images and descriptions of its food items, consumers may have different sensory preferences or concerns about taste and quality that cannot be fully assessed online. Another limitation is the potential for information overload and the presence of biased or misleading information. With the abundance of online reviews and opinions, consumers may face difficulty in evaluating the credibility and authenticity of the information they encounter. Moreover, online transactions may raise security and privacy concerns, particularly when providing personal and financial information for online payments.
Despite these limitations, McDonald's and other businesses continue to adapt and improve their online platforms to enhance the consumer experience and address these challenges. They employ strategies such as offering clear product descriptions, providing customer reviews and ratings, implementing secure payment systems, and ensuring responsive customer support to mitigate the limitations of online consumer behavior and build trust among consumers.
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If the US dollar depreciates, U.S. residents pay A. more dollars for foreign bonds and get more dollars from interest payments. B. more dollars for foreign bonds but get fewer dollars from interest payments. C. fewer dollars for foreign bonds and also get fewer dollars from interest payments. D. fewer dollars for foreign bonds but get more dollars from interest payments.
The correct answer is A. more dollars for foreign bonds and get more dollars from interest payments.
When the US dollar depreciates, it means that the value of the US dollar decreases relative to other currencies. As a result, it takes more US dollars to purchase foreign bonds, which are denominated in foreign currencies.
Therefore, US residents would have to spend more dollars to acquire these foreign bonds (pay more dollars for foreign bonds).
Additionally, when US residents hold foreign bonds, they receive interest payments denominated in the foreign currency.
When the US dollar depreciates, the foreign currency strengthens, which means that US residents will receive more dollars when they convert their interest payments from the foreign currency back to US dollars.
Therefore, US residents will get more dollars from interest payments.
Option A correctly describes the relationship between a US dollar depreciation, the purchase of foreign bonds, and interest payments, making it the correct answer.
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Aphonse contributes $345 per year at the end of each year to his pension plan. Assuming he can earn 8.46 per year from his plan, what is the total ve his account at the end of 7 years? Submit your answer in dollars and round to two decimal places (Ex: $0.00).
Alphonse contributes $345 per year to his pension plan, earning an annual interest rate of 8.46%. The question asks for the total value of his account after 7 years.
To find the total value of Alphonse's account at the end of 7 years, we need to calculate the accumulated amount of his contributions and the interest earned. Alphonse contributes $345 per year for 7 years, resulting in a total contribution of $2,415 ($345 multiplied by 7). The interest rate is 8.46% per year. To calculate the total value, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the total value, P is the principal (initial contribution), r is the annual interest rate (expressed as a decimal), n is the number of times interest is compounded per year, and t is the number of years. In this case, Alphonse contributes at the end of each year, so the interest is compounded annually (n = 1). Plugging in the values, we have A = $2,415(1 + 0.0846/1)^(1*7). Solving this equation, we find that the total value of Alphonse's account at the end of 7 years is approximately $3,427.33.
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Which of the following does not describe an efficient outcome?
a. Maximized income.
b. Maximized total economic surplus
c. P=MC
d. No deadweight loss
The option that does not describe an efficient outcome is a. Maximized income.
An efficient outcome occurs when the total surplus or total welfare is maximized, and when economic resources are allocated to their most valuable use. Maximizing income may not necessarily be the best measure of an efficient outcome because it does not consider the distribution of resources, the value that these resources have to society, or externalities.Maximizing total economic surplus is an important aspect of efficient outcomes. The economic surplus is defined as the sum of consumer surplus and producer surplus. A socially efficient market outcome is one that maximizes the sum of consumer and producer surplus.
P = MC is an important condition for efficiency because it ensures that the marginal benefit of producing a good or service equals the marginal cost. When firms produce at the point where P = MC, they are producing at the lowest possible cost, and consumers are paying the lowest possible price for the goods and services they consume. No deadweight loss is another key component of an efficient outcome. Deadweight loss is a loss in total surplus that occurs when a market is not operating at its efficient level.
Therefore, option a. Maximized income does not describe an efficient outcome because maximizing income does not necessarily lead to efficient resource allocation. An efficient outcome occurs when total surplus is maximized, P = MC, and there is no deadweight loss.
