Answer:
A market economy is an economic system in which the production and distribution of goods and services are determined by the forces of supply and demand. In a market economy, the government can use various strategies to influence economic conditions, including fiscal policy and monetary policy.
Fiscal policy refers to the government's use of spending and taxation to influence the level of economic activity and manage the economy. This can include measures such as increasing government spending, reducing taxes, or a combination of both.
Monetary policy refers to the actions taken by a central bank, such as the Federal Reserve in the United States, to manage the supply and demand of money and credit in the economy. This can include measures such as adjusting interest rates or the amount of money in circulation.
The options "equity promotion" and "economic stimulus" are not typically used to describe government strategies to influence economic conditions in a market economy.
Answer:
A fiscal policy.
Explanation:
Fiscal policy deals with the government's taxation and spending policies and is the principal tool used by the government to influence aggregate demand and achieve macroeconomic policy objectives such as high employment, price stability, and economic growth.
How can you relate the careers in Finance as Bachelor of Science in Information Systems (BSIS) students?
Which project management tool considers the longest time the completion of a sequence of activities might take?
To manage project activities, operations managers can calculate the ____ , which is a sequence of activities, the completion of which takes the longest time.
Which project management tool considers the longest time the completion of a sequence of activities might take?
To manage project activities, operations managers can calculate the ____ , which is a sequence of activities, the completion of which takes the longest time.
The project management tool that considers the longest time the completion of a sequence of activities might take is called the critical path. The critical path is a sequence of activities, the completion of which takes the longest time, and it determines the minimum amount of time required to complete a project. It is used to identify the most critical activities in a project and to ensure that they are completed on time in order to meet project deadlines. The critical path is determined by analyzing the dependencies between activities and the time required to complete each activity. By focusing on the critical path, project managers can ensure that the most important activities are prioritized and that the project stays on schedule.
Which of the following statements is true of the international business strategy of licensing?
It allows a firm to enter a foreign market with relatively little risk. The following statements are true of the international business strategy of licensing.
What is business?An innovative company or group that engages in professional activities is referred to as a business. They could be industrial, commercial, or something else. Businesses that are for-profit operate to make a profit, whereas those that are nonprofit do so to further a philanthropic cause.
An international business of licensing refers that the agreement. That has involved the two firms from different countries, The rights or resources are manufactured in foreign countries. The resources and rights may include patents.
Therefore, The statement is absolutely true. About The international business strategy of licensing.
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The duties of human resources include all the following EXCEPT
a)hiring.
b) professional development.
c) setting up employee e-mail.
d) disciplining employees.
Answer:
B will be your answer for the problem
Answer: C. setting up employee e-mail.
Explanation:
How do strong information literacy skills impact academic or professional career
On January 1 of this year, Conrad Nelson contributed $15,000 cash in exchange for 50 shares of stock in Sterling Inc., an S corporation. Sterling employs Conrad as its director of marketing. Conrad's current year salary was $70,000 and his pro rata share of Sterling's ordinary business income was $16,800. During the year, Conrad received a $9,000 cash distribution with respect to his Sterling stock. Compute Conrad's basis in his Sterling stock at year end. Multiple Choice $15,000 $22,800 $31,800 $92,800
Answer:
b. $22,800
Explanation:
Particulars Amount
Contribution $15,000
Ordinary business income share $16,800
Cash Distribution $(9,000)
Conrad’s basis in his Sterling stock on January 1, 2013 $22,800
Conrad's basis in his Sterling stock at year end is $22,800.
Using this formula
Conrad’s basis in his Sterling stock =Contribution + Conrad’s basis in his Sterling stock - Cash distribution
Let plug in the formula
Conrad’s basis in his Sterling stock =$15,000+$16,800-$9,000
Conrad’s basis in his Sterling stock = $22,800
Inconclusion Conrad's basis in his Sterling stock at year end is $22,800.
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Ross, a sales executive with Steel Mill Inc., learns of undisclosed company plans to produce a new type of steel. Ross tells Tim, who tells Uri, who buys 100 shares of Steel Mill stock. Uri knows that Tim got the information from Ross. When the firm publicly announces its new product, Uri sells the stock for a profit. Under the Securities Exchange Act of 1934, Uri is most likely
Answer:
a. liable for insider trading
Explanation:
THESE ARE THE OPTIONS FOR THE QUESTION BELOW;
a. liable for insider trading. b. not liable because Uri is only a tippee, not a tipper. c. not liable because Uri is too far removed from the initial disclosure. d. not liable because Uri traded on the basis of a material fact.
