2 pts If the textile industry is an example of a competitive market and it is composed of a large number of small firms and these firms have suffered economic losses and many sellers have left the industry, then economic theory suggests that these conditions will Cause the remaining firms to colllude so that they can produce more efficiently. Shift the demand curve rightward so that price will rise to the level of production cost. Cause new firms to enter the market. O Cause the market supply to decrease and the price of textiles to increase.
Answers
The conditions described in the scenario are likely to cause the market supply to decrease and the price of textiles to increase.
When firms suffer economic losses and leave the industry, the remaining firms may be incentivized to collude in order to reduce competition and increase profits. However, if there are still a large number of firms in the market, collusion may be difficult to achieve. As a result, the market supply of textiles may decrease as some firms exit the industry. This decrease in supply could lead to an increase in the price of textiles, as consumers still demand the product but there are fewer firms producing it. As some firms have experienced economic losses and left the industry, economic theory suggests that these conditions will cause the market supply to decrease and the price of textiles to increase.
When sellers leave a competitive market, it leads to a reduction in the overall market supply. As the supply decreases, the supply curve shifts to the left. With a reduced supply, the demand-supply equilibrium is disrupted, and the price for the remaining textiles in the market will rise until a new equilibrium is reached. This increase in price will help the remaining firms cover their production costs.
In conclusion, the conditions described in the scenario may cause the market supply of textiles to decrease and the price to increase. While collusion among remaining firms may be a possibility, it is not a guaranteed outcome and may not necessarily result in more efficient production. In a competitive market like the textile industry, when firms suffer losses and exit the market, it leads to a decrease in market supply and an increase in the price of textiles.
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Related Questions
Consider the following time series data. Suppose that you use exponential smoothing with an alpha of 0.7 to fit a forecasting model. What is the forecast for period 7?
Period | Forecast | Actual Value
Period 1 | 10. | 10
Period 2 | 10. | 11
Period 3 | 10.7 | 9
Period 4 | 9.51 | 12
Period 5 | 11.253 | 13
Period 6 | 12.476 | 11
a.) 12.443
b.) 11.443
c.) 9.443
d.) 10.443
Answers
Rounding the value to three decimal places, we get the forecast for period 7 as 11.443. Thus, the correct option is b) 11.443
To calculate the forecast for period 7 using exponential smoothing, we will apply the given alpha (0.7) to the time series data provided. Exponential smoothing is a forecasting technique that weighs past data points differently, with more recent data points having a higher weight. The formula for exponential smoothing is:
Forecast(t+1) = alpha × Actual(t) + (1 - alpha) × Forecast(t)
Here, the alpha is 0.7, and we need to calculate the forecast for period 7. Using the data from period 6, we have:
Forecast(7) = 0.7 × Actual(6) + (1 - 0.7) × Forecast(6)
Forecast(7) = 0.7 × 11 + (1 - 0.7) × 12.476
Solving for Forecast(7):
Forecast(7) = 0.7 × 11 + 0.3 × 12.476
Forecast(7) = 7.7 + 3.7428
Forecast(7) = 11.4428
Hence, b is the correct option.
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which economic indicators most strongly suggest than an economy is experiencing the expansion phase of the business cycle?
Answers
The economic indicators that most strongly suggest that an economy is experiencing the expansion phase of the business cycle are as follows: GDP Growth Rate, Employment, Consumer Confidence, Industrial Production, Investment and Capital Spending.
1. GDP Growth Rate: The growth rate of gross domestic product (GDP) is a crucial indicator of economic expansion. When the GDP is growing rapidly, it suggests that the economy is experiencing an expansion phase.
2. Employment: When an economy is in expansion, it will generate jobs, lowering unemployment rates. Therefore, falling unemployment rates indicate that the economy is growing.
3. Consumer Confidence: Consumer confidence is critical to the expansion phase of the business cycle. A rise in consumer confidence suggests that individuals believe that the economy will continue to grow.
4. Industrial Production: Industrial production also a crucial economic indicator. Industrial production growth shows that there is increased demand in the economy, meaning that it is growing.
5. Investment and Capital Spending: When businesses are investing in the economy by increasing their capital expenditure, it indicates that they believe the economy will continue to grow. When companies invest, it leads to increased job creation and economic growth.
