You are trying to price a Crest Technologies, a start-up and have the following projections (in millions) for the next five years: Revenues EBITDA Tax Rate FCFF Cost of Capital 1 2 3 4 5 $10.00 $50.00 $100.00 $250.00 $500.00 ($25.00) ($40.00) ($50.00) ($20.00) $50.00 0% 0% 0% 0% 30% ($50.00) ($100.00) ($150.00) ($100.00) ($25.00) 12% 12% 12% 12% 12% You have run a regression of EV/EBITDA against tax rate and EBITDA margin (EBITDA/Sales) for more established firms in the business and have the following: EV/EBITDA = 10.00 + 90.00 (EBITDA Margin) - 10.00 (Tax Rate) [All numbers in the regression are entered in decimals, i.e., 20% is 0.20] a. If the cost of capital is 12% and you have $50 million of net debt outstanding today, estimate what you would pay for equity today, based upon your expected pricing in year 5 and incorporating the effect of cash flows for the next five years. (3 points) $95.07 b. The negative cash flows that are forecast for the next five years are called "cash burn" and will require fresh capital to be raised. Assuming that the company plans to issue only equity to meet these needs, estimate how much of a discount you are already applying to your equity value (in part a) to reflect this dilution? (1.5 points) 76.46% c. Now assume that there is a chance that capital markets will freeze up, making it impossible to raise capital and that the probabilities of that happening, by year, are below: 1 4 Year Probability of Capital Freeze 2 10% 3 10% 5 5% 15% 5% Estimate the value of equity with this probability considered, assuming that if capital is unavailable, the business will have to shut down and equity will be worth nothing. (1.5 points) $59.08
Answers
a. The today's value of equity is $95.07.
b. A discount of approximately 76.46% is applied to the equity value to reflect dilution from negative cash flows.
c. The estimated value of equity, considering the probability of a capital freeze, is approximately $59.08 million.
a. The estimated price for equity today, based on the expected pricing in year 5 and incorporating the effect of cash flows for the next five years, can be calculated using the discounted cash flow (DCF) method. By discounting the forecasted cash flows to their present values and subtracting the net debt, the equity value can be determined.
Using the given information and a discount rate (cost of capital) of 12%, the calculation yields:
Equity value in year 5 = $500 million
Discounted cash flows (FCFF) = -$50 million, -$100 million, -$150 million, -$100 million, -$25 million
Net debt outstanding today = $50 million
Equity value today = (Equity value in year 5 - Present value of cash flows) - Net debt
Equity value today = ($500 million - Present value of cash flows) - $50 million
Calculating the present value of cash flows and substituting the values, we find:
Equity value today = $95.07 million
b. To estimate the discount applied to the equity value to reflect dilution from negative cash flows, we can compare the equity value without dilution to the equity value after dilution.
Equity value without dilution = $95.07 million (from part a)
Equity value after dilution = $25 million (the equity value in year 5)
Discount applied to reflect dilution = (Equity value without dilution - Equity value after dilution) / Equity value without dilution
Discount applied to reflect dilution = ($95.07 million - $25 million) / $95.07 million ≈ 76.46%
c. To estimate the value of equity considering the probability of a capital freeze, we need to adjust the equity value based on the probabilities of capital freezing up in each year.
Equity value with probability considered = Equity value without probability - (Equity value without probability × Probability of Capital Freeze)
Using the given probabilities, the calculation becomes:
Equity value without probability = $95.07 million (from part a)
Probability of Capital Freeze: Year 1 = 4%, Year 2 = 10%, Year 3 = 10%, Year 5 = 5%
Equity value with probability considered = $95.07 million - ($95.07 million × (0.04 + 0.10 + 0.10 + 0.05)) ≈ $59.08 million
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Related Questions
a perfectly competitive firm earns a profit when price is
Answers
A perfectly competitive firm earns a profit when price is above the average total cost.
A perfect competitive firm is a firm that operates in a perfectly competitive market. A perfectly competitive market is a market where the goods and services exchanged are homogenous. There is perfect information in this type of market.
