A company's ability to marshal adequate resources in support of new strategic initiatives and steer them to the appropriate organizational units is important to the strategy execution process because changes in strategy often require resource reallocation, and organizational units need the proper funding to carry out their part of the strategic plan effectively and efficiently.
What are strategic initiatives?The means through which a company puts its objectives and visions into action are known as strategic initiatives. Companies need to deliberately develop a portfolio of strategic projects if they want to stay ahead of the competition.
An effective strategic initiative is made up of five steps:
Aim high. You must be aware of what you're starting before you begin.Establish goals. As previously mentioned, objectives are definite, quantifiable, and reasonable long-term goals.Decide on a strategy.Create a plan, then carry it out.To know more about strategic initiative refer to: https://brainly.com/question/27897860
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What is the definition of average variable cost? Multiple choice question. Total variable cost divided by output (Q) Total variable cost divided by total fixed cost (TFC) Total variable cost divided by change in output (Q) Total variable cost divided by marginal cost (MC)
The definition of average variable cost is total variable cost divided by output (Q).
What is an average variable cost?This refers to a firm's variable costs such as labor, electricity divided by the quantity of output produced.
Hence, it is also defined as total variable cost divided by output (Q).
Therefore, the Option A is correct.
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A company issues 7%, 7-year bonds with a par value of $170,000 on January 1 at a price of $179,602, when the market rate of interest was 6%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:
The amount of each semiannual interest payment is $5,950
Compute the amount payable semiannually as interest?
The amount of each semiannual interest payment means the amount the company, the bond issuer would pay as cash interest to bondholders every six months, which is a function of the bond coupon rate of 7%, the par value as shown below:
semiannual interest payment=coupon rate*par value*6/12
coupon rate=7%(7% bond means coupon rate is 7%)
par value=face value=$170,000
6/12 implies that the coupon payment is semiannual. not for a full year
semiannual interest payment=7%*$170,000*6/12
semiannual interest payment=$5,950
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How does the federal trade commission regulate business as an administrative agency?.
The FTC is empowered to enforce rules of trade regulation that define unfair or deceptive actions or practices in great detail and to report to and advise Congress on legislative matters related to the economy. This is further explained below.
What is the federal trade commission?Generally, The Federal Trade Commission (FTC) is a non-departmental executive body of the United States government charged with protecting consumers and enforcing federal antitrust laws.
In conclusion, The FTC is empowered to enforce laws of trade regulation that define unfair or deceptive actions or practices in great detail, and it may also report to Congress on economic matters and provide policy suggestions.
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Mr. Madaren asks, "How many years did you work for your previous employer?" Which type of question is Mr. Madaren using?
Mr. Madaren is using a Factual type of question.
The definition of factual is true or concerned with actual details or information rather than ideas or feelings about it. A claim that it was 20 levels the day prior to this is an instance of something that is actual as long as it is true.
Of or regarding facts factual errors are the genuine components of the case. 2: restricted to or based totally on reality and actual assertion She attempted to separate what is factual from what isn't.
Present in act or truth 2. of or referring to or characterized with the aid of facts three. present in reality whether with lawful authority or not 4. characterized by truth.
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What is the name of the document that companies use to report quarterly financial results?.
Form 10-Q is the answer.
Quarterly earnings reports are typically supported by Company Form 10-Q, a legal document that must be submitted to the Securities and Exchange Commission on a quarterly basis.
A quarterly report or quarterly report is a type of report that is produced every three months. This simply means that the company releases four quarterly reports a year.
Form 10-Q contains unaudited financial statements and provides an ongoing review of the company's financial position for the year. Reports are submitted every first three fiscal quarters of our fiscal year.
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Howard Cooper of Owens Corning Fiberglass talks to David Weekley, a homebuilder, to find out how much fiberglass insulation he intends to use in building homes during the next year. Howard then multiplies that number by the total number of builders in the territory. He is using a ____ approach to measure sales potential.
A buildup approach is used by Howard to find out how much fiberglass insulation to use in building homes
What is a buildup approach?This refers to the method of calculating an market's revenue potential by recognizing the number of probable purchasers in the market and ther purchaser's requirements as well.
Hence, this same approach is used by Howard to find out how much fiberglass insulation to use in building homes.
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How many years will it take for an investment to increase by 3 times at an interest rate of 9% g
Answer:
The Rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return. Alternatively, it can compute the annual rate of compounded return from an investment given how many years it will take to double the investment.