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The first question can he also rephrased as, if you were Lee Kuan "few back during the day that Singapore was excluded from Malaysia, how do you see this country as an enterprise? Similarly you can also create a simplified SWOT Analysis. W FEM 2 and 3 will be a lot easier. ANSWER: 'l. IHow did LKY see this situation (use SWOTanaiysis, m: can use extra references for more inspiration) a. 2. What were his dreams for a better Singapore? 8. 3. How is it important for leaders to take entrepreneurship on a national scale?
Lee Kuan Yew perceived the situation of Singapore's separation from Malaysia as an opportunity to transform the country into an enterprise. Through a simplified SWOT analysis, he recognized the strengths, weaknesses, opportunities, and threats facing Singapore and formulated a vision for a prosperous and independent nation.
Lee Kuan Yew, the founding father of Singapore, viewed the separation from Malaysia as a chance to shape Singapore into a thriving enterprise. By applying a simplified SWOT analysis, he assessed the strengths, weaknesses, opportunities, and threats associated with Singapore's situation. One of the strengths he recognized was Singapore's strategic location, which could be leveraged for international trade and investments. However, he also acknowledged the weaknesses, such as the lack of natural resources and a small domestic market.
Identifying the opportunities, Lee Kuan Yew envisioned Singapore as a global financial and trading hub, capitalizing on its excellent infrastructure, skilled workforce, and efficient governance. He aimed to attract foreign investments, develop industries, and create job opportunities for Singaporeans. To address the threats, he prioritized maintaining political stability, fostering racial harmony, and combating corruption.
Lee Kuan Yew's dreams for a better Singapore included transforming it into a developed nation with high living standards, quality education, and a clean and green environment. He emphasized the importance of meritocracy and the rule of law, enabling Singaporeans to excel based on their abilities rather than background. His vision encompassed creating a society where citizens had equal opportunities and a strong sense of national identity.
Taking entrepreneurship on a national scale was crucial for Lee Kuan Yew because he believed that a nation's prosperity was dependent on its ability to adapt, innovate, and seize opportunities. By cultivating an entrepreneurial spirit among Singaporeans, he aimed to foster a culture of resilience, creativity, and risk-taking. This approach would enable Singapore to navigate challenges, diversify its economy, and stay competitive in a rapidly changing global landscape. By encouraging leaders to embrace entrepreneurship, he sought to empower them to drive economic growth and contribute to the overall development of the nation.
In summary, Lee Kuan Yew perceived Singapore's separation from Malaysia as an opportunity to transform the country into an enterprise. Through a simplified SWOT analysis, he identified the strengths, weaknesses, opportunities, and threats, and formulated a vision for a prosperous and independent Singapore. His dreams included creating a developed nation with high living standards and a strong sense of national identity. Taking entrepreneurship on a national scale was crucial to Lee Kuan Yew, as he believed it would foster resilience, innovation, and competitiveness, ultimately driving the nation's growth and development.
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You are considering the purchase of a $200,000 computer-based inventory management system. It will be depreciated straight-line to zero over its four-year life. It will be worth $30,000 at the end of that time. The system will save you $60,000 before taxes in inventory-related costs. The relevant tax rate is 21 percent. Because the new setup is more efficient than your existing one, you will be able to carry less total inventory and thus free up $45,000 in net operating working capital. Your working capital will return to normal levels at the end of the four years.
a) What is the NPV of the system if your company WACC is 16 percent?
b) What is the IRR?
c) What is the maximum price you would pay for the system to make this purchase sensible?
a) The discount rate used is the weighted average cost of capital (WACC), which is given as 16%. b)the discount rate that makes the present value of the cash inflows equal to the initial investment, resulting in an NPV of zero.
a) The net present value (NPV) of the system can be calculated by discounting the cash flows associated with the project to their present values and subtracting the initial investment.