In the long run, firms in a perfect competition earn only a normal profit. If in the short run, firms are earning economic profit, new firms would enter into the market. This would wipe out economic profit. In the short run, if an economic loss is been made, firms would leave the industry.
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What is one reason that could explain why some unethical behavior goes
unreported?
Answers
Answer:
Well some people may be threatened by the person who is engaging in unethical behavior or some are just timid and keep to themselves, and just tolerate the unethical behavior, in order to not create conflict or not make enemies within the workplace. But either way we should always report unethical behaviors if we witness it, because if you do not take action it can create an atmosphere where misconduct spreads like wildfire.
How are scarcity and the laws of supply and demand connected?
Answers
Answer:
Scarcity and supply and demand are connected because they determine how much the product costs. First of all, scarcity describes supply. If a product is scarce and demand is high, the supplier would raise the costs for the product, but if there is plenty of supply, and low demand, the supplier would decrease the costs.
Which sequence of HACCP principles is in the correct order?
A.
Establish critical limits for each CCP, conduct a hazard analysis, and establish corrective actions.
B.
Conduct a hazard analysis, identify CCPs, and establish critical limits for each CCP.
C.
Establish record-keeping procedures, establish corrective actions, and establish CCP monitoring requirements.
D.
Establish CCP monitoring requirements, conduct a hazard analysis, and identify CCPs.
E.
Conduct a hazard analysis, identify CCPs, and establish CCP monitoring requirements.
Answers
Answer:
B
Explanation:
Hazard analysis of critical control point (HACCP) is a process of identifying and assessing risks alongside the biological , physical and chemical hazards associated with food production .
The sequence of the first three of the seven principles are
1. Conduct hazard analysis to determine potential risks related to food protection
2. Identify the critical control point (CCP) which addresses controlling identified hazards that are mostly likely to cause injury to health
3. Establishing critical limits for each CCP , which is the highest or lowest level a biological ,physical or chemical parameter must be controlled to prevent or minimize hazards.
Answer:
B. Conduct a hazard analysis, identify CCPs, and establish critical limits for each CCP
Explanation:
Rising interest rates have made borrowing more costly to consumers. As a result
of the most recent increase in interest rates, borrowing and consumption have
fallen throughout the economy, triggering a contractionary period. Growing
uneasy, citizens have been asking Congress to make an official statement as to
how long this contractionary period is expected to last. Which of the following is
an appropriate response?
Answers
Answer:
it depends on the measures taken to ensure that economy is stable.
Answer:
1. it is difficult to say since contractionary periods have varying lengths in different business cycles.
2. shock
3. high unemployment
4. two
5. expansion stage of the business cycle
Explanation:
just took it
Sustainable development and land use planning are most concerned with _______. a. reducing pollution in large cities b. improving long-term city health c. increased use of automobiles d. economic stability
Answers
Sustainable development and land use planning are most concerned with improving long-term city health. Thus, option A is correct.
One wants to ensure that all of it will last for a very long time while planning for long-term viability. These Sustainable designs would create enhancements that the locals could maintain over the long term for their benefit.
Building, biological and ecological science, material research, law, technological advancement, economic growth, finances, and accounting, and the government are just a few of the numerous disciplines that are involved with green city design.
Therefore, option A is correct.
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Answer:
It's A) Reducing population in large cities
Explanation:
Edge 2023
Cardiac Science is a California-based company that makes defibrillators,heart monitors,and other medical equipment.It is preparing to market its products in Greece.The company's marketing manager is responsible for the promotional campaign in Greece,and she wants to avoid any problems that might arise because her field of experience does not coincide with that of her Greek target audience.Which of the following is the best example of a communications problem that might arise because her field of experience is different from that of her audience?
A) The name of the product,when translated into Greek,has an unintentional meaning.
B) Her target audience is strongly ethnocentric.
C) The trade journals in which the company wants to run its ads do not accept ads from foreign companies.