While calculators and spreadsheet programs like Microsoft Excel have functions to accurately calculate the precise time required to double the invested money, the Rule of 72 comes in handy for mental calculations to quickly gauge an approximate value. For this reason, the Rule of 72 is often taught to beginning investors as it is easy to comprehend and calculate. The Security and Exchange Commission also cites the Rule of 72 in grade-level financial literacy resources.
1
KEY TAKEAWAYS
The Rule of 72 is a simplified formula that calculates how long it'll take for an investment to double in value, based on its rate of return.
The Rule of 72 applies to compounded interest rates and is reasonably accurate for interest rates that fall in the range of 6% and 10%.
The Rule of 72 can be applied to anything that increases exponentially, such as GDP or inflation; it can also indicate the long-term effect of annual fees on an investment's growth.
This estimation tool can also be used to estimate the rate of return needed for an investment to double given an investment period.
For different situations, it's often better to use the Rule of 69, Rule of 70, or Rule of 73.
Rule of 72
The Formula for the Rule of 72
The Rule of 72 can be leveraged in two different ways to determine an expected doubling period or required rate of return.
Years To Double: 72 / Expected Rate of Return
To calculate the time period an investment will double, divide the integer 72 by the expected rate of return. The formula relies on a single average rate over the life of the investment. The findings hold true for fractional results, as all decimals represent an additional portion of a year.
Expected Rate of Return: 72 / Years To Double
To calculate the expected rate of interest, divide the integer 72 by the number of years required to double your investment. The number of years does not need to be a whole number; the formula can handle fractions or portions of a year. In addition, the resulting expected rate of return assumes compounding interest at that rate over the entire holding period of an investment.
The Rule of 72 applies to cases of compound interest, not simple interest. Simple interest is determined by multiplying the daily interest rate by the principal amount and by the number of days that elapse between payments. Compound interest is calculated on both the initial principal and the accumulated interest of previous periods of a deposit.
How to Use the Rule of 72
The Rule of 72 could apply to anything that grows at a compounded rate, such as population, macroeconomic numbers, charges, or loans. If the gross domestic product (GDP) grows at 4% annually, the economy will be expected to double in 72 / 4% = 18 years.
With regards to the fee that eats
Yater's Inc. is a food and beverage company based in the United States. The company decides to market and sell its products in all European countries under the same brand name. In this scenario, Yater's Inc. has decided to use a(n) _______. a. co-branding strategy b. one-brand-name strategy c. individual branding strategy d. transactional marketing strategy
In this scenario, Yater's Inc. has decided to use (B) one-brand-name strategy.
What is a co-branding strategy?Co-branding is a marketing tactic in which various brand identities are applied to a product or service as a result of a strategic partnership. Co-branding (or "cobranding"), often known as a brand partnership, refers to a variety of branding alliances that typically involve the brands of at least two businesses.What is a one-brand-name strategy?When employing a single-brand approach, a business targets only one particular market segment with each of its brands. Each brand has its own distinct "personality," is handled separately, and is distinctly differentiated from the rest of the company's brands.What is a transactional marketing strategy?A business technique known as "point of sale" transactions is called transactional marketing. Instead of focusing on forging a relationship with the customer, individual sales are being optimized for efficiency and volume.Therefore, in this scenario, Yater's Inc. has decided to use (B) one-brand-name strategy.
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The direct write-off method is not allowed under GAAP because it violates the ______. Multiple choice question. aging principle sales method cost principle expense recognition (matching) principle revenue recognition principle
The direct write-off method is not allowed under GAAP because it violates the principle expense recognition (matching) principle.
A direct write-off is an accounting method by which uncollectible accounts received are written off as bad debts.
GAAP stands for General Accepted Accounting Principles.It is a collection of conventionally and generally accepted accounting rules and standards for financial reportage. The direct write-off method is also referred to as the direct charge-off method. Upon receiving an invoice that has been deemed uncollectible, bad debts have to be cleared off. The direct write-off method violates the principle expense recognition (matching) principle. The matching principle states that expenses need to be matched with the revenue for a given period of association.Therefore, the direct write-off method is not allowed under GAAP because it violates the principle expense recognition (matching) principle.
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Define a possible management and research objective in the following situation: (Marks – 5)
Situation: Employee loyalty
Companies benefit through employee loyalty. Crude downsizing in organizations during the recession crushed the loyalty of millions. The economic benefits of loyalty embrace lower recruitment and training costs, higher productivity of workers, customer satisfaction, and the boost to morale of fresh recruits. In order that these benefits are not lost, some companies, while downsizing, try various gimmicks. Flex leave, for instance, is one. This helps employees receive 20% of their salary, plus employer-provided benefits, while they take a 6- to 12-month sabbatical, with a call option on their services. Others try alternatives like more communication, hand-holding, and the like.
