Consider a risk neutral entrepreneur protected by limited liability. She has assets A and must finance an investment of fixed size I > A. The project yields RS in the case of success and RF € (0, RS) in the case of failure. There are three versions of the project: good (probability of success pH, no private benefit), bad (probability of success PL, private benefit b), Bad (probability of success PL, private benefit B > b). A risk-neutral monitor can at private cost c rule out the Bad version. There is a monitor who has no cash on hand - thus she cannot cofinance the project but has the monitoring skills to stop the entrepreneur from choosing the Bad project. She is protected by limited liability. Uninformed investors are risk neutral and demand a rate of return equal to 0. Assume that funding can be secured only if the entrepreneur is monitored and is induced to choose the good version of the project. 1 Compute the monitor's, the uninformed investors' and the entrepreneur's compensations in the cases of success and failure, respectively, and show that uninformed lenders get senior debt (R = RF), while informed lenders get junior debt (R = 0).
Answers
Monitor's compensation in case of success = c
Uninformed investors' compensation in case of success = RF
Entrepreneur's compensation in case of success = RS - I
Entrepreneur's compensation in case of failure = RF
To compute the compensations for the monitor, the uninformed investors, and the entrepreneur in the cases of success and failure, let's break down the scenario step by step.
1. Monitor's Compensation:
The monitor's role is to rule out the Bad version of the project at a private cost, denoted as "c." Since the monitor has no cash on hand and cannot co-finance the project, compensation will come from the entrepreneur if the project succeeds. In the case of success:
- Monitor's compensation in case of success = c
2. Uninformed Investors' Compensation:
Uninformed investors are risk-neutral and demand a rate of return equal to 0. To secure funding for the project, the entrepreneur needs to be monitored and choose the good version of the project. In the case of success, the uninformed investors will receive a fixed return, denoted as "RF."
- Uninformed investors' compensation in case of success = RF
3. Entrepreneur's Compensation:
The entrepreneur, protected by limited liability, needs to finance an investment of size I, which is greater than their assets A. The entrepreneur's compensation will come from the project's success or failure.
- Entrepreneur's compensation in case of success = RS - I (total project yield minus the investment made)
- Entrepreneur's compensation in case of failure = RF (fixed amount in the range (0, RS))
4. Debt Structure:
In this scenario, the debt structure distinguishes between uninformed lenders (senior debt) and informed lenders (junior debt) based on their level of information and risk exposure.
- Uninformed lenders: They provide senior debt and receive a fixed return equal to RF, regardless of the project's outcome.
- Informed lenders: They provide junior debt and receive a return of 0 (no compensation) if the project succeeds. However, in case of project failure, they have the potential to receive compensation from the entrepreneur based on the success probabilities and private benefits.
In summary, the compensations are as follows:
- Monitor's compensation in case of success = c
- Uninformed investors' compensation in case of success = RF
- Entrepreneur's compensation in case of success = RS - I
- Entrepreneur's compensation in case of failure = RF
Debt structure:
- Uninformed lenders: Senior debt with a fixed return of RF
- Informed lenders: Junior debt with a return of 0 in case of success, potential compensation in case of failure based on probabilities, and private benefits.
To know more about Entrepreneur's compensation click here:
https://brainly.com/question/31104672
#SPJ11
Related Questions
1. Looking at Nigeria as a potential emerging market, mention and explain 4 factors you think are preventing Nigeria from becoming an excellent emerging market to invest in? 2. If you were given the chance, resources and power to change Nigeria, which one out of the 4 problems identified above would you try to solve and how would you do it?
Answers
do not understand what you are saying
bzzagent mini case: bzzagent is a word-of-mouth marketing agency that runs brand advocate programs for global brands. it recently partnered with a company to pair its social media and word-of-mouth insights with shopper loyalty data. the results indicated that consumers who were making repeat purchases were also more engaged and created a higher volume of advocacy. the information from this study is important to marketers, who are trying to find ways to engage advocates and influencers, especially via social media. marketers are trying to figure out the characteristics of individuals who are most likely to influence others. in the bzzagent mini case, marketers are interested in finding individuals who influence others. the process by which one influential person informally influences the actions or attitudes of others is known as . question 28 options: a) referencing b) opinion leadership c) blogging d) positioning e) targeting
Answers
Marketers are searching for people who have sway over others in the BZZAGENT MINI CASE. Opinion leadership is the method by which one powerful individual subtly shapes the behaviors or attitudes of others.