From the question, we are informed about Ross, who is a sales executive with Steel Mill Inc., learns of undisclosed company plans to produce a new type of steel. Ross tells Tim, who tells Uri, who buys 100 shares of Steel Mill stock. Uri knows that Tim got the information from Ross. When the firm publicly announces its new product, Uri sells the stock for a profit. In this case, Under the Securities Exchange Act of 1934, Uri is most likely liable for insider trading. The Securities Exchange Act of 1934 was set up to govern securities transactions base on secondary market, which when issued it will ensure greater financial transparency as well as accuracy along with less fraud and manipulation. The Act gives empowerment to SEC so the body can require periodic reporting of information from firms with publicly traded securities.
Communication which occurs via a
phone call would fall under which
category?
A. synchronous
C. horizontal
B. asynchronous
D. vertical
Assume the following: The variable portion of the predetermined overhead rate is $3.00 per direct labor-hour. The standard labor-hours allowed per unit of finished goods is 3 hours. The actual quantity of labor hours worked during the period was 44,000 hours. The total actual variable manufacturing overhead cost for the period was $63,000. The company produced 15,000 units of finished goods during the period. What is the variable overhead efficiency variance
Answer:
Variable overhead efficiency variance= $3,000 favorable
Explanation:
To calculate the variable overhead efficiency variance, we need to use the following formula:
Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate
Standard quantity= 3*15,000= 45,000 hours
Actual quantity= 44,000 hours
Standard rate= $3 per hour
Variable overhead efficiency variance= (45,000 - 44,000)*3
Variable overhead efficiency variance= $3,000 favorable
Assume that the reserve requirement is 10 percent. Also assume that banks do not hold excess reserves and there is no cash held by the public. The Federal Reserve decides that it wants to contract the money supply by $50 million using open-market operations.In order to accomplish its goal, the Fed needs to
Answer:
In order to accomplish its goal, the Fed needs to sell $5 million value of bonds.
Explanation:
First, we need to calculate the value of the bonds
Value of bond = Amount of Money supply x Reserve requirement rate
Where
Amount of Money supply = $50 million
Reserve requirement rate = 10%
Placing values in the formula
Value of bond = $50 million x 10%
Value of bond = $5 million
To increase the money supply the bonds are needed to be sold in the market.
Hence, In order to accomplish its goal, the Fed needs to $5 million value of bonds.
Windsor, Inc. just began business and made the following four inventory purchases in June: June 1 138 units $828 June 10 184 units 1288 June 15 184 units 1472 June 28 138 units 1242 $4830 A physical count of merchandise inventory on June 30 reveals that there are 184 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is $1610. $1105. $1150. $1656.
Answer:
$1,150
Explanation:
Given the above information, the value of the inventory method on June 30, using LIFO method would be calculated as;
= $828 + [ ($1,288 ÷ 184) × (184 - 138) ]
= $828 + (7 × 46)
= $829 + $322
= $1,150
Therefore, the ending inventory on June 30, using LIFO method is $1,150
Rodriguez Corporation issues 12,000 shares of its common stock for $145,600 cash on February 20. Prepare journal entries to record this event under each of the following separate situations. The stock has a $8 par value. The stock has neither par nor stated value. The stock has a $4 stated value.
Answer:
Event 1 : The stock has a $8 par value.
Debit : Cash $145,600
Credit : Common Stock $96,000
Credit : Paid in excess of par $49,600
Event 2 : The stock has neither par nor stated value.
Debit : Cash $145,600
Credit : Common Stock $145,600
Event 3 : The stock has a $4 stated value.
Debit : Cash $145,600
Credit : Common Stock $48,000
Credit : Paid in excess of par $97,600
Explanation:
The journal entries have been prepaid above
Microsoft develops, produces, and markets a wide range of computer software, including the Windows operating system. On its recent financial statements, Microsoft reported the following information about net sales revenue and accounts receivable (amounts in millions).