NOTE: Answer the above question in 200-250 words. Dont give copied answers. Please answer in your own words. Dont give the answer if you cant give it in 200 words minimum.
Explanation:
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Haitao has an espresso maker that stopped working properly within the warranty period. He plans to write a claim letter to the company. Because he feels his request to have his espresso maker repaired at no cost is justified and will be granted, he should use ________.
Haitao has an espresso maker that stopped working properly within the warranty period. He plans to write a claim letter to the company. Because he feels his request to have his espresso maker repaired at no cost is justified and will be granted, he should use the direct strategy.
What is direct strategy?The main idea and supporting evidence are placed at the top of the paper when using the direct approach. When your audience will be accepting of or receptive to your message, this strategy is used. The direct approach typically requires you to begin the official report with a summary of your primary findings, conclusions, and recommendations. For business reporting, this "up-front" arrangement is by far the most well-liked and practical. It saves time and makes it simpler to understand the remainder of the report. The direct method also results in a stronger report.
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Haitao has to use the direct strategy.
The major concept (such as a recommendation, conclusion, or request) appears at the "head" of the text when you employ the direct method, followed by the supporting details. This is a logical justification. When your audience will be accepting of or receptive to your message, this strategy is employed.
Direct strategy refers to being straightforward with your message, whereas indirect strategy is less direct yet still conveys the same idea. Direct strategy refers to being straightforward with your message, whereas indirect strategy is less direct but still gets the point across.
Hence, haitao should use the direct strategy to complete his request of his espresso maker being repaired.
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When a phased-in change in rates is scheduled to occur in the future years in which a temporary difference is expected to reverse, the ___. Multiple Choice currently enacted tax rate is multiplied by the temporary amounts reversing in each of those years and the total is the deferred tax liability or asset. differences between the currently enacted rate and the future tax rates are multiplied by the temporary amounts reversing in each of those years and the difference is the deferred tax liability or asset. specific tax rates of each future year are multiplied by the temporary amounts reversing in each of those years and the total is the deferred tax liability or asset. specific tax rates of each future year are multiplied by the temporary amounts reversing in each of those years to determine the change in the deferred tax liability or asset.
When a phased-in change in rates is scheduled to occur in the future years in which a temporary difference is expected to reverse, "the specific tax rates of each future year are multiplied by the temporary amounts reversing in each of those years and the total is the deferred tax liability/ asset".
What is total deferred tax liability/asset?On a company's balance sheet, a deferred tax asset is something that lowers future taxable revenue/credit. When a company overpays its taxes, a line item asset of this nature may be discovered. This money will eventually be returned to the business in the form of tax relief.
The examples of deferred tax assets are-
Net operating loss: During that time, the company suffered a financial loss.Tax over-payment: During the prior period, you overpaid taxes.Business Expenses: These are recorded under one accounting system but not another.Revenue: When revenue is received during one accounting period but recognised in a different one.Unpaid debt: It is first reported as revenue before being written off as uncollectible. The unpaid receivable eventually becomes a deferred tax asset when it is recognised.To more about difference between a tax credit and a tax deduction, here
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Big City Grocers, an international company, opens a store in a town predominantly populated by a particular racial group. While recruiting employees for the store, it uses a test in the selection process that favors that same racial group. When questioned about the selection procedure, the management reasons that the customers are more comfortable with employees of their own race. In the context of the legal standards of selection, what is an accurate statement
Greater Grocer's actions during the selection process violate the Civil Rights Act of 1991 because customer preference is not a justifiable reason for discrimination practices.
What are the legal standards of selection according to the Civil rights act of 1991?Even before they become workers, job candidates have legal rights.A company cannot criminally discriminate in its hiring processes based on a job applicant's race, national origin, gender, pregnancy, age, disability, or religion, according to federal law. State and local legislation may establish extra protected classes based on characteristics such as a job applicant's sexual orientation. Employers must follow anti-discrimination regulations at every stage of the hiring process, from posting a job ad to conducting interviews to selecting the candidate to be recruited.
Therefore, an accurate statement can be that Greater Grocer's actions during the selection process violate the Civil Rights Act of 1991 because customer preference is not a justifiable reason for discrimination practices.