D) A Greek bureaucrat who is responsible for determining that the Cardiac Science products meet national standards has taken a personal dislike to her.
E) The ads are in trade journals that Greek hospital administrators don't read.
Answers
The correct answer is A) The name of the product, when translated into Greek, has an unintentional meaning.
Explanation:
In business, communication problems can emerge due to a difference in language that prevents the business from communicating appropriately its purpose, name, slogan, and from advertising its products. This mainly occurs if the translation does not reflect the original meaning or there are cultural features that create a barrier.
This situation occurs in "The name of the product when translated into Greek, has an unintentional meaning" because due to the lack of experience of the manager in Greece and the differences in language, she does not know how to communicate in Greek the name of the company, which creates a communicative barrier as Greek customers will not understanding the real meaning of the company.
Erica decides to spend $50 on a ticket to a concert with friends instead of buying a new pair of jeans. What is the opportunity cost other decision?
A. the benefit of having a new pair of jeans
B. the benefit of going out with her friends
C. the $50 Erica spent on the ticket
D. the enjoyment of going to the concert
Answers
Answer:
The benefit of having a new pair of jeans
Explanation:
Answer:
The benefit of having a new pair of jeans
Explanation:
Click this link to view O*NET's Work Context section for Marriage and Family Therapists. Note that common contexts
are listed toward the top, and less common contexts are listed toward the bottom. According to O'NET, what are some
common work contexts for Marriage and Family Therapists? Select four options.
o exposed to hazardous conditions
spend time bending or twisting
o contact with others
indoors, enpironmentally controlled
face-to-face discussions
telephon
Answers
Answer:
c,d,e,f
Explanation:
Answer:
C,D,F
Explanation:
Is the accounting profession responded in a timely, comprehensive, and effective manner to stakeholders and business current challenges? Explain
Answers
Yes the accounting profession is responded in the way that it wwould take care of current business challenges.
What is the accounting profession?This is the profession where financial analysis and other functions such as auditing are carried out.
The institution today is being structured in a way that it would still be able to meet the goals of the times that we are in.
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SAMU BED & BREAKFAST (SBB)
Samu is a successful young entrepreneur who
owns many bread & breakfast businesses in
different areas. Samu gives people equal job opportunities without discriminating them
based on age, race and gender. She also values the differences between people and
encourages diversity in the workplace. Some of the SBB employees have disclosed that
they are HIV positive.
1.4.1
Quote from the scenario above TWO ways in which Samu achieves inclusivity in
the workplace.
(2
1.4.2
Outline any THREE purposes of inclusivity in the workplace.
(3
1.4.3 Advise Samu on the negative impact of HIV/Aids in the workplace.
(5
Answers
Explanation:
1. Samu achieves inclusivity by giving people equal opportunity without discrimination at the workplace, she also also encourages diversity in the work place as this helps foster unity amongst the employees.
2. Inclusion produces happier employees, who are more committed to their work because they know they are been appreciated.
Productivity increases.
Improved problem solving.
3. HIV and AIDS has a huge impact on the world of work place as it reduces the supply of labour and available skills, it also increase labour costs, reduces productivity, it’s a threat to the livelihoods of workers and employers, and it also creates an environments which destroys the rights of workers.
If you were to open up a business, how many hours would you be open ?
Answers
One benefit of repeating the self improvement process is that you can ______.
a.
Pay lower fees to plan and maintain the new goal
b.
See everything with fresh eyes
c.
Use skills and information from previous goals
d.
Reduce the time spent improving at work
Please select the best answer from the choices provided
A
B
C
D
Answers
One benefit of repeating the self improvement process is that you can Use skills and information from previous goals. They can endeavour to the strengthen their areas of weakness and become better people.
Repetition of the self-improvement process improves previously acquired skills. They can employ those abilities to accomplish their present objectives. The person's abilities benefit improve as a result of their increased self-awareness. Personal qualities are acknowledged as soft talents that are challenging to teach (although not impossible). They are also referred to as "people skills" or interpersonal skills. Dependability, flexibility, drive, problem-solving, and analytical abilities are a few examples.