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As e-commerce continues to develop, many retailers are likely to maintain some type of "brick-and-mortar" store or physical location primarily because.
Answers
Many retailers are likely to maintain some type of "brick-and-mortar" store or physical location primarily because consumers expect integrated shopping experiences that includes face to face options.
What does e-commerce mean?E-commerce, also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions.
The 4 types of e-commerce presence that we have include:
Web sites,Social mediae-mail,Offline media.Hence, many retailers are likely to maintain some type of "brick-and-mortar" store or physical location primarily because consumers expect integrated shopping experiences that includes face to face options.
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can be in form of a written summary of the findings of a required investigation or a particular problem
A) presentation
B) itinenaries
C) reports
D) notices
Answers
Why miscommunication and misunderstanding happen
Answers
Answer:
misunderstanding happens due to the distance . misunderstanding happen due to lack of time to solve problem . misunderstanding happens due to third person between two persons . misunderstanding happens due to the virtual world .
Engi Sola Corp. Manufactures solar engines for tractor trailers. Given the fuel savings available, new orders for 125 units have been made by customers requesting credit. The variable cost is $9,700 per unit, and the credit price is $11,100 each. Credit is extended for one period. The required return is 1.9% per period. If Engi Sola extends credit, it expects that 30% of the customers will be repeat customers and place the same order every period forever, and the remaining customers will be one-time orders.
Answers
Answer:
The net present value (NPV) of the decision to grant credit is $2,938,157.89.
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
Engi Sola Corp. Manufactures solar engines for tractor trailers. Given the fuel savings available, new orders for 125 units have been made by customers requesting credit. The variable cost is $9,700 per unit, and the credit price is $11,100 each. Credit is extended for one period. The required return is 1.9% per period. If Engi Sola extends credit, it expects that 30% of the customers will be repeat customers and place the same order every period forever, and the remaining customers will be one-time orders.
Calculate the NPV of the decision to grant credit.
The explanation of the answer is now given as follows:
Number of new orders = 125 units
Percentage of repeat order = 30%
Number of order that will be repeated forever = Number of new orders * Percentage of repeat order = 125 * 30% = 37.50 units
Credit price per unit = $11,100
Variable cost per unit = $9,700
Contribution margin per unit = Credit price per unit - Variable cost per unit = $11,100 - $9,700 = $1,400
Total contribution for all new order = Number of new orders * Contribution margin per unit = 125 * $1,400 = $175,000
Total contribution margin for order that will be repeated forever = Contribution margin per unit * Number of order that will be repeated forever = $1,400 * 37.50 = $52,500
Net present value (NPV) of total contribution margin for order that will be repeated forever = Total contribution margin for repeated order forever / Required return = $52,500 / 1.9% = 2,763,157.89
Net present value (NPV) of the decision to grant credit = Total contribution for all new order + NPV of total contribution margin for order that will be repeated forever = $175,000 + 2,763,157.89 = $2,938,157.89
Therefore, the net present value (NPV) of the decision to grant credit is $2,938,157.89.
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Answers
In the context of sports, with the recent proliferation of mobile devices and growing connectivity, many people have _____. Multiple choice question. received significant financial aid to facilitate sports development and participation gained the ability to produce and distribute sport content and commentary turned to traditional content such as newspaper reports gained entry into professional athletic and sports teams
Answers
Answer:
gained the ability to produce and distribute sport content and commentary.
Explanation:
In the context of sports, with the recent proliferation of mobile devices and growing connectivity, many people have gained the ability to produce and distribute sport content and commentary.
On March 25, 2014, Patton Company sold merchandise on account,$10,000. The applicable sales tax percentage is 8.5%. Record the transaction.
Answers
Answer:
Kindly see attached picture
Explanation:
Sales tax percentage= 8.5%
Sales = 10,000
Sales tax payable = 0.085 × 10000 = 850
Accounts payable = 10000 + 850 = 10850
Kindly see attached picture for journal entry
fill in the blanks with the word or phrase from the drop-down list that best completes the sentence. a. select answer pertains to the location of inventory or stock and the number of storage locations the firm maintains, while select answer is the quantity of stock the firm maintains at each location. b. using select answer is a component of handling materials appropriately in the factory, in the warehouse, and in transport terminals. c. activities for moving products within plants, warehouses, and transportation terminals comprise the select answer system.