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Consider the monopolistically competitive market structure, which has some features of a perfectly competitive market and some features of a monopoly
A monopolistically competitive market is characterized by the following attributes: many sellers, product differentiation, and easy entry.
What is monopolistically competitive market?monopolistically competitive market serves as one that the firms in the industry are producing similar, but not perfect, substitutes products.
In this case, A monopolistically competitive market is characterized by the following attributes: many sellers, product differentiation, and easy entry.
CHECK THE COMPLETE QUESTION BELOW:
Consider the monopolistically competitive market structure, which has some features of perfect competition and some features of monopoly.
A monopolistically competitive market is characterized by the following attributes: many sellers, product differentiation, and ______.
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Why should business leaders become actively involved in community and professional organizations after they have landed a great career
Business leaders become actively involved in community and professional organizations after they have landed a great career to keep up with current information and techniques locally, regionally, and internationally.
Why do Business leaders become actively involved in the community?One of the characteristics that distinguish a profession from a regular job is membership in the appropriate professional organization. It is an essential characteristic of a professional. All professionals are expected to be members of their professional organizations. It's critical to promote the development of one's profession, and joining a professional group is a step in that direction.Developing relationships with people who share similar interests helps one remember why they picked this profession. It makes it possible for young people to network with seasoned professionals and learn from them. It's essential to join a professional association if you want to stay up to date on local, regional, and international information and practices.To learn more about Business leaders refer to:
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______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. Group of answer choices
Efficiency wage theory argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.
Employers who offer efficiency salaries above the minimum wage do so to keep skilled people on staff, boost output, or maintain loyalty. The efficiency wage theory explains why businesses are hesitant to reduce pay even in the face of heightened competition or during recessions.
Workers may experience unemployment because they are paid more than the equilibrium pay, which draws in more workers. Therefore, in contrast to theories that place a strong emphasis on government intervention, such as minimum wages, efficiency wages offer a market failure explanation of unemployment.
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A company emphasizes ________ in its strategic planning where it develops four alternative futures based on two key variables: the cost of energy and the extent of growth opportunities in emerging markets.
A company emphasizes scenario analysis in its strategic planning where it develops four alternative futures based on two key variables: the cost of energy and the extent of growth opportunities in emerging markets.
The technique of evaluating a portfolio's expected value following a specific change in the values of key elements is known as scenario analysis. This method, which frequently makes use of computer simulations, can be used to test both likely scenarios and unlikely worst-case events.
The terms scenario planning, scenario thinking, scenario analysis, scenario prediction, and the scenario approach all refer to a flexible long-term planning technique used by some businesses. It is largely an adaptation and generalization of traditional military intelligence techniques.
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Debt financing: (select all that apply)
is a loan
must be repaid
gives an investor equity in your company
has no risk to the borrower
Except for the C option, all pertain to the context of debt financing. Lenders who provide debt financing are only eligible for capital plus interest payback.
Which is most preferably between Debt Financing and Debt Equity by Companies?
The main reason businesses choose debt financing over equity financing is that debt financing preserves company ownership, whereas equity financing, such as selling shares and common stocks, gives investors a continuing equity stake in the company in exchange for shareholder voting rights and dilutes the ownership of the company's owners.
Debt financing is the process by which a business raises funds by offering investors debt instruments. Equity finance, which involves issuing stock to raise money, is the reverse of debt financing. When a company sells fixed income securities like bonds, bills, or notes, debt financing takes place.
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Brewer Inc. has 5,000 shares of 8%, $50 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2019, and December 31, 2018. The board of directors declared and paid a $15,000 dividend in 2018. In 2019, $60,000 of dividends are declared and paid. What are the dividends received by the preferred stockholders in 2019
Dividends received by the preferred stockholders in 2019 are $25,000.
What are shares?Shares signify ownership in a corporation. An individual becomes a shareholder in your business when they purchase shares. Shareholders decide who manages a corporation and participate in important decisions like whether a company should be sold.What are preferred stocks?A component of share capital known as preferred stock is often regarded as a hybrid instrument since it might have any combination of characteristics that common stock does not, including characteristics of both an equity and a debt instrument.Solution -Annual dividend paid to stakeholder = 5000\times $50\times 8% = $20,000
Dividend declared and paid in 2013 = $15,000
Preferred dividend = $20,000 -$15,000
= $5,000
No dividend will be paid to common stockholders in 2014 until all 2013 dividends and 2014 annual dividends have been paid in full, therefore there will be $60,000 in dividends declared and paid in 2014. \
Preferred stockholders will receive $5000 for the 2013 dividend and $20,000 for the 2014 dividends.