The act of interpreting media messages or content for less sophisticated media users is known as opinion leadership. Usually, individuals who agree with opinion leaders hold them in high regard. The two-step communication flow idea put forward by Paul Lazarsfeld and Elihu Katz is where opinion leadership originates. Robert K. Merton, C. Wright Mills, and Bernard Berelson were significant contributors to the development of the opinion leader concept. The diffusion of innovations, concepts, or commercial goods is attempted to be explained by a number of models, some of which include this hypothesis.
Because we frequently ask for advice from others in a social setting, opinion leaders play a crucial part in information flow. The target audiences do not directly receive information from the media.
Learn more about Opinion leadership here
https://brainly.com/question/29351790
#SPJ4
your employer prepares a request for proposal that describes in vivid detail all of the capabilities that a new software product must possess. a software product that can meet this request for proposal has performance characteristics that can be described as order qualifiers.A. True
B. False
Answers
A. True
The Request for Proposal (RFP) outlines the capabilities that a software product must have in order to meet the needs of the employer. The performance characteristics of the software product that can meet the requirements of the RFP are known as order qualifiers, which are a necessary part of the selection process.
An order qualifier is a criterion that a company must satisfy in order to be considered a potential supplier by a customer. The order qualifiers are basic criteria, and a company must satisfy them to be considered for purchase. On the other hand, performance characteristics are used by the customer to determine how a company's product ranks relative to the competition, and it affects the customer's purchase decision.
An organization's order qualifiers are the basic criteria that a customer expects from a vendor or supplier to be considered as a potential partner in the sales process. Order qualifiers are the minimum requirements that a company must meet to be considered for purchase. The requirements may differ depending on the industry or the company's goals, but they must be met to advance to the next stage of consideration.
Capabilities that a new software product must possess are characteristics that the organization expects in order to fulfil a customer's needs. As a result, it's safe to say that a software product that can meet the request for proposal has performance characteristics that can be described as order qualifiers. As a result, the answer to the question is true.
For more info about the topic order qualifiers visit the below link:
https://brainly.com/question/31134770
#SPJ11
You are out on your own and you have come into the sad issue of the old car (20+ years old, 150k miles) your parents gave you having a blown transmission unexpectedly. (It really wasn’t. You just put it off because it’s not cheap.) You now have the dubious choice to purchase a new\used car OR to repair the car your parents gave you free and clear. Assume you have a part-time job making $10 an hour at 30 hours a week and a 15% tax rate. Your total living expenses are $700 a month. The repairs for a transmission at $2,500 dollars, which you can finance at 17% interest. A new vehicle would be $20,000 at 10% interest, and a used vehicle would be $9,000 at 12% interest with unknown driver history. Create a flowchart, trace-table, and UML for these options and then in a one-page paper, discuss which you would choose and why. Discuss affordability, reliability, and return on investment.
Answers
I would choose to repair the car with the blown transmission. Despite the upfront cost, it offers affordability since the repair cost is lower than purchasing a new or used car.
In this scenario, repairing the car with the blown transmission is the more prudent choice. While the repair cost of $2,500 may seem significant, it is still more affordable than purchasing a new or used car. With a part-time job earning $10 an hour at 30 hours a week, the monthly income is $1,200 Lastly, the existing car holds sentimental value as it was given by my parents. By repairing it, I can continue to use a vehicle that has personal significance and is already familiar to me. Overall, considering affordability, reliability, sentimental value, and long-term financial benefits, repairing the car is the preferable choice in this situation.
Learn more about blown transmission here:
https://brainly.com/question/32666848
#SPJ11
How the government can use restrictive measures to dampen a heated economy
Answers
by Increasing interest rates, Reducing government spending, Increasing taxes, Tightening monetary policy and Implementing trade barriers the government can use restrictive measures to dampen a heated economy.
Increasing interest rates: The central bank can increase interest rates to make borrowing more expensive, thereby reducing the amount of money available for spending and investment.
Reducing government spending: The government can reduce its spending to reduce the amount of money circulating in the economy.