Current Year Prior Year
Accounts receivable, net of
allowances of $333 and $375 $14,987 $13,014
Net revenues 69,943 62,484
According to its Form 10-K, Microsoft recorded bad debt expense of $14 and did not reinstate any previously written-off accounts during the current year.
Required:
1. What amount of bad debts was written off during the current year?
2. Assuming that all of Microsoft's sales during the period were on open account, compute the amount of cash collected from customers for year 2.
Answer:
Allowance for Doubtful Account
Accounts written off $56 Beginning balance $375
[$375+$14-$333]
Bad debt expense $14
Ending balance $333
Accounts Receivable (Gross)
Beginning balance $13,389 Accounts written off $56
[$13014+$375]
Net sales revenue $69,943 Cash collected $67,956
[$13389+$69943-$56-$15320]
Ending balance $15,320
[$14987+$333]
Which provides the best example of a company policy which addresses attendance and time off?
A company requires all employees to file vacation day requests first with the human resources department and then with their supervisors.
A company uses a system for promotions that evaluates candidates based on achievements and without knowledge of the candidate's gender or race.
A company requires all employees to file vacation day requests first with the human resources department and then with their supervisors.
A company requires all incoming job candidates to complete a screening for illegal and certain legal substances before hiring.
All employees must submit requests for vacation days to the human resources office first, then to their managers. Consequently, the optimal choice is (D).
What is a time and attendance policy?For your business to run smoothly, you must have a time and attendance policy, which is a list of guidelines for your employees on when to report for duty and under what conditions they may be excused.
It promotes a professional workplace. It promotes efficiency. Setting expectations for workers makes it easier for them to comprehend the duties they will be responsible for.
No of the nature of your company, the sector in which you work, or the location of your office, you must have a time and attendance policy for your staff.
Hence, option (D) is accurate.
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Sales Mix and Break-Even Sales Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows: Products Unit Selling Price Unit Variable Cost Sales Mix Laptops $1,200 $600 40% Tablets 700 350 60% The estimated fixed costs for the current year are $4,500,000. Required: 1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. fill in the blank 1 units 2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year. Laptops fill in the blank 2 units Tablets fill in the blank 3 units 3. Assume that the sales mix was 60% laptops and 40% tablets. Compare the break-even point with that in part (1). Why is it so different
Answer: See explanation
Explanation:
1. The estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year will be calculated thus:
Selling price per unit will be:
= ($1200 × 40%) + ($700 × 60%)
= 480 + 420
= $900
Variable cost per unit will be:
= ($600 × 40%) + ($350 × 60%)
= 240 + 210
= $450
Contribution margin will then be
= selling price per unit-variable cost
= $900 - $450
= $450
Therefore, the breakeven point in sales units of the overall product will be:
= fixed cost /contribution per unit
= $4,500,000 / $450
= 10000 units
2. The unit sales of both laptops and tablets for the current year will be:
Laptop = 10000 × 40% = 4000
Tablet = 10000 × 60% = 6000
3. Assume that the sales mix was 60% laptops and 40% tablet, the break-even will be:
Selling price per unit will be:
= ($1200 × 60%) + ($700 × 40%)
= 720 + 280
= $1000
Variable cost per unit will be:
= ($600 × 60%) + ($350 × 40%)
= 360 + 140
= $500
Contribution margin will then be
= selling price per unit-variable cost
= $1000 - $500
= $500
Therefore, the breakeven point in sales units of the overall product will be:
= fixed cost /contribution per unit
= $4,500,000 / $500
= 9000 units
A business issued a 90-day, 5% note for $10,000 to a creditor on account. The company uses a 360-day year for interest calculations. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity, including interest.
If an amount box does not require an entry, leave it blank or enter 0. When required, round your answers to the nearest dollar.
Answer and Explanation:
The journal entries are shown below:
Accounts Payable $10,000
To Notes payable $10,000
(Being the issuance of the note is recorded)
Interest expense $125 ($10,000 × 5% × 90 days ÷ 360 days)
Notes payable $10,000
To Cash $10,125
(Being the cash paid is recorded)
These two entries should be recorded for the given transaction
Using these data from the comparative balance sheet of Rollaird Company, perform horizontal analysis.