Answers
The word or phrase from the drop-down list that best completes the sentence: a. Stock location pertains to the location of inventory or stock and the number of storage locations the firm maintains, while stock level is the quantity of stock the firm maintains at each location.
Using unit load devices is a component of handling materials appropriately in the factory, in the warehouse, and in transport terminals.
Activities for moving products within plants, warehouses, and transportation terminals comprise the materials handling system.
Stock location is the location of inventory or stock and the number of storage locations the firm maintains. It is important for retailers to manage their stock location efficiently to reduce costs, meet customer demand, and improve profitability. A stock location system is a tool that helps retailers track and organize their stock location by using codes, labels, or barcodes
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Why are economic systems needed? Respond to the question below with a minimum of 5 sentences.
Answers
Answer:
Explanation:Since economic resources are scarce, they must be used efficiently. We want to produce as much goods and services as we can, and in the process, produce the goods and services needed the most. There are five functions an economic system performs in producing goods and services for consumption.
assume that households have positive wealth. which of the following explains how the income effect of an interest rate increase affects consumption?
Answers
The income effect of an interest rate increase affects consumption: As the interest rate increases, nonlabour income increases and current consumption increases.
What is interest rate?Interest rate is the cost of borrowing money or the rate of return earned by an investor. It is typically expressed as a percentage of the principal amount borrowed or invested over a certain period of time. Interest rates are determined by a variety of factors, such as the risk associated with the loan, the borrower's credit rating, the type of loan and the amount of money being borrowed. Generally, the higher the risk associated with lending the money, the higher the interest rate. Interest rates can vary from one lender to another, so it is important to shop around to find the best deal.
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Complete Question:
Assume that households have positive wealth.
Which of the following explains how the income effect of an interest rate increase affects consumption?
As the interest rate increases, nonlabour income increases and current consumption increases.
As the interest rate increases, the opportunity cost of current consumption falls, and therefore current consumption increases.
As the interest rate increases, permanent income increases and future consumption increases.
As the interest rate increases, expected future income increases and future consumption increases.
A football team receives $258,000 in sponsorship for equipment, and the administrative costs are expected to be $27,000. What are the costs as a percentage of sponsorship revenue?
Answers
Based on the calculation below, costs as a percentage of sponsorship revenue is 10.47%.
How to calculate costs as a percentage of revenue?The costs as a percentage of sponsorship revenue can be calculated using the following formula:
Costs as a percentage of sponsorship revenue = (Expected administrative costs / Sponsorship revenue) * 100 …………………………….. (1)
Substitute the relevant values into equation (1), we have:
Costs as a percentage of sponsorship revenue = ($27,000 / $258,000) * 100
Costs as a percentage of sponsorship revenue = 0.104651162790698 * 100
Costs as a percentage of sponsorship revenue = 10.47%
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Under the current managed float exchange rate regime; countries with surpluses in their balance of payments frequently do not want to see their currencies appreciate because it makes their goods ________ expensive abroad and foreign goods ________ in their countries.
Answers
The country will not want their currencies to appreciate because it makes their goods expensive abroad and foreign goods be cheaper in their countries.
The floating exchange rate system is a system where currency price on forex market is based on supply and demand of other currencies therein.
Countries with surpluses in their balance of payments usually have a favorable currency because they exports more than it imports.Hence, the country will not want to see their currencies appreciate because it makes their goods expensive abroad and foreign goods be cheaper in their countries.
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PLS HELPPP!!! FASTTT!!! A firm has three different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B will give the firm $15 million at the end of one year, $10 million at the end of two years, and $5 million at the end of three years. Option C will give the firm $30 million at the end of one year, and nothing thereafter. Which of these options has the highest present value?
a. Option A
b. Option B
c. Option C
d. The answer depends on the rate of interest, which is not specified here.
Answers
Answer:
i would say d
Explanation:
Based upon conflict resolution, answer the following question
You have assembled some employees into a team to reach the goal of improving customer service in your department, but all they do is argue when they meet.
What should you do?
Answers
As a leader, it is essential to address the issue of conflict within the team.
