Answer: Senior citizens (65 years and older) = psychographic.
Explanation:
Psychographic segmentation is simply segmentation that is based on the psychological characteristics of the consumer such as lifestyles, personality, social class etc while Demographics is the study based on factors like sex, age, and race.
Base on the above explanation, "Senior citizens (65 years and older) = psychographic" is the answer. It should be noted that this is demographic related and not psychological.
Due to impending labor strife over planned layoffs in its Silicon Valley headquarters, a social networking company has decided to outsource its programming operations to an emerging market, India, to obtain cheaper labor. Since then, this social networking company has encountered criticism that has diminished its current market position and staff productivity. You have been retained by this company to develop an appropriate reactive (emergent) strategy that would begin by
Answer:
putting a halt on the layoffs
Explanation:
This strategy should begin by putting a halt on the layoffs. This should be top priority since the layoffs themselves are the main cause for the criticism that the company is receiving and this criticism is the sole reason as to why its market position and staff productivity has fallen drastically. People think the company is failing and the staff is scared that they will eventually be fired. By stopping layoffs and waiting for a market recovery you give other better options a chance to arise and more efficient strategies to take effect.
An isoquant is a curve that represents combinations of:_______.
Answer:
two inputs which are capable of producing the same level of output.
Explanation:
Isoquant is a word made up of two parts. Iso is one and quant is for quantity not output.
It means a combination of inputs that give a certain output.
The factors of production can be substituted for each other to produce the same quantity of a product. These combinations are called isoquant.
Plotting all possible combinations that give a level of output gives the isoquant curve
Use the following selected information from Whitman Corp. to determine the Year 1 and Year 2 common size percentages for cost of goods sold using Net sales as the base.
Year 2 Year 1
Net sales $ 276,200 $ 231,400
Cost of goods sold 151,900 129,590
Operating expenses 55,240 53,240
Net earnings 27,820 19,820
a. 36.4% for year 2 and 4 for year 1
b. 550% for year 2 and 56.% for year 1
c. 119.45% for year 2 and 100.0% for year 1
d. 125% for your 2 and 100% for year 1
e. 657% for year 2 and 56.0% for year 1
Answer:
D,F,A,I
Explanation:
Suppose the following items were taken from the balance sheet of Nike, Inc. (All dollars are in millions.)
1. Cash $2,100.0 7. Inventory $2,300.0
2. Accounts receivable 2,600.0 8. Income taxes payable 70.0
3. Common stock 2,830. 0 9. Equipment 2,000.0
4. Notes payable 310.0 10. Retained earnings 4,850.0
5. Buildings 3,800.0 11. Accounts payable 3,400.0
6. Mortgage payable 1,340.0
Classify each of these items as an asset, liability, or stockholders' equity, and determine the total dollar amount for each classification. (Enter amounts in millions to 1 decimal place, e.g. 45.5 million.)
Stockholders' Equity - Cash
Stockholders' Equity Accounts receivable
Liability Common stock
Stockholders' Equity Mortgage payable
Liability Inventory
Liability Income taxes payable
Assets $ 2000
Liability $
Stockholders' Equity $
Answer:
Assets
1. Cash 2,100
2. Accounts receivable 2,600
7. Inventory $2,300
5. Buildings 3,800
9. Equipment 2,000
Total: 12,800
Liabilities
11. Accounts payable 3,400
8. Income taxes payable 70
4. Notes payable 310
6. Mortgage payable 1,340
Total: 5,120
Equity
3. Common stock 2,830
10. Retained earnings 4,850
Total 7,680
Liabilities + Equity = 12,800
Explanation:
Assets= represent all the property and rights owned by the company that will be used to produce a positive cashflow in the business activity.
Liabilites= this represents the obligation against third parties wheter they are to do or to pay something
Equity = represents the stockholders rights. They are composed by their contribution and the retained earnigns which represent the accumulated income and losses of the business.
Prime Cost and Conversion Cost Benton Engineering Services Company incurred the following during 2019:
Direct labor $60,000
Overhead 110,000
Selling expenses 56,000
Administrative expenses 95,000
Calculate prime cost and conversion cost for Benton Engineering Services Company during 2019.