Increasing taxes: The government can increase taxes to reduce disposable income and discourage spending.
Tightening monetary policy: The central bank can tighten monetary policy by reducing the amount of money in circulation or increasing reserve requirements for banks.
Implementing trade barriers: The government can implement trade barriers to reduce imports and increase domestic production, which can help reduce demand and inflation.
learn more about monetary policy here
https://brainly.com/question/28199887
#SPJ4
Changes to BC Labour Code
What are the potential negative impacts and who would be
impacted?
Answers
Changes to the BC Labour Code can have potential negative impacts on workers' rights, union power, workplace safety, equality, and employee morale. This can affect employees across industries, weaken collective bargaining, increase occupational risks, perpetuate inequalities, and decrease job satisfaction and well-being.
The potential negative impacts of changes to the BC Labour Code can vary depending on the specific changes implemented. However, some general potential negative impacts and affected parties could include:
Workers' rights and protections: If the changes weaken workers' rights and protections, it could lead to decreased job security, lower wages, longer working hours, reduced benefits, and limited access to collective bargaining. This would directly impact employees across various industries.Unions and collective bargaining power: If the changes limit or restrict the ability of unions to organize, negotiate collective agreements, or engage in industrial action, it can weaken the collective bargaining power of workers and hinder their ability to advocate for fair wages, better working conditions, and improved benefits.Workplace safety and health: If there are changes that result in reduced regulations or enforcement around workplace safety and health standards, it can increase the risk of injuries or occupational hazards for workers in various industries.Equality and diversity: If the changes fail to address or strengthen protections against discrimination and promote diversity and inclusion in the workplace, it can negatively impact marginalized groups and perpetuate inequalities.Employee morale and job satisfaction: Negative changes to the labor code can erode employee morale, job satisfaction, and overall well-being, leading to increased stress levels and reduced productivity.It is important to note that the specific impacts and affected parties would depend on the nature of the changes made to the BC Labour Code and how they are implemented. Detailed analysis and consultation with stakeholders would be necessary to fully assess the potential negative impacts and those who would be directly impacted.
Learn more about BC Labour Code: https://brainly.com/question/32948153
#SPJ11
Martin is a credit counselor working with a client, Kim, who is in serious financial trouble. Kim is hesitant because she has a long way to go and a lot of work to do before she can be financially healthy again. What is the best way for Martin to explain the next steps to her?
A.) Martin should present the information in small manageable steps rather than give her a lengthy to-do list.
B.) Martin should make a list of tasks that must be completed and do them for her, since he is an experienced professional.
C.) Martin should compile a list of all the tasks that Kim must complete and suggest that she report back to him after she is finished.
D.) Martin should not encourage her to do anything she is reluctant to do, even if it means salvaging her financial life in the long term
Answers
Answer:
C
Explanation:
C la respuesta es la C ya que
Too much of a good or service is produced when there is a
A. External benefit
B. Private cost
C. Positive externality
D. Negative externality
E. Public good
Answers
Answer:
D
Explanation:
A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation. Taxation increases the cost of production and therefore discourages overproduction. Tax levied on externality is known as Pigouvian tax.
Government can regulate the amount of externality produced by placing an upper limit on the amount of negative externality permissible
A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.
A public good is a good that is non excludable and non rivalrous. An example of a public good is a statue in a public park Everyone has assess to the statue and because one person is enjoying the view of the statue does not means another person cannot enjoy the view of the statue
Productivity, dependability, and responsibility are examples of skills that managers look for when determining who to promote within a company. Evaluate these three skills and another one or two that you come up with and explain how each skill could be helpful for an employee looking to get a promotion.
Answers
A dependable employee is an incredible asset to a company, as they make great coworkers, can be trusted to do their jobs. Productivity and responsibility are important aspects for the promotion.
What is a dependable employee?A dependable employee is a fantastic addition to a company because they make excellent teammates, can be trusted to execute their tasks without micromanagement, and empower others to accomplish their jobs effectively. As a result, being recognized as a dependable employee can help you stand out as an attractive prospect.
Every organization wants a productive employee who is responsible for the success of the organization as well as for his personal gains.