Firstly, it is crucial to identify the root cause of the disagreements and find ways to resolve them. One approach could be to facilitate a team-building session where team members can discuss their differences and work towards a common goal. Encouraging active listening and providing a safe space for employees to express themselves can foster an environment of trust and collaboration. It is also important to set clear expectations for the team and establish ground rules for communication and conflict resolution. Lastly, as a leader, it is vital to remain impartial and avoid taking sides to ensure fairness and promote a healthy team dynamic. By taking these steps, the team can move towards achieving their goal of improving customer service and building stronger relationships with each other.
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Somebody help me pls
Answers
Answer:
yr question is not here???????
What is it that you need help with?
It's probably best to specify that in the question first.
Congress passes a bill calling for a 5% tax decrease. The president then signs it
a.) the government's monetary policy
b.) government's open. market regulations
c.) the government's tight money policy
d.) the government's fiscal policy
Answers
Answer:
d.) the government's fiscal policy
Explanation:
Fiscal policy is the actions of a government to alter spending and taxation to influence economic direction. This implies that fiscal policy tools are the level of government spending and taxation.
Reducing taxes and government spending increases the money supply in the market. The government will consider these actions during recessions to stimulate economic growth. Increasing taxes and decreasing spending reduces money circulation in the economy, thereby regulating economic growth.
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.
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When you complain to your supervisor that the new company software is not working correctly, you are using downward communication
O True
O False
Answers
Because downward communication occurs when information and messages flow down through an organization's formal chain of command.
Hope it helps...Answer:
False
Explanation:
downward communication is the flow of information and messages from a higher level inside an organization to a lower one.
Employers will consider an application valid even if it has not been signed.
T or F
Answers
When talking about personal finances, dave ramsey says, "you will either manage your money or the lack of it will:.
Answers
Personal finance is the financial management of an individual's budget, savings, and investments. As Dave Ramsey says, "You will either manage your money or the lack of it will manage you." Here's what this means: Financial stability is vital to achieving our goals and leading a stress-free life.
The way we manage our money determines whether we can meet our financial goals, pay our bills on time, or save for future expenses. It's challenging to maintain a comfortable lifestyle without financial stability. Unfortunately, many individuals are unable to manage their money correctly. They frequently lack financial planning, which causes them to experience difficulties and financial crises. As a result, Dave Ramsey's saying holds significance. It reminds us that it's essential to have a financial plan and be careful with our money. It encourages us to prioritize our spending, save money, and invest our money wisely. In essence, it's a call to be proactive and make sound financial decisions, not just react to financial difficulties when they arise.
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What does the stock market drive companies to do?
Answers
Answer:
It drives companies to push themselves to increase their market value, and make sure all the companies news is relevant and important.
Explanation:
The stock market is an online exchange where prices are put together and people make different trades. The stock market drives them to increase their earnings and ultimately the price per share of their stock.
Pompeii, Inc., has sales of $53,000, costs of $24,200, depreciation expense of $2,550, and interest expense of $2,300. If the tax rate is 24 percent, what is the operating cash flow, or OCF
Answers
Answer:
$23,052
Explanation:
The computation of operating cash flow is shown below:-
Before that we have to determine the net income which is
Income statement
Sales $53,000
Cost ($24,200)
Depreciation ($2,550)
EBIT $26,250
Interest expense ($2,300)
Earnings before tax $23,950
Tax (5,748)
(24% × $23,950)
Net income $18,202
Now,
Operating cash flow = EBIT + Depreciation - Tax
= $26,250 + 2,550 - $5,748
= $23,052
steps on how to create your own app
Answers
Explanation:
● Steps on how to create your own app
First you have to know coding and programing...
Cost of goods sold is determined only at the end of the accounting period in.
Answers
The Cost of goods sold is known only at the end of the accounting period in the periodic inventory system.
What is an inventory System?Inventory systems is one that has a periodic and perpetual inventory systems. The inventory systems is known to be the way of recording and evaluating the value of inventories in a timeframe.
In the periodic inventory system, cost of goods sold is known by only at the end of a specific accounting period.
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A company's flexible budget for 19,000 units of production showed sales, $81,700; variable costs, $30,400; and fixed
costs, $12,000. The variable costs expected if the company produces and sells 12,000 units is:
Multiple Choice
Answers
After solving the given problem, the variable costs expected if the company produces and sells 12,000 units is $19,200.