Answer:
Prime cost is $60,000
And, the conversion cost is $170,000
Explanation:
The computation of the prime cost and the conversion cost is shown below:
Prime cost is
= Direct material + Direct labor
= $0 + $60,000
= $60,000
And,
Conversion cost = Direct labor + Overhead
= $60,000 + $110,000
= $170,000
Basically we applied the above formula so that the prime cost and conversion cost could come
The primary advantages of specialization are that employees acquire greater _______ from repetition, they avoid _______ time in shifting from one task to another, and they do the types of work for which they are ________ suited.
Answer:
Efficiency
wasting
best / well
Explanation:
Specialization is a method of production where a worker focuses on a particular production process in order to be more efficient.
For example, if a worker focuses on maybe packaging a product only. By doing the packaging repeatedly, the worker would become more efficient at his work - he would make less mistakes and become faster. Also, less time is wasted from moving from one duty to another.
Advantages of specialisation
Workers becomes more efficientproduction increases at producing goodsIt matches worker with the duties they are best suited forConsider the life-cycle of an industry. Which stage would you consider brewing to be in:________.a. Embryonicb. Growthc. Matured. Declining
Answer: c. Mature
Explanation:
In the Mature stage of an industry, the product is already well known, the market saturated and competition is fierce amongst the number of participants who remain. Competition comes in form of trying to reduce costs as well as strong advertising to push sales.
The Brewing industry produces a well known product in alcoholic beverages and the market is quite saturated. Competition is fierce amongst participants as they try to get more market share and there is a strong focus on advertising to drive sales. Brewing is therefore at the Mature stage in the life-cycle of an industry.
In the life cycle of industries we would consider brewing to be in the mature stage of the industry.
What is the life-cycle of an industry?This is used to refer to the cycle that industries take from the stage where they are being planned to when they begin to function.
The brewing process is at maturity due to the fact that the product is already being developed by the brewing industry.
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Pastina Company sells various types of pasta to grocery chains as private label brands. The company’s reporting year-end is December 31. The unadjusted trial balance as of December 31, 2021, appears below. Account Title Debits Credits Cash 30,000 Accounts receivable 40,000 Supplies 1,500 Inventory 60,000 Notes receivable 20,000 Interest receivable 0 Prepaid rent 2,000 Prepaid insurance 6,000 Office equipment 80,000 Accumulated depreciation 30,000 Accounts payable 31,000 Salaries payable 0 Notes payable 50,000 Interest payable 0 Deferred sales revenue 2,000 Common stock 60,000 Retained earnings 28,500 Dividends 4,000 Sales revenue 146,000 Interest revenue 0 Cost of goods sold 70,000 Salaries expense 18,900 Rent expense 11,000 Depreciation expense 0 Interest expense 0 Supplies expense 1,100 Insurance expense 0 Advertising expense 3,000 Totals 347,500 347,500 Information necessary to prepare the year-end adjusting entries appears below. Depreciation on the office equipment for the year is $10,000. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $1,500. On October 1, 2021, Pastina borrowed $50,000 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years. On March 1, 2021, the company lent a supplier $20,000, and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022. On April 1, 2021, the company paid an insurance company $6,000 for a one-year fire insurance policy. The entire $6,000 was debited to prepaid insurance. $800 of supplies remained on hand at December 31, 2021. A customer paid Pastina $2,000 in December for 1,500 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue. On December 1, 2021, $2,000 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,000 per month. The entire amount was debited to prepaid rent. I want the answers from question 1-8
Answer:
1.Dr Depreciation expense 10,000
Cr Accumulated depreciation-equipment 10,000
2.Dr Salaries expense 1,500
Cr Salaries payable 1,500
3.Dr Interest expense 1,500
Cr Interest payable 1,500
4.Dr Interest receivable 1,333
Cr Interest revenue 1,333
5.Dr Insurance expense 1,500
Cr Prepaid insurance 1,500
6.Dr Supplies expense 700
Cr Supplies 700
7.Dr Sales revenue 2,000
Cr Unearned revenue 2,000
8.Dr Rent expense 1,000
Cr Prepaid rent 1,000
Explanation:
Preparation of Journal entries
1. Based on the information given we were told that Depreciation on office equipment for the year is the amount of $10,000 which means that the Journal entry will be recorded as:
Dr Depreciation expense 10,000
Cr Accumulated depreciation-equipment 10,000
2. Based on the information given we were told that Salaries earned from 16 December to December 31, 2021, were the amount of $1,500 which means that the Journal entry will be:
Dr Salaries expense 1,500
Cr Salaries payable 1,500
3. Based on the information given we were told that On October 1, 2021, they borrowed the amount of $50,000 with an interest note that have to be paid yearly on September 30 at 12% which means that the transaction will be recorded as:
Dr Interest expense 1,500
(50,000*12%*3/12)
Cr Interest payable 1,500
4. Based on the information given we were told that on March 1, 2021, the company borrowed a supplier the amount of $20,000 with an interest of 8% to be paid on February 28, 2022 which means that the transaction will be recorded as:
Dr Interest receivable 1,333
(20,000*8%*10/12)
Cr Interest revenue 1,333
5. Based on the information given we were told that on April 1, 2021, the company paid an the amount of $6,000 to an insurance company for a one-year fire insurance policy which means that the Journal entry will be:
Dr Insurance expense 1,500
(6,000*3/12)
Cr Prepaid insurance 1,500
Since it is a one year fire insurance we subtracted the different between the month of April 1st and December 31st .