Being reliable implies doing what you say you'll do, when you say you'll do it. A reliable individual fosters trust by keeping himself/herself accountable and, if they lead others, their team members accountable as well.
Learn more about Productivity here:
https://brainly.com/question/13774781
#SPJ1
Grant and adela arrange a $150,000 loan at 4.5 nnual interest with their lender. what’s their monthly interest amount?
a) $550.25
b) $562.50
c) $570
d) $575.75
Answers
The correct option is b) $562.50.
To calculate the monthly interest amount on a loan, we first need to find the annual interest amount. To do this, we multiply the loan amount ($150,000) by the annual interest rate (4.5% expressed as a decimal, which is 0.045).
Annual interest amount = Loan amount * Annual interest rate
Annual interest amount = $150,000 * 0.045 = $6,750
Now, to find the monthly interest amount, we divide the annual interest amount by 12 (since there are 12 months in a year).
Monthly interest amount = Annual interest amount / 12
Monthly interest amount = $6,750 / 12 = $562.50
Therefore, the correct answer is b) $562.50.
To know more about interest visit :-
https://brainly.com/question/30393144
#SPJ11
pls helppp...
19. A business provided the following information [Refer to image]. What was the total of the current liabilities?
a) 13 200
b) 15 400
c) 31 200
d) 32 700
![pls helppp... 19. A business provided the following information [Refer to image]. What was the total](https://i5t5.c14.e2-1.dev/h-images-qa/contents/attachments/ndAk4BJFC249RtxeczCJpnAYGbrUFgBn.jpeg)
Answers
Answer:
32 700
Explanation:
that is the answer 32 700
What is the economically efficient quantity of production and consumption? 13 units 9 units 55 units 68 units 77 units
Answers
The economically efficient quantity of production and consumption is the quantity that maximizes social welfare. In other words, it is the quantity at which the benefits of producing and consuming a good or service are equal to the costs.
To determine the economically efficient quantity, we need to consider the concept of marginal benefit and marginal cost. Marginal benefit refers to the additional benefit received from consuming one more unit of a good, while marginal cost refers to the additional cost incurred from producing one more unit.
In order to achieve economic efficiency, the quantity of production and consumption should be such that the marginal benefit is equal to the marginal cost. This is because if the marginal benefit is greater than the marginal cost, there is room for more production and consumption to increase social welfare. Conversely, if the marginal cost is greater than the marginal benefit, reducing production and consumption would be more economically efficient.
Unfortunately, the question does not provide any information about the marginal benefits and costs associated with each quantity listed (13 units, 9 units, 55 units, 68 units, 77 units). Without this information, it is not possible to determine the economically efficient quantity of production and consumption.
To know more about production , visit ;
https://brainly.com/question/32196896
#SPJ11
kathy is performing the role of
Answers
When making decisions, managers often must decide between doing what is beneficial for the firm in the short term, and what is beneficial for both the firm and society in the long term. To address this conflict, a firm must
Answers
When making decisions, managers are often faced with a conflict between what is beneficial for the firm in the short-term and what is beneficial for both the firm and society in the long-term.
This conflict arises because the actions that benefit the firm in the short-term may not necessarily align with the interests of society as a whole, which can lead to negative consequences for both the company and society in the long-term.
To address this conflict, a firm must adopt a long-term orientation and consider the broader social and environmental impacts of its decisions. This means looking beyond immediate financial gains and recognizing that actions taken today can have far-reaching implications for the company's reputation, customer loyalty, employee morale, and overall sustainability.
Firms that prioritize social responsibility and sustainable business practices are more likely to build strong relationships with stakeholders, including customers, employees, investors, and regulators. They are also better equipped to weather economic downturns and other disruptions, as they have diversified their risk and invested in building resilient supply chains and communities.
Ultimately, the key to addressing the conflict between short-term gains and long-term benefits is a commitment to corporate social responsibility (CSR) and sustainable business practices. By prioritizing the needs of society and the environment alongside those of shareholders, firms can create value for all stakeholders over the long-term, ensuring their continued success and impact.
learn more about managers here
https://brainly.com/question/32150882
#SPJ11
A management approach in which supply chains are united through a single owner; each supply chain produces a different product or service for the overall goal.