Variable costs are expenses that change in proportion to the activity of a company. This means that as the level of production or sales increases, variable costs will also increase, and as production or sales decrease, variable costs will decrease as well.
The variable costs can be influenced by the company's decision to increase or decrease production or sales activities. Examples of variable costs may include costs of raw materials, direct labor, and sales commissions.
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if the exchange rate between the dollar and the pound is currently 1.50 and is expected to be 1.35 in one year
Answers
If the rate is expected to be 1.35 in one year, the expected rate of depreciation of the dollar is 10%.
What is the expected rate of depreciation of the dollar?To calculate the expected rate of depreciation, we can use the formula: Rate of depreciation = (Ending exchange rate - Starting exchange rate) / Starting exchange rate
Given that the starting exchange rate is 1.50 and the expected ending exchange rate is 1.35, we substitute values into the formula:
Rate of depreciation = (1.35 - 1.50) / 1.50
Rate of depreciation = -0.15 / 1.50
Rate of depreciation = -0.10
Rate of depreciation = -10%.
Full question:
If the exchange rate between the dollar and the pound (the pound price of the dollar) is currently 1.50, and is expected to be 1.35 in one year, then the expected rate of depreciation of the dollar is _____.
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The expected percentage change in the exchange rate between the dollar and the pound is -10%.
This indicates a 10% depreciation of the dollar against the pound.
If the exchange rate between the dollar and the pound is currently 1.50 and is expected to be 1.35 in one year, it means that the pound is expected to appreciate against the dollar.
This implies that it will take fewer dollars to buy one pound in the future.
To calculate the percentage change in the exchange rate, we can use the following formula:
Percentage Change = [(New Rate - Old Rate) / Old Rate] * 100
Using the given values, we can substitute them into the formula:
Percentage Change = [(1.35 - 1.50) / 1.50] * 100
Simplifying the expression:
Percentage Change = (-0.15 / 1.50) * 100
Percentage Change = -10%
Therefore, the expected percentage change in the exchange rate between the dollar and the pound is -10%.
This indicates a 10% depreciation of the dollar against the pound.
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please someone answer this brainlest and 45 pionts. In this activity, you will help three students sort through information about the clusters in this unit to help them chart their career pathway. Each student has a basic idea of which cluster they would like to be in, but that’s it! Your task will be to give them career options in these clusters, explain how their skills match that pathway, chart their education path, and describe their ultimate work environment. Our students may not go down the pathway you recommend, but at least you will give them a good rough outline to work with!
Stephanie
Growing up with dyslexia, Stephanie always struggled in English and Reading. Math was a breeze for her, though. Along the way, there were a few teachers who really worked closely with Stephanie to help her absorb the information she needed, and they showed her how to make learning fun! Stephanie particularly loved studying trigonometry and even her high school teacher is having difficulty keeping up with her. Now that she has been able to figure out how to study, education no longer scares Stephanie. In fact, she finds it a great way to explore and understand the world around her!
Based on what you know about Stephanie, create a personalized career pathway form for her. On this form, you need to include the following information:
Recommended pathway for Stephanie
Skills that Stephanie has that would be valuable in this career
What type of education is required to work in this career pathway
A description of where she might work and what tasks she might perform
Ethan
Ethan has always been interested in the stars. For his eighth birthday, his father bought Ethan a telescope that allowed him to see comets, satellites, and nearby planets clearly. Once in high school, Ethan struggled with his English Literature course until one of his classmates pointed out that many poems have a mathematic rhythm. This was really interesting to Ethan. Unfortunately, Ethan’s grandparents, who live in Thailand, suffered a complete loss of their home due to a tsunami. They have come to live with Ethan. Ethan wonders if there was a way to prevent the tsunami or if the kind of earthquakes that cause the tsunami here happen on the moon.
Based on what you know about Ethan, create a personalized career pathway form for him. On this form, you need to include the following information:
Recommended pathway for Ethan
Skills that Ethan has that would be valuable in this career
What type of education is required to work in this career pathway
A description of where he might work and what tasks he might perform
Yusuke
Yusuke has been a fan of online games for as long as she can remember. She particularly loves the role-playing games that allow her to build virtual empires and exchange goods with other players. Yusuke believes that because she connects with gamers from around the world while she is playing, the games help her develop a better world view. She unlocks almost every puzzle there is in a game and many times, players will reach out to Yusuke for tips and tricks. If there is a work-around, Yusuke will find it! She has saved up her money for three years to buy a gaming laptop that will be able to give her the all-encompassing experience that she wants. Yusuke is excited to try even more games with her new tech, as soon as she gets a feel for it.