Hence,
12 months- 9 months= 3 months
=6,000 x 3/12
= 1,500
6. Based on the information given we were told that the amount of $800 of supplies remained on hand at December 31, 2021 which means that the transaction will be recorded as:
Dr Supplies expense 700
(1,500-800)
Cr Supplies 700
7. Based on the information given we were told that a customer paid the amount of $2,000 in December which means that the transaction will be recorded as;
Dr Sales revenue 2,000
Cr Unearned revenue 2,000
8. Based on the information given we were told that the payment that was made represented rent for December 2021 and January 2022 at the amount of $1,000 per month which means that the Journal entry will be recorded as:
Dr Rent expense 1,000
Cr Prepaid rent 1,000
From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: Appropriate term for completing sentencea. Feedback is often used to (improve, direct) operations. ___________________b. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor component of product costs. ___________________c. Advertising costs are usually viewed as (period,product) costs. ___________________d. The balance sheet of a manufacturer would include an account for (cost of goods sold, workin process inventory). ___________________
Answer:
a. Feedback is often used to improve operations.
Feedback is used to improve operations as it shows the areas that could work better if they were improved upon.
b. The implementation of automatic, robotic factory equipment normally decreases the direct labor component of product costs.
Automated machines do the job faster and do not have to be paid wages so when they are used they reduce the direct labor component of product costs.
c. Advertising costs are usually viewed as period costs.
Period costs are those that are incurred for the period in question and are not related to the manufacturing section so advertising is a period cost.
d. The balance sheet of a manufacturer would include an account for working process inventory.
As manufacturers produce their own goods, they will record a Work in Process inventory instead of a Cost of goods which is for firms that have to purchase inventory.
Do you disagree that “leaders are born, not made”?
Answer: I disagree
Explanation: everyone was born but not everyone is a leader. anyone can be born to do something but it is up to the person who they will become
The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of the above?A) Financial losses.B) Legal fines.C) Jail time.D) Agency conflicts.
Answer:
Agency conflicts.
Explanation:
Behaviors are considered unethical if they are not regarded as right or proper for an organization, an individual or a profession. Agency conflicts arise when a party which is called the agent fails to act on behalf of the principal. Options A, B, C are all examples of the punishments that may arise from engaging in unethical behaviors.
This makes option d the odd one out of the 4 options and it is therefore the answer to the question.
Thank you!
A major cost of the separation of ownership and control of corporations is that the managers of the corporation may sometimes act in their own best interest as opposed to shareholders’ interests. What can shareholders do to discipline self-interested managers? [SELECT ALL THAT APPLY.] Question 2 options: fire them vote to replace the board of directors who can replace the self-interested managers reduce their pay (fine them) sell shares to push down the stock pric
Answer:
a. vote to replace the board of directors who can replace the self-interested managers
b. fire them
Explanation:
In a corporations in which the major aim is to promote the interest of the shareholders, there is bound to be class of interest between the managers and the shareholders.
Most times, the manager will try to pursue his own personal interest at the detriment of the organization. Firing such managers and, in most cases, voting during board meetings to replace them are ways to put the organization back to business.
What gives the tourists the advantage of being able to pay "2nd price" or even "3rd price" for their souvenirs, when the locals can’t do that when they buy things they need at the shops in Angoram?