December 31, 2020 December 31, 2019
Accounts receivable $550,200 $420,000
Inventory 855,600 620,000
Total assets 2,909,750 2,575,000
(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Increase or (Decrease)
December 31, 2020 December 31, 2019 Amount Percentage
Accounts receivable $550,200 $420,000 $ %
Inventory 855,600 620,000 $ %
Total assets 2,909,750 2,575,000 $ %
Answer:
1) Accounts receivable amount = $550,200 - $420,000
Accounts receivable amount = $130,200
% increase = $130,200/$420,000 * 100
% increase = 0.31 * 100
% increase = 31%
2. Inventory amount = $855,600 - $620,000
Inventory amount = $235,600
% increase = $235,600/$620,000 * 100
% increase = 0.38 * 100
% increase = 38%
3. Total asset amount = $2,909,750 - $2,575,000
Total asset amount = $334,750
% increase = $334,750/$2,575,000 * 100
% increase = 0.13 * 100
% increase = 13%
With a 9-month maturity bucket, a 3-month loan would be considered a _____ asset and a 30-year mortgage with a rate adjustment in 6 months would be classified as a _____ asset. Rate-sensitive asset; fixed-rate asset Rate-sensitive asset; rate-sensitive asset Fixed-rate asset; fixed-rate asset Fixed-rate asset; rate-sensitive asset
Answer:
Fixed-rate asset; rate-sensitive asset
Explanation:
in the case when there is a 9 month maturity bucket so here the 3 month loan should be considered as the fixed rate asset as there is no change in the rate for the first asset while on the other hand there is a rate adjustment in 6 month so this is to be considered as the rate senstitive asset
Therefore the last option is correct
How can the member countries of wto appreciate the fta
Item Skipped Item 10 Assume a company makes four products (A, B, C, and D) in a single facility. Data concerning these products appear below: Product A Product B Product C Product D Selling price per unit $ 42.30 $ 50.00 $ 37.60 $ 33.50 Variable manufacturing cost per unit $ 20.80 $ 30.70 $ 21.00 $ 19.90 Variable selling cost per unit $ 2.70 $ 2.10 $ 1.00 $ 2.40 Milling machine minutes per unit 3.30 4.10 2.60 1.30 Monthly demand in units 1,000 4,000 3,000 3,000 The milling machines are the constraint in the production facility. A total of 14,000 minutes is available per month on these machines. Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity
Answer:
The company should be willing to pay less than $4.20 for one additional minute of milling machine time.
Explanation:
a) Data and Calculations:
Product Product Product Product
A B C D
Selling price per unit $42.30 $50.00 $37.60 $33.50
Variable manufacturing cost per unit $20.80 $30.70 $21.00 $19.90
Variable selling cost per unit $2.70 $2.10 $1.00 $2.40
Total variable costs per unit $23.50 $32.80 $22,00 $22.30
Contribution per unit $18.80 $17.20 $15.60 $11.20
Milling machine minutes per unit 3.30 4.10 2.60 1.30
Contribution per minute $5.70 $4.20 $6.00 $8.62
Monthly demand in units 1,000 4,000 3,000 3,000
Minutes required 3,300 16,400 7,800 3,900
Best use of existing minutes 2,300 0 7,800 3,900
Additional minutes required 1,000 16,400 0 0
Total minutes required = 31,400
Minutes available = 14,000
Minutes to buy = 17,400
Lost contribution from:
Product A = (1,000 * $5.70 = $5,700
Product B = (16,400 * $4.20 = 68,880
Total lost contribution $74,580
Required time to produce lost contribution = 17,400
Estimated to pay for additional minute = $4.29 ($74,580/17,400)
Rather than merely counting media exposures, a better measure of marketing public relations effectiveness is the ________. A) number of promotional tools required B) effect it has on its market capitalization C) change in product awareness, comprehension, or attitude D) changes observed in media behavior E) impact it has on the company's market share
Answer:
D) changes observed in media behavior
Explanation:
The public relation effectiveness is the marketing principle, that is used t measure how effectively the public relation or paid campaign is moving their paid, earned share. There are various methods to measure this such as media content analysis, social media reach and engagement, and sales figures.
A person has the right to be secure in his or her person or property from unreasonable searches and seizures.