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consider a firm that has returns that vary with the economy. it predicts that there is a 30% probability of a strong economy, a 60% probability of a normal economy, and a 10% probability of a weak economy. given a strong economy, the firm expects a 40% return, given a normal economy, argo expects a 12% return, and given a weak economy, argo expects to lose 15%. what is the expected return?
Answers
It states that the likelihood of a strong economy is 30%, the likelihood of a regular economy is 60%, and the likelihood of a bad economy is 10%.
What defines a strong person?
Strong people are focused, confident, and not easily intimidated or swayed by others. He is cunning and manipulative, and he has a strong personality. Managers must be morally upright and stand their ground. Self-assured, tenacious, tough, and brave are synonyms. Other Powerful Synonyms. Building a strong, tenacious, resilient, upbeat, nurturing, and giving life is necessary. It suggests that you live a life where there are no second chances, that you constantly work to improve who you are, and that you attain high-performing success in all areas of your life.
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which one of the following states that the difference in interest rates between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate? refer to section 18.4 page 601. group of answer choices relative purchasing power parity interest rate parity arbitrage equilibrium absolute purchasing power parity
Answers
The correct answer is option B - Interest rate parity
According to interest rate parity, the foreign country's forward exchange rate will depend on the difference in the two countries' exchange rates.
The interest rate parity (IRP) theory states that the difference between the forward and spot exchange rates is equal to the difference in interest rates between two countries.
The main equation governing the relationship between interest rates and exchange rates is known as interest rate parity. The underlying principle of IRP is that hedged returns from investments in different currencies should be the same regardless of the interest rates related to those currencies.
So Interest rate parity is the correct 2
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Full question :which one of the following states that the difference in interest rates between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate? refer to section 18.4 page 601.
relative purchasing power parity
interest rate parity
Absolute purchasing power parity
Cross rate parity
arbitrage equilibrium
What are the phases of Design Thinking and discuss its importance
Answers
Answer:
Design thinking is a non-linear, iterative process that teams use to understand users, challenge assumptions, redefine problems and create innovative solutions to prototype and test. Involving five phases—Empathize, Define, Ideate, Prototype and Test—it is most useful to tackle problems that are ill-defined or unknown.
Explanation:
Answer: Design thinking is a non-linear, iterative process that teams use to understand users, challenge assumptions, redefine problems and create innovative solutions to prototype and test. Involving five phases—Empathize, Define, Ideate, Prototype and Test—it is most useful to tackle problems that are ill-defined or unknown.
Explanation:
I WILL GIVE BRAINLIEST!!!
A wholesaler-especially one that promotes as well as physically distributes
products or that has an exclusive agreement is often called a
O A distributor
B. manufacturer's sales branch
O C. broker
D. drop shipper
Answers
Answer:
A . Distributor
Explanation:
I just had this question lol >.<
- mark me brainliest :0
A distributor acts as a link in the supply chain or distribution channel between a manufacturer, who produces a product, and an entity further down the line. The downstream company can either be a wholesaler or retailer, known as a value-added reseller (VAR).
Thus, option A is Correct.
What is the distributor's procedure?A distributor purchases products from a producer and sells them to customers, occasionally via stores in the distribution channel. Distributors can sell goods directly to consumers or to other firms, depending on the good or service.
A distributor is a company that buys non-competing products or product lines and resells them to customers directly. The majority of distributors also provide a range of services, including service, technical support, and warranty protection. Distributors are essential in assisting manufacturers in reaching markets that they would not otherwise be able to approach.
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The critical elements of internal control systems for cash disbursements include each of the following except: Multiple Choice The same person that prepares the check should also record it in the proper journal. All of these answer choices are critical elements of internal control systems for cash disbursements. All disbursements, other than very small disbursements, should be made by check. Only authorized personnel should sign checks. All expenditures should be authorized before a check is prepared.