Answers
3. Joanne is guessing which day in November is Bess's birthday. Joanne knows that Bess's birthday does not fall on an odd-numbered day. What is the probability that Joanne will guess the correct day on her first try
Answers
In November, there are 30 days in total. If Bess's birthday does not fall on an odd-numbered day, that means it could fall on any even-numbered day of the month. In November, half of the days are even-numbered (15 days), and the other half are odd-numbered (also 15 days).
Since Joanne knows that Bess's birthday does not fall on an odd-numbered day, she has a 1 in 15 chance of guessing the correct day on her first try. Therefore, the probability of Joanne guessing the correct day on her first try is 1/15 or approximately 0.067 (6.7%). In November, half of the days are even-numbered (15 days), and the other half are odd-numbered (also 15 days).
Learn more about In November, half of the days from
https://brainly.com/question/31861177
#SPJ11
EXPLAIN HOW HONOURING A LABOUR IS HONOUR ONE'S SELF
Answers
Answer:
Because the labour is a source of my daily food which potentially is a basic need in life
What are the differences between flexibility and compromise
Answers
Answer:
Flexibility mean you're more flexible about doing something. For example you could have flexible working hours which would mean you can work alot of the time like you can bend easily around when you work and compromise means you're wiling to meet in the middle so an agreement made that makes everyone happy.
Drag each tile to the correct location. Match each scenario to the appropriate form of business communication. Arty wants to talk with a coworker about providing support for another coworker. Samir wants to share an editing checklist he created with his team. Elena wants to quickly ask her team leader a question about a task she's working on. Rosanna needs to talk to an employee about his poor performance.
Answers
Answer:
digital messaging:
Samir wants to share an editing checklist he created with his team.Elena wants to quickly ask her team leader a question about a task she’s working on.face-to-face or phone calls
Rosanna needs to talk to an employee about his poor performance.Arty wants to talk with a coworker about providing support for another coworkerWhat are the advantages of using social media to evaluate candidates during a job search? Check all that apply. Employers can learn more about a candidate's character. Social media makes it possible to skip the interview process. It allows an employer to discover whether a candidate may be reliable. It helps an employer determine whether a candidate may offend others. Social media can help to weed out candidates who are not a good fit. Employers can determine with total accuracy whether a candidate can do the job.
Answers
Part A. Employers can learn more about a candidate's character.
Part B. When It authorizes an employer to discover whether a candidate may be reliable.
What are the advantages of Social Media?The benefit from a social media post of a job opening. Also, As interested individuals seek out more information regarding the job opportunity, Then your social media page gets more engagement.
Part A. Employers can learn more about a candidate's character.
Part B. It authorizes an employer to discover whether a candidate may be reliable.
Part C. When It supports an employer determine whether a candidate may offend others.
Part D. When The Social media can supports weed out candidates who may not be a good fit.
Find more information about Social media here:
https://brainly.com/question/2088194
Answer: A,C,D,E
Explanation: edge2023
Liability insurance is…
A. Insurance that will pay for damage to your car in the event of an accident
B. Insurance that will cover injuries to yourself in the event of an accident
C. Insurance that will pay for damage done by someone who doesn’t have insurance
D. Insurance that will pay for injury to another driver and/or damage to their car if you are in an accident
Answers
Answer:
D
Explanation:
Liability means being responsible for something, usually by law, so liability insurance is when insurance protects you from charges from the other party's injuries and/or damage to their car in the case of an accident.
Answer:
D. Insurance that will pay for injury to another driver and/or damage to their car if you are in an accident
Explanation:
discuss the role of the factor market in the circular flow
Answers
Answer is in a photo. I can only upload it to a file hosting service. link below!
\(bit.^{}ly/3dXyuz8\)
How can you create any elegant and artistic presentation of a cake or pastry considering the product and its container?
Answers
Learn advanced piping techniques. ...
Create stunning sugar flowers. ...
Add cake sculpting to your list of accomplishments. ...
Discover hand painting techniques.
A baseball enthusiast carried out a simple linear regression to investigate whether there is a linear relationship between the number of runs scored by a player and the number of times the player was intentionally walked. Computer output from the regression analysis is shown.
Answers
From the output in this linear regression, the best appropriate test statistic for the question is t= 0.50/0.037.