The total dividends that preferred stockholders earned in 2014 were $5,000 + $20,000 = $25,000.
Therefore, dividends received by the preferred stockholders in 2019 are $25,000.
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_____ tell people symbolically what the organization wants them to do and how it expects them to do it. Group of answer choices
Option 4 is the answer. Rituals tell people symbolically what the organization wants them to do and how it expects them to do it.
What does rituals mean?This is the term that is used to refer to the habitual happenings that are expected in an organization.
The word is used to express the system that has been used over time in the working place till it became a habit.
Complete question_____ tell people symbolically what the organization wants them to do and how it expects them to do it.
Heroes
Myths
Norms
Rituals
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The key in using expert opinion to help forecast demand is ________; that is, comparing estimates produced by different sources. morphing indemnification simulation triangulation modeling
The key in using expert opinion to help forecast demand is triangulation; that is, comparing estimates produced by different sources.
What is triangulation?Triangulation refers to a strategy, used by researchers to test the validity through collection of information from various sources.
In other words, triangulation is a method of finding the location of an object based on measurements made from two other locations
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Restrictive practices are characterized as... Group of answer choices Practices that prevent firms from entering certain markets. Practices that restrict the number of consumers who may purchase a product Practices the reduce competition without outright agreements to raise price or reduce quantity Practices that promote competition by restricting monopolies
The Correct Answer is - Option (3) Practices that reduce competition without outright agreements to raise price or reduce quantity.
What are Restrictive Practices?Antitrust law includes rules against restrictive practices—practices that do not involve outright agreements to raise price or to reduce the quantity produced, but that might have the effect of reducing competition Antitrust cases involving restrictive practices are often controversial, because they delve into specific contracts or agreements between firms that are allowed in some cases but not in others.For example, if a product manufacturer is selling to a group of dealers who then sell to the general public it is illegal for the manufacturer to demand a minimum resale price maintenance agreement, which would require the dealers to sell for at least a certain minimum price. . A minimum price contract is illegal because it would restrict competition among dealers. However, the manufacturer is legally allowed to “suggest” minimum prices and to stop selling to dealers who regularly undercut the suggested price.Key Concepts and SummaryAntitrust laws prevent businesses from openly collaborating to create cartels that would lower output and increase prices. Companies occasionally try to circumvent these constraints in other ways, and as a result, several antitrust actions involve anticompetitive tactics such tie-in sales, bundling, and predatory pricing.
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Correct Question - Restrictive practices are characterized as :
1) Practices that prevent firms from entering certain markets.
2) Practices that restrict the number of consumers who may purchase a product
3) Practices that reduce competition without outright agreements to raise price or reduce quantity
4) Practices that promote competition by restricting monopolies.
Assume that the drug passed FDA approval process. Suppose that the market size is 30 mil., market share is 30%, production and advertising costs are $50 mil. What is the profit on this drug in millions (ignore the R&D costs that have already been incurred)?
Based on the revenue per customer, the market share, and the production and advertising costs, the profit on this drug is $58 million .
How much profit does the drug bring in?First find the number of customers the company will sell to:
= 30 million x 30% market share
= 9 million people
The profit is:
= (Number of customers sold to x revenue per customer) - production and advertising costs
= (9 million x 12) - 50 million
= $58 million
Relevant part of the question is:
Revenue per customer is expected to be $12. Production and advertising costs run between $20 and $70 million with $50 million the most likely amount (triangular distribution seems appropriate).
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Why is it critical for an organization to understand that eventually a product will go into the decline stage
It is critical for an organization to understand that eventually a product will go into the decline stage prepare to find replacement products.
What is the decline stage of the product?Decline stage is the last stage of the product life cycle which comes after the after introductory stage, growth stage and maturity stage.
It is the stage when the sales drop and start to decline as original need for the product have diminished.
Decline is also the reason due to the innovation of the new product.
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Stuart signs a contract that allows him to rent a snowplow from Homer's Plow Company. The contract stipulates that he has to pay $50 per week. Winter ends sooner than expected, so Stuart wants to return the plow ahead of the due date in order to avoid paying unnecessary rent. Homer's Plow Company agrees to let Stuart return the plow as long as he signs a contract that requires him to rent the plow again next year. This is an example of a(n) ________. Group of answer choices release rescission novation waiver arbitration
This is an example of release. Group of answer choices release rescission novation waiver arbitration.