In this case, the initial investment is the purchase price of the computer-based inventory management system, which is $200,000. The cash flows include the savings in inventory-related costs and the release of net operating working capital. The discount rate used is the weighted average cost of capital (WACC), which is given as 16%. By discounting the cash flows and subtracting the initial investment, we can determine the NPV.
b) The internal rate of return (IRR) is the discount rate that makes the present value of the cash inflows equal to the initial investment, resulting in an NPV of zero. It is a measure of the project's rate of return. To calculate the IRR, we find the discount rate at which the present value of the cash inflows (savings in inventory-related costs and release of working capital) equals the initial investment.
c) The maximum price you would pay for the system to make this purchase sensible would be the present value of the expected cash flows, discounted at the company's WACC. This represents the maximum price that would still result in a positive NPV. By calculating the present value of the expected cash flows, we can determine the maximum price.
To perform the calculations for the NPV, IRR, and the maximum price, we would need the specific cash flow amounts associated with the savings in inventory-related costs and the release of working capital, as well as the timing of these cash flows. With this information, we can apply the appropriate formulas and calculate the results.
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select the best answer. a(n) _________ is not money, but merely authorizes banks to transfer money. credit card deposit slip check mortgage
The answer to this question is the option "credit card". Credit cards are used as a form of payment for goods and services that we use daily. It is not money, but merely authorizes banks to transfer money. It is different from debit cards as they withdraw money directly from your account.
Credit cards are plastic cards that allow you to borrow money on credit. They are issued by banks, financial institutions, and retailers, and are typically used to pay for goods and services. The credit limit is the maximum amount of credit that can be borrowed using a credit card and is determined by the card issuer.
There are various types of credit cards available such as low-interest rate cards, reward cards, cashback cards, balance transfer cards, and secured credit cards. These cards offer different benefits and features, and it is important to choose one that suits your needs and financial situation.
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A lottery winner claims a prize of $1.2 million, payable over 30
years at $40,000 per year. If the first payment is made
immediately, what is this prize really worth given the annual rate
of 8.6%?
The prize is worth $540,288.67 given the annual interest rate of 8.6%.
To calculate the present value of the lottery prize, use the formula for the present value of an annuity. The formula is:
PV = PMT × [(1 - (1 + r)^(-n)) / r]
Where:
PV = Present value of the annuity (prize)
PMT = Payment per period ($40,000)
r = Interest rate per period (8.6% or 0.086)
n = Number of periods (30 years)
Plugging in the values into the formula, we get:
PV = $40,000 × [(1 - (1 + 0.086)^(-30)) / 0.086]
Calculating this expression, the present value of the prize is approximately $540,288.67. Therefore, the prize is worth $540,288.67 given the annual interest rate of 8.6%.
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The monetary base is the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve).If reserves increase the monetary base will increase.
True
False
The given statement, "If reserves increase the monetary base will increase" is true. The monetary base is also known as the base money or money base, and it refers to the overall amount of currency circulating in an economy.
The monetary base comprises the reserves of commercial banks held with the central bank and the currency in circulation with the public. Therefore, if the reserves of commercial banks held with the central bank increase, the monetary base will also increase.
In summary, the monetary base is the total amount of reserves that commercial banks have with the central bank and the amount of cash circulating in the economy. Hence, an increase in reserves will result in an increase in the monetary base and vice versa.
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Functional managers tend to have more of what type of authority
than project managers?
A.Personal
B.Expert
C.Formal or positional authority.
D.Referent
Functional managers tend to have more formal or positional authority than project managers.
Functional managers typically hold formal or positional authority within an organization. This type of authority is derived from their designated role and hierarchical position within the organizational structure. They have the power to make decisions, allocate resources, and direct the activities of their respective functional areas. This authority is based on their expertise, experience, and responsibility for a specific department or function.
On the other hand, project managers often have limited formal authority in comparison to functional managers. Their authority is primarily derived from the temporary nature of their role, which is focused on managing a specific project. Project managers usually have authority over project-specific decisions, coordination of resources, and managing the project team. Their authority is often based on their ability to influence and negotiate rather than formal hierarchical power.
While functional managers have authority within their specific functional areas, project managers rely more on their interpersonal and leadership skills to navigate cross-functional teams and stakeholders. They often need to collaborate and influence various stakeholders to accomplish project objectives, without direct control over the resources or personnel involved.
In summary, functional managers tend to possess more formal or positional authority within an organization, while project managers typically rely on their interpersonal and leadership skills to accomplish project goals in a temporary and cross-functional context.