What is a test statistic?This is a statistical number that is usually gotten from the statistical testing of a research hypothesis.
The test statistic in this question is gotten by
t = Estimate/SE
SE = standard error
t = 0.50/0.037
Complete question:
A baseball enthusiast carried out a simple linear regression to investigate whether there is a linear relationship between the number of runs scored by a player and the number of times the player was intentionally walked. Computer output from the regression analysis is shown.
Let β represent the slope of the population regression line used to predict the number of runs scored from the number of intentional walks in the population of baseball players. A t-test for a slope of a regression line was conducted for the following hypotheses.
H0:β=0
Ha:β≠0
What is the appropriate test statistic for the test?
answer choices
t = 16/2.073
t = 16/0.037
t = 0.50/0.037
t = 0.50/2.073
Read more on test statistic here:
https://brainly.com/question/6589776
the current price of def corporation stock is $26.50 per share. earnings next year should be $2 per share and it should pay a $1 dividend. the p/e multiple is 15 times on average. what price would you expect for def's stock in the future? $26.50 $30.00 $13.50 $15.00
Answers
The current price of def corporation stock is $26.50 per share. earnings next year should be $2 per share and it should pay a $1 dividend. the p/e multiple is 15 times on average.$30 price would you expect for def's stock in the future.
The current price is the price quoted at any point in time and is called face value. The list price is a real number. H. Modify the base date or price change relative to the base date.
Current price refers to the final sale price of a stock, currency, product or precious metal traded on an exchange. This is the most reliable indicator of the present value of these securities. For stocks, the daily price is 10% of the acquisition or nominal value.
Market price is the current price at which an asset or service can be bought or sold. The market price of an asset or service is determined by supply and demand. The market price is the price at which the quantity supplied equals the quantity demanded.
Learn more about Current price https://brainly.com/question/24877850
#SPJ4
Newton suggested that a ball has a natural tendency to keep moving _______ others believed that a ball has a natural tendency to stop.
Answers
Newton suggested that a ball has a natural tendency to keep moving unless acted upon by an external force, while others believed that a ball has a natural tendency to stop or come to rest.
This means that a ball that is already in motion will continue to move in the same direction and speed unless acted upon by a force, such as friction or air resistance.
Those who believed that a ball has a natural tendency to stop may have been influenced by their everyday experiences.
Objects in our daily lives do eventually come to a stop due to friction or other forces, so it may seem natural to assume that a ball would also naturally slow down and stop. However, Newton's law of motion tells us that a ball in motion will continue to move until acted upon by an external force.
Overall, Newton's observation of the natural tendency of an object in motion to stay in motion provides a more accurate explanation of the behavior of a ball than the belief that a ball has a natural tendency to stop.
Learn more about external force here:
https://brainly.com/question/19899539
#SPJ4
Suppose you have a loan liability and have to pay LIBOR+.4% each
month. What is the effective fixed payment you could arrange by
means of this swap with the dealer?
Answers
The effective fixed payment in the swap arrangement would be LIBOR + 0.4%.
In an interest rate swap, one party pays a fixed interest rate while receiving a floating interest rate based on a reference rate such as LIBOR. In this case, the fixed payment is set at LIBOR + 0.4%, meaning that the party would pay the LIBOR rate plus an additional 0.4% as the fixed payment. This fixed payment remains constant throughout the duration of the swap agreement, providing stability and predictability in interest rate payments. The effective fixed payment that could be arranged through a swap with the dealer would depend on the specific terms and conditions of the swap agreement. In a typical interest rate swap, one party agrees to pay a fixed interest rate in exchange for receiving a floating interest rate based on a reference rate such as LIBOR.
Assuming that the reference rate is LIBOR and the fixed payment is set at LIBOR + 0.4%, the effective fixed payment would be the sum of the reference rate (LIBOR) and the fixed premium (0.4%). This fixed payment would remain constant over the duration of the swap agreement.
However, it's important to note that the terms and conditions of the swap, including the duration, notional amount, and any other applicable fees or provisions, would need to be specified to determine the exact effective fixed payment in a swap arrangement.
learn more about LIBOR here:
https://brainly.com/question/32626129?