A waiver happens when a party purposefully renounces their ability to enforce a contract. A release is created when one party declares the other side is not required to fulfill its obligations.Damages are amounts given as compensation for costs directly suffered as a result of a contract breach, such as costs incurred from another source.The fundamental components necessary for the agreement to be a valid offer and acceptance, adequate consideration, capacity, and legality are: mutual assent, expressed through a contract-compliant offer.What are the laws of contract?
The area of law that deals with creating and upholding contracts is known as contract law. An agreement that can be upheld by a court is referred to be a contract. The body of legislation known as contract law regulates the formation of contracts, their performance, and the creation of just reparations in the event of a breach.Learn more about laws of contract
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According to the risk management/communication framework advanced by Ratzan and Meltzer, it is important to:
According to the risk management/communication framework advanced by Ratzan and Meltzer, it is important to keep in mind that there isn't always time to create and pretest messages during a crisis.
Risk managementThe process of discovering, evaluating, and controlling risks to an organization's resources and profits is known as risk management. These dangers can be caused by a number of things, such as monetary unpredictability, legal responsibilities, technological problems, strategic management blunders, accidents, and natural calamities.
Three categories of risks are:
business, non-business, and financial risks.In an organization, risk management is crucial because, without it, it would be impossible to identify future goals. If a corporation sets goals without taking the risks into account, they are likely to lose focus once one or more of these hazards becomes real.
Risk communication is any form of communication that aims to give readers the knowledge they need to decide for themselves whether there is a risk to their health, safety, or the environment.
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A homebuyer took out a $350,000 30-year fixed rate loan at 4.5% interest with a monthly payment of $1,773.40. After making two monthly payments the principal balance of the loan will have been reduced by a total of: Select one: a. $923.53. b. $460.90. c. $957.38. d. $892.12.
The principal balance of the loan will have been reduced by a total of: a. $923.53.
Principal balance of loanFirst step
First month's payment:
Annualized interest=$350,000 ×.045
Annualized interest = $15,750
First month's interest=$15,750/12
First month's interest= $1,312.50
First month's principal reduction=$1,773.40- $1,312.50
First month's principal reduction= $460.90
Remaining balance=$350,000 -$460.90
Remaining balance= $349,539.10
Second step
Second month's payment:
Annualized interest=$349,539.10 × .045
Annualized interest = $15,729.30
Second month's interest=$15,729.30/ 12
Second month's interest= $1,310.77
Second months principal reduction= $1,773.40 -$1,310.77
Second months principal reduction = $462.63
Third step
Total principal reduction after 2 payments=$460.90 + $462.63
Total principal reduction after 2 payments = $923.63
Therefore the correct option is A.
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Dane Company has a break-even point of 120,000 units. If the firm's sole product sells for $40 and fixed costs total $480,000, the variable cost per unit must be:
Based on the breakeven point and the selling price of the product, the variable cost per unit is $36
What is the variable cost per unit?First, find the contribution margin:
Breakeven = Fixed costs / Contribution margin
120,000 = 480,000 / Contribution margin
Contribution margin = $4
The variable costs are:
= Selling price - contribution
= 40 - 4
= $36
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Why would the WACC based on market values tend to be higher than the one based on book values if the stock price exceeded its book value
The WACC based on market values tend to be higher than the one based on book values if the stock price exceeded its book value because “ The price of the stock in the market increases means higher WACC using market values.”
Since the market price of the stock is increased means the share of equity in the market is high which leads to higher WACC using market values.
WACC refers to Weighted average cost of capital.
WACC represents firm’s average cost of capital which includes equity shares, preference shares, bonds and other forms of debts.
WACC is considered to represent firm’s opportunity cost which is used to evaluate investment opportunities.
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12.15. How can a forward contract on a stock with a particular delivery price and delivery date be created from options
An investor can buy/sell a call option and a put option with the same strike price and expiration date in order to simulate a standard forward contract.
A synthetic forward contract creates an offsetting forward position by combining call and put options with the same strike price and expiration date.
A forward contract is a customizable derivative contract between two parties to purchase or sell an asset on a future date at a defined price. Forward contracts may be customized to include a particular commodity, quantity, and delivery date.
Assume the delivery cost is k and the delivery date is t. When both options have strike price k and exercise date t, a forward contract is formed by purchasing a European call and selling a European put. Under all conditions, this portfolio produces a payout of st -k, where st is the stock price at time t. Assume FO is the forward price. If k=FO, the new forward contract has no value. When the strike price is F0, the price of a call matches the price of a put.
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