Answer:
There might be a passage attached but from a general perspective, tourists usually have an advantage in bargaining for souvenirs because they are the only market being sold to. Souvenirs are usually made exclusively for tourists which gives them bargaining power because if the tourists do not buy the goods, no one else will. The number of locals who will buy souvenirs from other locals is statistically insignificant because the locals make the souvenirs themselves.
When they go into the town or city of Angoram, you find that the shops there are selling to many more buyers and so the prices are set and cannot be bargained. This is why the locals cannot ask for 2nd or 3rd prices.
Federal, state, and local government organizations fulfill several roles within the economy. Which of the following are roles provided by government organizations?a) Acting as a consumer of goods and services b) Restricting access to economic information c) Employing consumers "
Answer:
c) Employing consumers
Explanation:
Some of the roles of the government are :
1. providing public goods e.g. roads, security
2. increasing inefficiency
3. To foster economic growth and development
In order to perform these roles, the government needs to employ labour, so they employ consumers.
for example, in order to provide a public good such as road, government needs to employ contractors, engineers and other people who have the skills needed to construct a road
Company that makes shopping carts for supermarkets and other stores recently purchased some new equipment that reduces the labor content of the jobs needed to produce the shopping carts. Prior to buying the new equipment, the company used 6 workers, who together produced an average of 90 carts per hour. Workers receive $10 per hour, and machine cost was $50 per hour. With the new equipment, it was possible to transfer one of the workers to another department, and equipment cost increased by $10 per hour, while output increased by 6 carts per hour.
A. Compute the multifactor productivity(MFP) (labor plus equipment) under the Prior to buying the new equipment. (Round to 4 decimal places)
B. Compute the % growth in productivity between the Prior and after buying the new equipment. (Round to 2 decimal places)
C. Comment on the changes in productivity according to two measures,and which you believe in the more pertinent for this situation?
Answer:
A. Compute the multifactor productivity(MFP) (labor plus equipment) under the Prior to buying the new equipment.
multi-factor productivity = 90 carts / ($60 + $50) = 0.8182 carts/$
B. Compute the % growth in productivity between the Prior and after buying the new equipment.
new multi-factor productivity = 96 carts / ($50 + $60) = 0.8727 carts/$
% growth = (0.8727 - 0.8182) / 0.8182 = 6.66% increase
C. Comment on the changes in productivity according to two measures,and which you believe in the more pertinent for this situation?
the multi-factor productivity increased by 6.66% because even though the total cost of the factors of production remained the same, total output increased by 6 units
How is owner’s equity affected when is paid for expenses?
Answer:
Profit and loss are directly linked to the amount of money the company is spending to run its business -- its operating expenses. So changes in operating expenses naturally affect owner's equity.
importance of price elasticity of demand in business
The sales and profits of an individual product may not follow the life cycle pattern.A. TrueB. False
Answer:
A. True
Explanation:
The product life cycle is a term that describes a form of structure or arrangement of sales and profits of a product in a given time.
However, due to volatile marketing conditions, it is TRUE, that the sales and profits of an individual product may or may not follow the life cycle of the general pattern.
Hence, the correct answer in this situations is absolutely TRUE
Weber Company purchases $50,000 of raw materials on account, and it incurs $60,000 of factory labor costs. Supporting records show that (a) the Assembly Department used $24,000 of raw materials and $35,000 of the factory labor, and (b) the Finishing Department used the remainder. Manufacturing overhead is assigned to departments on the basis of 160% of labor costs. Journalize the assignment of overhead to the Assembly and Finishing Departments.
Answer:
Assembly: 56,000 *Debit, Finishing: 40,000 *Debit, and Factory Overhead: 96,000 *Credit
Explanation:
Assembly
DM: 24,000
DL:35,000
FO: 35,000 x 160% =56,000
Finishing 26,000 and 25,000
FO 25,000 x 160% =40,000
Fair Oaks Farms’ manure management, specifically the use of cow manure to power their facilities and fuel their milk tankers, is most closely related to which managerial challenge?
Answer:
These are the options for the question:
Managing for globalizationManaging for sustainabilityManaging for animal welfareManaging for diversityManaging for information technologyAnd this is the correct answer:
Managing for sustainabilityExplanation:
The use of cow manure to power facilities and fuel milk tankers is a managerial challenge directly related with the sustaniable aspecto of the Farm.