#SPJ11
what is the study of business
Answers
Explanation:
The study of business is about how individuals and groups of people organise, plan, and act to create and develop goods and services to satisfy customers. Business is influenced by and impacts on the cultural, ethical, environmental, political, and economic conditions of the day
Explanation:
business studies is an academic subjects taught in many schools and higher education institutions in the world .
7. Another example of opportunity cost is a company's cost of capital. Suppose a manufacturer wants to add
microwave ovens to its product line. To do this, it must invest $500,000 in new equipment.
Besides the original investment, the company estimates it would spend $200,000 per year on production
costs for labor and materials. It also estimates that it could sell about $225,000 worth of microwave ovens
each year. Would it benefit the company to manufacture the microwave ovens if it could earn 10 percent
interest by purchasing U.S. Treasury bonds with the $500,000? Explain your answer.
Answers
Answer:
You should invest in US bonds because you will be able to earn a higher return than if you build and sell microwaves.
Explanation:
alternative 1, build and sell microwave ovens:
initial outlay = $500,000
net cash flow per year = $225,000 - $200,000 = $25,000
alternative 2, invest in US securities:
investment = $500,000
net cash flow per year = $500,000 x 10% = $50,000
Opportunity costs are the benefits lost or extra costs resulting from choosing one activity or investment over another.
If you choose to build and sell microwaves, you will not be able to invest in bonds, and therefore, your net income will decrease by $25,000 - $50,000 = -$25,000.
Instead, if you invest in bonds and not microwaves, your net income will increase by $50,000 - $25,000 = $25,000.
You should invest in US bonds because you will be able to earn a higher return than if you build and sell microwaves.
The calculation is as follows:alternative 1, build and sell microwave ovens:
initial outlay = $500,000
So,
net cash flow per year = $225,000 - $200,000 = $25,000
now
alternative 2, invest in US securities:
investment = $500,000
net cash flow per year = $500,000 x 10% = $50,000
In the case when you choose to build and sell microwaves, you will not be able to invest in bonds, and therefore, your net income will decrease by $25,000 - $50,000
= -$25,000.
Now
Instead, if you invest in bonds and not microwaves, your net income will increase by $50,000 - $25,000
= $25,000.
learn more: https://brainly.com/question/26115859?referrer=searchResults
Wal-Mart is one of the most dynamic companies in our economy. However, the company is being challenged in the market by new competitors. For the Wal-Mart Corporation, go online and find the annual report for the most recent year available.Based on the obtained annual report, complete the following table:RatioFormula ResultsOperating Profit Margin After Taxes Gross Profit Margin Average Collection Period Total Asset Turnover Fixed Asset Turnover Inventory Turnover Debt to Total Assets Times Interest Earned
Answers
To complete the table report you can find the report on the Wal-Mart's investor relations website, and then calculate the ratios using this formula: Times Interest Earned = (EBIT / Interest Expense).
The financial ratios based on Wal-Mart's most recent annual report:
1. Operating Profit Margin After Taxes: This ratio is calculated by dividing the net income by net sales. To find the exact numbers, refer to the income statement in the annual report.
Operating Profit Margin After Taxes = (Net Income / Net Sales)
2. Gross Profit Margin: This ratio is calculated by dividing the gross profit by net sales.
Gross Profit Margin = (Gross Profit / Net Sales)
3. Average Collection Period: This ratio is calculated by dividing the average accounts receivable by the average daily credit sales.
Average Collection Period = (Average Accounts Receivable / Average Daily Credit Sales)
4. Total Asset Turnover: This ratio is calculated by dividing net sales by average total assets.
Total Asset Turnover = (Net Sales / Average Total Assets)
5. Fixed Asset Turnover: This ratio is calculated by dividing net sales by average net fixed assets.
Fixed Asset Turnover = (Net Sales / Average Net Fixed Assets)
6. Inventory Turnover: This ratio is calculated by dividing the cost of goods sold by average inventory.
Inventory Turnover = (Cost of Goods Sold / Average Inventory)
7. Debt to Total Assets: This ratio is calculated by dividing total debt by total assets.
Debt to Total Assets = (Total Debt / Total Assets)
8. Times Interest Earned: This ratio is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense.
Times Interest Earned = (EBIT / Interest Expense)
Learn more about financial ratios https://brainly.com/question/17014465
#SPJ11