Based on what you know about Yusuke, create a personalized career pathway form for her. On this form, you need to include the following information:
Recommended pathway for Yusuke
Skills that Yusuke has that would be valuable in this career
What type of education is required to work in this career pathway
A description of where she might work and what tasks she might perform
Answers
Explanation:
Stephanie:
Recommended pathway: Mathematics and Statistics
Skills: Stephanie has excellent math skills and a love for learning, which will be valuable in a career related to mathematics and statistics. She also has the ability to make learning fun and has developed effective study habits.
Education: A bachelor's degree in mathematics or statistics is usually required to work in this field. Higher-level positions may require a master's degree or PhD.
Work environment: Stephanie may work in a variety of settings, such as research and development, government agencies, finance, or education. Some tasks she might perform include analyzing data, creating mathematical models, and developing algorithms.
Ethan:
Recommended pathway: Astronomy and Astrophysics
Skills: Ethan has a passion for astronomy and a talent for mathematics. He has also shown an interest in finding solutions to real-world problems, such as the prevention of natural disasters.
Education: To work in the field of astronomy and astrophysics, a bachelor's degree in astronomy, physics, or a related field is usually required. Advanced degrees such as a master's or PhD may be necessary for research or teaching positions.
Work environment: Ethan may work in a variety of settings, such as universities, government agencies, observatories, or private research firms. Some tasks he might perform include observing and analyzing astronomical data, developing models and simulations, and conducting research on topics such as planetary formation or the evolution of stars.
Yusuke:
Recommended pathway: Computer Science and Information Technology
Skills: Yusuke has a talent for problem-solving and a deep understanding of online gaming. She is also able to connect with people from around the world and has developed skills in teamwork and collaboration.
Education: A bachelor's degree in computer science, information technology, or a related field is usually required to work in this field. Certifications in specific programming languages or technologies may also be valuable.
Work environment: Yusuke may work in a variety of settings, such as software development companies, video game studios, or technology consulting firms. Some tasks she might perform include developing software or games, testing and debugging code, and collaborating with other team members to create new technologies or improve existing ones.
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn’t equipped to do. Estimates regarding each machine are provided below. Machine A Machine B Original cost $75,500 $190,000 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $19,600 $40,000 Estimated annual cash outflows $4,990 $9,970
Answers
Based on the calculations, the Net present value of Machine A is $706 while that of Machine B is -$32,538. Thus, Machine A is preferable as it has a positive NPV and a profitability index greater than 1.
The net present value (NPV) and profitability index (PI) of each machine , we need to discount the future cash flows to their present value using the given 9% discount rate. Here are the steps for each machine:
Machine A:
Calculate the annual net cash flow: $19,600 - $4,990 = $14,610
Use the formula for present value of an annuity to calculate the present value factor for an 8-year annuity at 9%: PV factor = \(= [1 - (1 + r)^{(-n)] / r\\\\=[1 - (1 + 0.09)^(-8)] / 0.09 \\= 5.2061\)
Calculate the present value of the annual cash flows: PV = $14,610 x 5.2061 = $76,206
Calculate the net present value : NPV = $76,206 - $75,500 = $706
Calculate the profitability index: PI = PV of future cash flows / initial investment = $76,206 / $75,500 = 1.01
Machine B:
Calculate the annual net cash flow: $40,000 - $9,970 = $30,030
Use the formula for present value of an annuity to calculate the present value factor for an 8-year annuity at 9%: PV factor =
\(= [1 - (1 + r)^{(-n)] / r\\\\=[1 - (1 + 0.09)^(-8)] / 0.09 \\= 5.2061\)
Calculate the present value of the annual cash flows: PV = $30,030 x 5.2061 = $157,462
Calculate the net present value : NPV = $157,462 - $190,000 = -$32,538
Calculate the profitability index: PI = PV of future cash flows / initial investment = $157,462 / $190,000 = 0.83
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