This is because a natural resource: cow manure, is being used in an efficient manner to provide much needed power to the firm's facilities. The amounts of manure, times, and processes that are used, are all part of the sustainability policy of the farm, which has to be overseen by the manager.
Use the supply schedule below to answer the questions that follow.Supply of Flower Bouquets
Price (dollars per bouquet) Quantity of Bouquets Supplied40 125
35 100
30 75
25 50
20 25
15 0A. What is the quantity of bouquets supplied if the market price is $30?
B. Suppose the market price falls from $30 per bouquet to $20 per bouquet. The quantity of bouquets supplied will (decrease or increase) by____bouquets.
a. quantity of bouquets supplied if the market price is $30 is 75
b. It should be decreased by 50.
The calculation is as follows:a. The corresponding matching for $30 price is 75 units.
b. The difference would say the decreasing quantity;
(75 – 25 =) 50 units.
I.e. decrease; 50
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At an interest rate of 10% per year, $100,000 today is equivalent to how much in a year from now?
Answer:
FV= $110,000
Explanation:
Giving the following information:
Present value= $100,000
Number of periods= 1 year
Interest rate= 10% compounded annually
To calculate the equivalent amount of money, we need to use the following formula:
FV= PV*(1+i)^n
FV= 100,000*(1.1^1)
FV= $110,000
A 2-column table with 5 rows. Column 1 has entries 25 percent, 25 percent, 25 percent, 25 percent, Total 100 percent. Column 2 has entries 12 dollars, 12 dollars, 12 dollars, 12 dollars, Total 48 dollars. Which of the following scenarios could be accurately modeled using this diagram? Juan Victor gave a gratuity of $25 on a bill that was $48. Juan Victor gave a 25% gratuity of $12 on a bill that was $48. Juan Victor gave a gratuity of $12 on a bill that was $100. Juan Victor gave a 12% gratuity on a bill that was $25.
Answer:
Juan Victor gave a gratuity of 25% of $12 on a bill that was $48
Explanation:
Answer:
b
Explanation:
The ultimate purpose of economics is
Answer:
The ultimate purpose of economics is to understand and promote the enhancement of well-being. Which is literally to study how individuals make choices.
Explanation:
I hope this helps!
The ultimate purpose of economics is to study and understand how societies allocate scarce resources to meet unlimited human wants and needs.
What are the benefits?It analyzes production, consumption, and distribution of goods and services, along with the factors influencing these processes. Economics seeks to optimize resource allocation to achieve maximum efficiency, growth, and welfare for society.
Through the analysis of supply, demand, prices, and market interactions, it provides insights into economic behaviors, policies, and decision-making. By addressing issues like poverty, unemployment, and inflation, economics aims to improve overall well-being and quality of life, contributing to sustainable and prosperous societies.
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Which of the following organizations is not likely to use budgets? a. Nonprofit organizations. b. Manufacturing firms. c. Firms in service industries. d. Merchandising firms. e. None of the answers is correct, because all are likely to use budgets.
Answer:
e. None of the answers is correct, because all are likely to use budgets.
Explanation:
The budget is important for all types of the businesses whether it is a non profit organization, manufacturing firms, service industries firms, etc
As this is important to analyze the expenses and the revenue earned and incurred for the particular period so that the organization could take an appropriate action to control these expenses and try to make profit as much as they can
Therefore the correct option is e.
Baggins Incorporated identifies new product development and product improvement as the top corporate goals. An employee developed an innovation that will correct a shortcoming in one of the company's products. Although Baggins current Return on Investment (ROI) is 12%, the product innovation is expected to generate ROI of only 10%. As a result, awarding bonuses to employees based on ROI resulted in:________
a. goal conflict.
b. information overload.
c. goal congruence.
d. decreased value of information.
Answer:
A) goal conflict
Explanation:
We were informed about Baggins Incorporated that identifies new product development and product improvement as the top corporate goals. And how an employee developed an innovation that will correct a shortcoming in one of the company's products.
In the case of , awarding bonuses to employees based on ROI as explained resulted in goal confict.
It should be noted that goal confict takes place when one goal lessen the effectiveness of other goal.
Jurisdiction M imposes an individual income tax based on the following schedule.
Rate Income bracket
5% $-0- to $50,000
+ 8% $50,001 to $200,000
+ 12% $200,001 and aboveWhich of the following statements is true?
A) The schedule provides no information as to whether Jurisdiction M's tax is horizontally equitable.