True Or False
Answer:
true
Explanation:
Answer:
TRUE
Explanation:
i got it right
what issues should be covered in the negotiations between your organization and the outsourcing organization. You can list the issue, and then follow up with a couple of sentences to explain. Some groups think of this as what goes into the contract, although there are issues to consider that might not be in the contract. Cultural differences between the two organizations would be an example of an issue that is important to consider, but may not be put in the contract.
The correct answer to this open question is the following.
Although there are no options attached we can say the following.
The issues that should be covered in the negotiations between your organization and the outsourcing organization are the following.
As it is written in the question, the corporate culture of the outsourcing company is one of the issues to be discussed because it is important that the outsource company understand your values, mission, and mission, so the relationship could be professional and amicable.
Then, one important aspect of the negotiation must be the lines of communication to be "on the same page."
Another issue is the services to be provided, the price for each service and the way results are going to be measured.
As important as the previous issue, is the quality of the people who are going to be temñporarly hired, so there are no big differences between the quality of work from the employees of your company vs. the employees recommended and hired by the outsourcing company.
The level of expertise at suppliers is a major concern of your company. The outsourcing company has to show ways provable ways that guaranteed the expertise of suppliers.
One final important aspect is the solution of controversies in case there are problems between suppliers and your company, knowing that the outsourcing company is responsible for the hirings and contracts with the outsourced workers.
Umber Mattresses has had issues with inventory in the past. Missed shipping and unexpected price hikes have caused production issues that have impacted its bottom line. Its leadership team has asked the production manager to prepare a recommendation for fixing the inventory issue. Which of the following would be her best response?
A. prepare a materials requirement planning review
B. move to a flexible manufacturing system
C. install a computer-aided manufacturing system
D. enlist a small group of trusted suppliers
E. switch to a multiple supplier approach
Answer: E. switch to a multiple supplier approach
Explanation:
Since the company has had issues with inventory in the past, then the recommendation of the production manager should be that the company should switch to a multiple supplier approach.
By switching to multiple supplier, the company can compare prices and also have alternative suppliers to call in case there's a challenge with a particular supplier.
Seventy percent of Parlee Corporation's sales are collected in the month of sale, 25% in the month following sale, and 5% in the second month following sale. The following are budgeted sales data for the company: January February March April Total sales $600,000 $700,000 $500,000 $300,000 Total budgeted cash collections in April would be: Group of answer choices $35,000 $125,000 $210,000 $370,000
Answer: $370,000
Explanation:
Based on the information given in the question, the total budgeted cash collections in April would be calculated as the addition of the sales value from February to April and this will be:
February sale = 5% × $700,000 = $35,000
Add: March sale = 25% × $500,000 = $125,000
Add: April Sale = 70% × $300000 = $210000
Total Collection = $370000
(1 point) This problem is similar to one in your textbook. Suppose that the parents of a child will need $105000 in 9 years for college expenses, and that the bank account earns 9.25% compounded continuously. Round your answers to the nearest cent. You may need to compute your answers to 4 or more decimal places before you round to the nearest cent. a) At what constant, continuous rate must the parents deposit money into the account in order to save the money
Answer:
The parents need to deposit $7,979.78 annually to save $105,000 at the end of 9 years.
Explanation:
a) Data and Calculations:
Amount needed in 9 years time = $105,000
Bank interest rate = 9.25% compounded continuously
Period of deposit = 9 years
From an online financial calculator:
N (# of periods) 9
I/Y (Interest per year) 9.25
PV (Present Value) 0
FV (Future Value) 105000
Results
PMT = $7,979.78
Sum of all periodic payments $71,817.98
Total Interest $33,182.02
Under its executive stock option plan, Q Corporation granted options on January 1, 2021, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2023 (the vesting date). The exercise price is the market price of the shares on the date of grant, $18 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. No forfeitures were anticipated; however, unexpected turnover during 2022 caused the forfeiture of 5% of the stock options. Ignoring taxes, what is the effect on earnings in 2023
Answer:
$18 million
Explanation:
Calculation to determine the effect on earnings in 2023
First step is to calculate the Award’s Fair Value
Using this formula
Award’s Fair Value = Purchase Granted Option × Fair Value Per Option
Let plug in the formula
Award’s Fair Value=$15 million × $4
Award’s Fair Value=$60 million
Second step is to calculate the reduction in earning
Using this formula
Reduction in earning = Award’s Fair Value ÷ Vesting years
Let plug in the formula
Reduction in earning= $60 million ÷ 3 years
Reduction in earning= $20 million each year
Now let calculate the Effect on earnings
Effect on earnings= [$60 million*(100%-5%)* 2/3] - $20 million
Effect on earnings= ($60 million*95%*2/3)-$20 million
Effect on earnings=$38 million-$20 million
Effect on earnings=$18 million
Therefore the effect on earnings in 2023 is $18 million
An adequate option pricing model estimates the fair value of the options to be $4 per option. There were no predicted forfeitures; nonetheless, unanticipated turnover during 2022 resulted in the forfeiture of 5% of the stock options. Without accounting for taxes, the effect on earnings in 2023 is $19 million.