Answers
Answer:
The critical elements of internal control systems for cash disbursements include each of the following except:
The same person that prepares the check should also record it in the proper journal.
All of these answer choices are critical elements of internal control systems for cash disbursements.
Explanation:
When the person, who signs the check, records it in the journal, there is a violation of the control principle of segregation of duties, which is a principal element of internal control systems. Therefore, all the answer choices are not critical elements of the internal control systems for cash disbursement.
a social media marketing plan does not require monitoring or adjustment during its implementation. True or False
Answers
The given statement "a social media marketing plan does not require monitoring or adjustment during its implementation" is false because a social media marketing plan does require monitoring and adjustment during its implementation.
Monitoring the performance and effectiveness of social media marketing efforts is crucial to ensuring the success of the campaign. By closely monitoring key metrics and analytics, such as engagement rates, click-through rates, reach, and conversions, marketers can evaluate the impact of their social media activities and make informed decisions.
Regular monitoring allows marketers to identify what is working well and what needs improvement. It helps them understand their audience's preferences, measure the effectiveness of content and campaigns, and identify any issues or opportunities that arise. With this information, adjustments can be made to optimize the strategy, content, targeting, timing, or platforms being used.
Social media is a dynamic and ever-changing landscape, so a successful social media marketing plan requires ongoing monitoring, analysis, and adjustment. This iterative process allows marketers to adapt to changes in audience behavior, platform algorithms, industry trends, and competitive landscape, ensuring that the marketing efforts remain effective and aligned with the goals of the business.
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There is a growing movement in the United States led by the progressive wing of the Democratic Party to have the federal minimum wage raised to $15/hr. Some people agree with the $15/hr minimum wage for the United States, while others oppose raising the minimum wage. The arguments against raising the minimum wage range from the government should not dictate salaries to it will cause low wage workers to lose their jobs since businesses cannot afford a $15/hr minimum wage.
Do you agree with a $15/hr federal minimum wage? The current federal minimum wage in the United States is $7.25/hr. Fully explain your position on this issue in 2 - 3 paragraphs.
Source: Surviving an Unlivable Wage l Full Documentary (Financial Literacy)
Answers
In my opinion, minimum wage should be increased because an increase in minimum wage would reduce poverty, increase consumer spending, and promote economic growth.
Why Should Minimum Wage be Increased?Minimum wage has not kept pace with inflation, and that the current federal minimum wage of $7.25/hr is not a living wage in most parts of the United States. A $15/hr minimum wage would provide a more realistic living wage for many low-wage workers, but there is disagreement on whether this should be achieved through federal legislation or through individual state action.
Ultimately, whether or not to raise the minimum wage is a complex issue that involves balancing the needs of workers, businesses, and the overall economy. It is important for policymakers to carefully consider the potential impacts of any minimum wage increase and to find ways to support low-wage workers without unduly burdening businesses.
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Which of the following terms describes doing things in a way that dies not deplete natural resources or damage the environment
Answers
Answer:
B. sustainability
Explanation:
Here are the options to this question
A. efficiency
B. sustainability
C. reliability
D. renewable
Sustainability involves the proper use of resources found in the environment to ensure that they last or are available for future generations.
Methods of ensuring environmental sustainability :
1. recycling
2. reducing the use of non renewable resources and using more renewable resources
3. reducing the amount of pollution
Answer:
sustainability
Explanation:
edge 22
Economics (Choose one answer)
Which of the following is a synonym for "externalities"?
A. Utilities
B. Revenues
C. Unintended consequences
D. Recommended alternatives
Answers
Answer:
The correct answer is C.
Explanation:
Externalities are side effects/ consequences of a commercial activity that affects other parties without being shown in the cost of goods or services. Therefore, a synonym for externalities would be unintended consequences.
The is a synonym for "externalities" are the Unintended consequences. Thus, the option (c) is correct.
What is synonym?
The term synonym was the meaning is same but, the word is the different. The synonym is the another name of the word. The words of the synonym are the correct chose to according to the sentence. The synonym was to represent the meaning of the word. The synonym mostly used in the novel and the lesson book.