B) Jurisdiction M's tax is vertically equitable.
C) Jurisdiction M's tax is vertically equitable only for individuals with $50,000 or less taxable income.
D) Both A. and B. are true.
Answer:
D) Both A. and B. are true.
A) The schedule provides no information as to whether Jurisdiction M's tax is horizontally equitable. B) Jurisdiction M's tax is vertically equitable.Explanation:
When we are talking about horizontal equity of a tax, we are talking about how the tax base is measured and the ability that taxpayers have to pay the tax. There is nothing here about tax base or taxpayers' ability to pay.
On the other hand, vertical equity deals with the tax rate structure. In this case, the tax rate is progressive, meaning that it increases as the taxpayers' income increases. Progressive taxes are vertically equitable.
On November 1 of the current year, Rob Elliot invested $29,750.00 of his cash to form a corporation, GGE Enterprises Inc., in exchange for shares of common stock. No other common stock was issued during November or December. After a very successful first month of operations, the retained earnings as of November 30 were reported at $5,000.00. After all transactions have been entered into the accounting equation for the month of December, the ending balances for selected items on December 31 follow. On that date, the financial statements were prepared. The balance sheet reported total assets of $56,150.00 and total stockholders' equity of $38,300.00.
1. What is the amount of profit or loss during December?
2. What were the total expenses for December?
3. How much was paid for rent?
Answer:
1. What is the amount of profit or loss during December?
$9,3002. What were the total expenses for December?
$12,9503. How much was paid for rent?
$1,220Explanation:
we are missing some numbers, so I looked for a similar question. I found one that was almost identical, but the amount of initial paid in capital varied by a little bit. I still used it with the only difference that I used the given common stock, not the common stock that appears in the picture.
Common stock $29,750
retained earnings for November = $5,000
total assets = $56,150
total stockholders' equity = $38,300
retained earnings = $38,300 - $29,750 = $8,550
$5,000 from November$3,550 from DecemberDecember's profit = $3,550 (retained earnings) + $5,750 (dividends) = $9,300
income statement = $27,250 - total expenses = $9,300 + $5,000 = $14,300
total expenses = $27,250 - $14,300 = $12,950
utilities expense = $12,950 - $6,450 - $4,625 - $1,220 = $655
Name four external factors that have an influence on business. Give examples of the ways in which each factor can affect the business performance of two companies: Walmart and Ford Motor Company.
Answer:
The following are the answer to this question:
Explanation:
The name of four factors can be defined as follows:
Economy: The term economy is the most important factor in your business and the volatility of stocks focused on political movements, wars, violence, and changes in currency. Legal: One industry might have been affected by state, local or governmental changes to the law. The court's ruling has continued to suffer for instance from cigarette firms. Also because the jury has helped make certain adjustments, tobacco products weren’t purchased to a child under 18 years old. Environmental: It is also the external entity, that can affect your organization, as though users produce specific goods, which can create stench and smoke, as well as the impact on the environment, in which the goods are prohibited by authorities. Political: Some political reasons, which could affect the business, that is also known as the levels of corruption, regulation against secrecy, regulation on discrimination.Your landscaping company can lease a truck for $7,800 a year (paid at year-end) for 6 years. It can instead buy the truck for $38,000. The truck will be valueless after 6 years. The interest rate your company can earn on its funds is 7%.
Question:
Graded assignment(towards 15% Hw grade) Saved Help Save& Exit Submit Check my work Your landscaping company can lease a truck for $7,800 a year (paid at year-end) for 6 years. It can instead buy the truck for $38,000. The truck will be valueless after 6 years. The interest rate your company can earn on its funds is 7%. 10 points
What is the present value of the cost of leasing?
Answer:
Cost of lease = $37,179.01
Explanation:
Leasing is a finance arrangement where one party (the lessor) transfers the right to use an asset to another party (the leasse) in exchange for a rent.
The cost of a lease to the leasee is the present value of the future lease payment discounted at the cost of capital.
So using the present value of annuity formula, we can work out the cost of the lease arrangement as follow:
PV =A× (1- 1+r)^(-n)/r
PV- Present Value
r- interest rate
n- number of years
A- annual lease payment
PV -
A-7,800
r-7%
n-6
PV = 7,800× (1- (1.07)^(-6)/0.07 = 37,179.01
Present Value = $37,179.01
Cost of lease = $37,179.01