Expense charged in 2021 = (15 million * $4) *1/3 = $20 million.
Expense charged in 2022 = [(15 million * $4 * 95%) * 2/3] - $20 million = $18 million.
Expense to be charged in 2023 = [(15 million * $4 * 95%) * 2/3] - $38 million = $19 million
Thus, without accounting for taxes, the effect on earnings in 2023 is $19 million.
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Suppose your college or organization is considering a new project to develop an information system that would allow all employees, students, and customers to access and maintain their own human resources information, such as address, marital status, and tax information. The main benefits of the system would be a reduction in human resources personnel and more accurate information. For example, if an employee, student, or customer had a new telephone number or email address, he or she would be responsible for entering the data in the new system. The new system would also allow employees to change their tax withholdings or pension plan contributions. Identify five potential risks for this new project and be sure to list some negative and positive risks.
Required:
Provide a detailed description of each risk and propose strategies for addressing each risk.
Answer:
The description of the given question is explained below in the explanation portion.
Explanation:
Risk 1: New customer
Our advantage comes from developing strong client relationships, that also typically lead to other initiatives with this client.Risk 2: Poor cost estimate
It's always research linked towards the building of educational business process, therefore a complicated project consisting of several components including students, instructional personnel, and clients.Risk 3: Difficult to maintain
Throughout the long term, disproportionately numerous people will be able to use that same technology in some of these circumstances.Mr X offers Mango for sale to Y at a price of Tk8500 per ton. Initially, Mr. Y accepts X’s offer. But with certain changes in the market situation Mr.Y wants to revocation of the offer and acceptance. Explain how Mr. Y revoked this offer
Answer:
To revoke an offer, Mr. Y can communicate to Mr. X that he no longer wishes to proceed with the sale of mangoes at the agreed upon price of Tk8500 per ton. This can be done through various means of communication, such as in person, over the phone, or in writing.
It is important to note that an offer can only be revoked before it has been accepted. Once an acceptance has been communicated, the offer is considered to be binding and cannot be revoked. Therefore, it is essential that Mr. Y communicates his revocation of the offer before Mr. X has accepted it.
It is also worth noting that an offer can be terminated or become void in certain circumstances, even if it has not yet been accepted. For example, if the offer specifies a time limit for acceptance and that time limit expires, the offer is no longer valid. Similarly, if the subject matter of the offer is destroyed or becomes unavailable, the offer may also be terminated.
Explanation:
The Porter Beverage Factory owns a building for its operations. Porter uses only half of the building and is considering two options for the unused space. The Popcorn Store would like to purchase the half of the building that is not being used for $614,000. A 5% commission would have to be paid at the time of purchase. The Porter Beverage would like to lease the half of the building for the next 5 years at $162,100 each year. Porter would have to continue paying $33,600 of property taxes each year and $6,400 of yearly insurance on the property, according to the proposed lease agreement. Determine the differential income or loss from the lease alternative. Enter a loss as a negative number.
Answer:
The Porter Beverage FActory
Differential income from the lease alternative is:
= $27,200.
Explanation:
a) Data and Calculations:
Alternative Alternative
1 Sale 2 Lease
Income:
Sales proceeds $614,000
Lease receipts $810,500
5% commission (30,700)
Property taxes each year (168,000)
Annual insurance (32,000)
Income (loss) $583,300 $610,500
Differential income = $27,200 ($610,500 - $583,300)
b) The above differential income does not take in account the time value of money. In addition, it does not consider future streams of income that can be received when the building is either leased out to another entity or sold.