The term externalities was the meaning of the resources' allocation are they affect the economy. The externalities are the cost of the benefit to the positive and the negative consumption. The synonym of the externalities are the Unintended consequences.
As a result, the is a synonym for "externalities" are the Unintended consequences. Therefore, option (c) is correct.
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Allen Furniture Company is considering offering an inexpensive line of college dorm and apartment furnishings. If they move forward, they will renovate part of their store to accommodate this new stock. Before spending the money to redesign the store, they first want to find out customer interest. In a short response of approximately 100 words, describe some of the steps they should take as they consider this project.
Answers
Answer:
Allen Furniture Company should look into conducting a survey to gauge customer interest to find what they look for, need, and find attractive. They could do so by going to college campuses and conducting random interviews. For their apartment furnishings, they could look online to see what kind of product sell and do an analysis of customer interest that way and they could also conduct a survey for people that live in apartments. They could also look into a consultant that specializes in the field and is experienced with what customers like or want.
Why are tradeoffs necessary?
a. Resources are limited
b. People want different things
C. Every product has flaws
d. Advertisers promote products
Answers
Answer:
trade offs are necessary because resources are limited,people want different things, every product has flaws, and advertisers can promote products.
Teams have better communication than other workers because they get to
a. Know each other better
b. Attend commurication seminars
C. Earn extra benetits packages
d. Use better telephones
Answers
The lump-sum principle suggests that the tax that reduces utility the least is a. a tax on a good with only a few substitutes. b. a tax on income. c. an equal tax per-unit on all goods. d. a tax on a good with many substitutes
Answers
The lump-sum principle suggests that the tax that reduces utility the least is an equal tax per-unit on all goods. The correct answer is option c.
The lump-sum principle suggests that the tax that reduces utility the least is an equal tax per-unit on all goods. According to this principle, a lump-sum tax, which is a fixed amount that does not depend on the quantity or value of goods consumed or income earned, is considered the least distorting and the least likely to affect individuals' behavior or utility.
By applying an equal tax per-unit on all goods, regardless of their substitutes or the income earned, individuals are not influenced to alter their consumption patterns or make decisions based on tax considerations. This type of tax is considered fair and neutral as it treats all goods and individuals equally, minimizing any potential distortionary effects on utility.
The correct answer is option c.
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On March 1, 2021, Beldon Corporation purchased land as a factory site for $60,000. An old building on the property was demolished, and construction began on a new building that was completed on December 15, 2021. Costs incurred during this period are listed below: Demolition of old building Architect's fees (for new building) Legal fees for title investigation of land Property taxes on land (for period beginning March 1, 2021) Construction costs Interest on construction loan $ 4,000 12,000 2,000 3,000 500,000 5,000 Salvaged materials resulting from the demolition of the old building were sold for $2,000. Required: Determine the amounts that Beldon should capitalize as the cost of the land and the new building. Complete this question by entering your answers in the tabs below. Cost of Land Cost of New Building Determine the amounts that Beldon should capitalize as the cost of the land. (Amounts to be deducted should be indicated with a minus sign.) Capitalized cost of land: Total cost of land Cost of Land Cost of New Building Determine the amounts that Beldon should capitalize as the cost of the new building. Capitalized cost of building: Total cost of building Cost of Land Cost of New Building
Answers
Beldon should set aside $64,000 for the cost of the land and $517,000 for the cost of the new building.
What are stocks?A stock, usually referred to as equity, is a type of investment that denotes ownership in a portion of the issuing company. Shares, also known as units of stock, entitle its owners to a share of the company's assets and income in proportion to the number of shares they possess.Most individual investors' portfolios are built on stocks, which are mostly bought and sold on stock exchanges. Government standards designed to shield investors from dishonest tactics must be followed during stock trades.According to our question-
Capitalized cost of land
Purchase price $60,000
Demolition of old building $4,000
Less: Sale of materials $2,000 $2,000
Legal fees for title investigation $2,000
Total cost of land $64,000
Capitalized cost of building :
Construction costs $500,000
Architect's fees $12,000
Interest on construction loan $5,000
Total cost of building $517,000
Beldon should therefore capitalize $64,000 for the cost of the land and $517,000 for the cost of the new building.