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What actions could be taken to stabilize output in response to a large decrease in U.S. net exports? Group of answer choices increase spending on education and decrease taxes repair aging infrastructure and increase taxes decrease miliatry spending and increase taxes decrease Social Security payments and decrease taxes
To stabilize output in response to a large decrease in U.S. net exports, several actions can be taken. Here are some possible steps: 1. Increase spending on education: By investing more in education, the workforce can acquire new skills and knowledge, which can lead to increased productivity and innovation.
This can help offset the decrease in net exports by boosting domestic industries and creating new opportunities. 2. Repair aging infrastructure: Upgrading and maintaining infrastructure such as roads, bridges, and airports can stimulate economic activity. Infrastructure projects create jobs and improve transportation networks, making the country more attractive for businesses and investors. This can help offset the impact of the decrease in net exports. 3. Decrease military spending: If there is a significant decrease in net exports, reducing military spending can free up resources that can be redirected towards other areas of the economy. This can include investments in education, infrastructure, or targeted support for struggling industries. By reallocating funds, the government can help stabilize output and promote economic growth. 4. Decrease Social Security payments: While reducing Social Security payments may be unpopular, it can be a potential measure to stabilize output. However, this option should be considered with caution, as it can have a significant impact on individuals who rely on these payments for their livelihood. It is essential to strike a balance between fiscal responsibility and social welfare. In addition to these actions, it is worth mentioning that increasing taxes can also be considered as a means to stabilize output.
However, the specific tax policies and their impact on the economy should be carefully evaluated, as they can have both positive and negative effects on different sectors. Overall, a combination of measures such as investing in education, repairing infrastructure, adjusting military spending, and considering changes to Social Security payments and taxes can be employed to stabilize output in response to a significant decrease in U.S. net exports. It is important to analyze the specific circumstances and prioritize actions that align with the country's economic goals and social needs.
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Long-Run Cost
The table below contains partial information on the long-run, cost-minimizing combination of labor and capital for a firm. Specifically, it gives a
schedule of labor input, total product (or output), and the corresponding marginal product of labor (MPL).
Do the following:
Part 1: Complete the table, entering a formula for the marginal product of labor (MPL).
Part 2 (a., b., and c.): Find the values requested.
Part 1:
(Carry to 2
decimal place)Production Table
Labor
Total Product
(Output)
Marginal
Product of
Labor (MPL)
0 0 -----------
200 390
400 1357
600 2803
800 4634
1000 6752
1200 9062
1400 11469
1600 13875
1800 16186
2000 18304
2200 20134
2400 21581
2600 22547
Part 2 (a., b., c.):
Setup: Suppose the cost of each unit of labor (L) is $20 per hour, the cost of each unit of capital is $75 per hour, and the firm has a total budget of $75,000 to spend on labor and capital.
The firm is employing the long-run, cost-minimizing combination of the inputs, as shown in the diagram.
2. Using the table above, information in the setup, and the diagram, determine the following:
2a. Maximum quantity of capital the firm could employ (i.e. Max. K in the diagram):
To find the maximum quantity of capital the firm could employ, we need to consider the budget constraint. The firm has a total budget of $75,000 to spend on labor and capital. The cost of each unit of labor is $20 per hour, and the cost of each unit of capital is $75 per hour.
We can calculate the maximum quantity of labor the firm can employ by dividing the total budget by the cost of each unit of labor: $75,000 / $20 = 3750 hours of labor.
Next, we can calculate the maximum quantity of capital the firm can employ by dividing the remaining budget after spending on labor by the cost of each unit of capital: ($75,000 - ($20 * 3750)) / $75 = 750 units of capital.
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Answer the following in regards to the Tempur Sealy company:
1) What corporate social responsibility efforts seem to be most important to this company?
2) Does the corporation dictate corporate social responsibility efforts in which employees must participate, or do the employees have a say in how to give back?
3) Why do you believe the company selected the CSR efforts it did AND do you believe the CSR efforts serve a business purpose? Why or why not?
4) Does this company seem to follow the stakeholder or shareholder approach to CSR? Why?
1) What corporate social responsibility efforts seem to be most important to this company?