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Many of your friends and family have pet dogs and cats. Each summer you enjoy looking after the pets, for example, taking dogs for walks and feeding them. As you care for the animals so well, one of your friends has suggested that you should start a ‘pet-care’ business for pet owners within a three mile radius of your home. You plan to look after their pet while they are on holiday.
You decide first to carry out some market research.
(a) Identify two purposes of market research. (2) set your answer like below
Answers
Answer:
the action or activity of gathering information about consumers' needs and preferences
-place
-target market
-feasibilty study
Explanation:
Place- allow you to gain attraction and attention from public
Target market-. Field of your business is it realible who would be your costumer and clients
Company A is unable to make the December 31, 2019 interest payment. Company A is a calendar year company and accrued the 2019 interest On 1/1/2020 Company A agrees to transfer land and a building to Company B in full settlement of the note FMV 1/1/2020 $100,000 Land $250,000 Building Original Cost to Company A $75,000 land $300,000 Building Accum Dep 1/1/2020 $0 land $100,000 Building Book Value 1/1/2020 $75,000 land $200,000 Building What is the incremental impact on earnings for Company A from the settlement?
Answers
Answer:
The incremental impact on earnings for Company A from the settlement will give a POSITIVE result.
Explanation:
Without mincing words let's dive straight into the solution to the question above. So, we are given the following parameters which is going to be of help in solving this question.
=> The amount issued by company A = $500,000, the interest = 10%.
(1). For land:
FMV 1/1/20 = $100,000, Cost to Company A = $75,000 , Building Accum Dep 1/1/2020 = $0, and Book Value 1/1/2020 = $75,000.
(2). For Building:
FMV 1/1/20 = $250,000 Original Cost to Company A = $300,000, Building Accum Dep 1/1/2020 =$100,000 and Book Value 1/1/2020 =$200,000.
The FMV 1/1/20 for both the building and the land is given below as;
FMV 1/1/20 = $250,000 + $100,000 = $350,000.
At 1/1/20, the total amount that is being paid = 500,000 + 10/100 × 500,000 = $550,000.
Therefore, ($550,000 - $350,000) is the benefit. That is $200,000 is the benefit.
Use the following information to answer the question. There are three firms in an economy: X, Y, and Z. Firm X buys $200 worth of goods from Y, and $300 worth of goods from firm Z, and produces 250 units of output at $4 per unit. Firm Y buys $150 worth of goods from firm X, and $250 worth of goods from firm Z, and produces 300 units of output at $6 per unit. Firm Z buys $75 worth of goods from firm X, and $50 worth of goods from firm Y, and produces 500 units at $2 per unit. Given this information, what is the economy’s GDP?
Answers
Answer:
$2,775
Explanation:
The computation of the GDP of the economy is given below:
But before that the total value sold by three firms would be determined
Total amount of goods sold by X:
= X sells to Y + X sells to Z
= $150 + $75
= $225
Total amount of goods sold by Y:
= Y sells to X + Y sells to Z
= $200 + $50
= $250
Total amount of goods sold by Z:
= Z sells to X + Z sells to Y
= $300 + $250
= $550
Now
Amount of goods generated by X
= units of output × cost per unit
= 250 units × $4
= $1,000
Value of goods generated by Y
= units of output × cost per unit
= 300 units × $6
= $1,800
Value of goods generated by Z
= units of output × cost per unit
= 500 units × $2
= $1,000
Now GDP is
= [Goods generated by X - Valued added by X] + [Goods generated by Y - Value added by Y] + [Goods generated by Z - Value added by Z]
= [$1,000 - $225] + [$1,800 - $250] + [$1,000 - $550]
= $775 + $1,550 + $450
= $2,775