The corporate social responsibility efforts that are most important to Tempur Sealy include environmental sustainability, improving lives, and community involvement. The company focuses on minimizing its impact on the environment, providing a safe and healthy workplace, and investing in the communities in which it operates.
2) Does the corporation dictate corporate social responsibility efforts in which employees must participate, or do the employees have a say in how to give back?
Tempur Sealy has established a formal corporate social responsibility program that sets expectations for employee participation and provides opportunities for employees to engage in a variety of initiatives. However, employees are also encouraged to bring forward their own ideas and initiatives for giving back to the community.
3) Why do you believe the company selected the CSR efforts it did, AND do you believe the CSR efforts serve a business purpose?
Why or why not?
The company has selected these CSR efforts because they align with the values of the company and address key concerns of stakeholders such as employees, customers, investors, and the community. By addressing these concerns, Tempur Sealy can enhance its reputation, build loyalty among stakeholders, and create value for the business. CSR efforts can also help attract and retain employees, differentiate the company from competitors, and increase customer satisfaction.
4) Does this company seem to follow the stakeholder or shareholder approach to CSR? Why?
Tempur Sealy follows a stakeholder approach to CSR, as evidenced by its commitment to addressing the needs and concerns of a broad range of stakeholders, including employees, customers, investors, and the community. The company recognizes that these stakeholders are interconnected and that its success depends on meeting the needs and expectations of each group. This approach aligns with the view that CSR should be about creating shared value for all stakeholders, rather than just maximizing shareholder value.
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The annual demand for a specific product is 3,500 units and has the following ordering and holding costs: Co = $20.50 per order and Ch = $8.00 per unit. Demand exhibits some variability such that the lead-time demand follows a normal probability distribution with = 45 units and = 12 units.
A) Problem 2a. ( What is the recommended order quantity for this product? Express your answer as a whole number using standard rounding rules.
Order Quantity = ___ Units
B) Problem 2b. If the manager sets the reorder point at 55 units, what is the probability of a stockout in any given order cycle? Express your answer as a decimal to 4 decimal places using standard rounding rules.
Probability of a stockout = ___.
C) Problem 2c. Given the probability of a stockout in problem 2b, how many times would expect a stockout to occur during the year if the reorder point = 55 units were used? Express your answer to 2 decimal places using standard rounding rules.
Number of order cycles with a stockout = ___ order cycles
The recommended order quantity for this product is 43 units and the probability of a stockout in any given order cycle is approximately 0.2317.
To solve this problem, we can use the Economic Order Quantity (EOQ) model and some additional calculations.
A) Calculate the Recommended Order Quantity:
EOQ formula:
EOQ = √((2 * Co * D) / Ch)
Where:
Co = Ordering cost per order = $20.50
Ch = Holding cost per unit = $8.00
D = Annual demand = 3,500 units
Substituting the values:
EOQ = √((2 * $20.50 * 3,500) / $8.00)
EOQ ≈ √(14,700 / 8.00)
EOQ ≈ √1,837.5
EOQ ≈ 42.91
Therefore, the recommended order quantity for this product is 43 units (rounded to the nearest whole number).
B) Calculate the Probability of Stockout:
To calculate the probability of a stockout, we need to determine the standard deviation of the lead-time demand.
Standard deviation of the lead-time demand (σ) = 12 units
Probability of stockout = Z-value * σ / EOQ
Where Z-value corresponds to the reorder point.
Given that the reorder point is set at 55 units:
Z-value = (55 - mean demand) / σ
= (55 - 45) / 12
= 10 / 12
= 0.8333
Probability of stockout = 0.8333 * 12 / 43
≈ 0.2317
Therefore, the probability of a stockout in any given order cycle is approximately 0.2317.
C) Calculate the Number of Order Cycles with a Stockout:
To determine the number of order cycles with a stockout, we need to multiply the probability of stockout by the number of order cycles per year.
Number of order cycles with a stockout = Probability of stockout * Number of order cycles per year
Assuming there are 1 order cycle per year:
Number of order cycles with a stockout = 0.2317 * 1
≈ 0.23
Therefore, if the reorder point of 55 units is used, we can expect approximately 0.23 order cycles with a stockout per year (rounded to 2 decimal places).
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