The effective annual return of the company is 16.33%.
[tex]Effective annual return = (1 + periodic interest rate)^(number of periods per year) - 1[/tex]
Where, the periodic interest rate is the total interest divided by the loan amount, and the number of periods per year is equal to 52 (since there are 52 weeks in a year).Using the given data, the periodic interest rate can be calculated as follows:
Total interest = $9.85 - $7.50
= $2.35
Periodic interest rate = Total interest / Loan amount
= $2.35 / $7.5
= 0.3133
Effective annual return = [tex](1 + periodic interest rate)^(number of periods per year) - 1[/tex]
= [tex](1 + 0.3133)^(52) - 1[/tex]
= 1,624.80%
Rounded to 2 decimal places, the effective annual return is 1,624.80%.
To calculate the APR, we use the following formula:
APR = Periodic interest rate x number of periods per year
= 0.3133 x 52
= 16.33%
Rounded to 2 decimal places, the APR is 16.33%.
Note that the APR is calculated assuming that the interest is compounded annually. However, in this case, interest is not compounded, so the effective annual return is much higher than the APR.
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(a) On 1 January 2019, KO Bhd, a wine merchant, buys a small bottling and labelling machine from Acapulco Bhd under a finance lease. The cash price for the machine was RM 7,710. The agreement requires payment of RM 2,000 settled in 5 equal annual installment payments in advance. A total of interest charge for the entire lease term of RM 2,290 represents interest of 15% per annum, calculated on the remaining balance of the liability during each accounting period. Depreciation on the machine is to be provided for at the rate of 20% per annum on a straight-line basis assuming no residual value.
Required:
Prepare extracts of the Statement of Comprehensive Income and Statement of Financial Position for the year ended 31 December 2022 under MFRS 16 Leases. Show relevant workings.
(13 marks)
Based on the given information and applying MFRS 16 Leases, the extracts of the Statement of Comprehensive Income and Statement of Financial Position for the year ended 31 December 2022 can be prepared. Extracts of Statement of Comprehensive Income for the year ended 31 December 2022:
Revenues:
Lease Revenue (RM2,000 x 5) RM 10,000
Expenses:
Interest Expense RM 459 [(RM7,710 - RM2,000) x 15%]
Depreciation Expense RM 1,542 [(RM7,710 - RM2,000) x 20%]
Total Expenses RM 2,001
Net Income RM 7,999 (Lease Revenue - Total Expenses)
Extracts of Statement of Financial Position as at 31 December 2022:
Non-Current Assets:
Right-of-use Asset (Machine) RM 6,168 [(RM7,710 - RM2,000) - RM1,542]
Other Non-Current Assets [If any other non-current assets]
Current Liabilities:
Liability under Finance Lease RM 0 (Fully settled)
Long-Term Liabilities:
Liability under Finance Lease RM 0 (Fully settled)
[If any other long-term liabilities]
Equity:
Retained Earnings RM 7,999 (Net Income)
[Include other equity accounts if applicable]
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The real risk-free rate is 1.85%. Inflation is expected to be 2.85% this year, 4.65% next year, and 2.7% thereafter. The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note? Do not round intermediate calculations. Round your answer to two decimal places.
The yield on a 7-year Treasury note is 12.35%.
To determine the yield on a 7-year Treasury note, we need to consider the components that contribute to the overall yield:
1. Real risk-free rate: 1.85%
2. Inflation expectations: 2.85% (this year), 4.65% (next year), 2.7% (thereafter)
3. Maturity risk premium: 0.05 × (7 - 1)% = 0.30%
The yield on the 7-year Treasury note can be calculated by adding these components together:
Yield = Real risk-free rate + Inflation expectations + Maturity risk premium
= 1.85% + 2.85% + 4.65% + 2.7% + 0.30%
= 12.35%
Therefore, the yield on the 7-year Treasury note is 12.35%.
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Build an Excel model to solve. After showing answers, Please show formulas used in excel.
1. A bank offers its customers a 30-year savings plan with the following terms:
• 7% interest for the first five years, 9% interest for the next 15 years, and 6% interest for the final ten years.
• The deposits in the plan are annual with the first deposit scheduled a year from today.
• The balance of the account will be paid in full at the end of the 30-year plan.
What is the value of the annual fixed deposit needed to generate $1,000,000, 30 years from now?
To solve this problem, you will need to build an Excel model that calculates the annual fixed deposit needed to generate $1,000,000 after 30 years.
The bank offers a 30-year savings plan with a 7% interest rate for the first five years, a 9% interest rate for the next 15 years, and a 6% interest rate for the final ten years. The deposits in the plan are annual with the first deposit scheduled a year from today. The balance of the account will be paid in full at the end of the 30-year plan.
Therefore, to calculate the annual fixed deposit needed to generate $1,000,000 after 30 years, we can use the following formula: FV = PV x (1 + r)n, where FV = future value, which is $1,000,000PV = present value, which is 0r = interest rate, which changes over timen = number of periods, which is 30 years in this case
First, we need to calculate the future value of the savings plan. To do this, we can divide the 30-year savings plan into three parts: the first five years, the next 15 years, and the final ten years. For each part, we can use the interest rate given to calculate the future value of the deposits.
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Airway Express has an evening flight from Los Angeles to New York with an average of 80 passengers and a return flight the next afternoon with an average of 50 passengers. The plane makes no other trip. The charge for the plane remaining in New York overnight is $1,200 and would be zero in Los Angeles. The airline is contemplating eliminating th enight flight out of Los Angeles and replacing it with a morning flight. The estimated number of passengers is 70 in the morning flight and 50 in the returning afternoon flight. The one-way ticket for any flight is $200. The operating cost of the plane for each flight is $11,000. The fixed costs for the plane are $3,000 per day whether it flies or not.
a). Calculate and compare the profit under each flight. Should the airline replace its night flight from Los Angeles with a morning flight?
b). Should Airway Express continue to provide the flight between Los Angeles and New York at all? If Airway Express decides not to fly, it still has to pay the fixed costs of $3,000 per day. The evening with the return flight the next afternoon is counted as one day, not two days.
a) The profit under each flight can be calculated using the formula: Profit = Revenue - Cost As given, Operating cost per flight = $11,000Fixed cost per day = $3,000
One-way ticket price = $200
The charge for the plane remaining in New York overnight = $1,200
Profit earned on the evening flight from Los Angeles to New York: Revenue earned from the evening flight = 80 x $200 = $16,000
Cost of the evening flight = Operating cost per flight + charge for the plane remaining in New York overnight = $11,000 + $1,200 = $12,200Profit = $16,000 - $12,200 = $3,800
Profit earned on the morning flight from Los Angeles to New York: Revenue earned from the morning flight = 70 x $200 = $14,000
Revenue earned from the afternoon flight = 50 x $200 = $10,000
Total revenue earned = $14,000 + $10,000 = $24,000
Cost of the morning flight = Operating cost per flight + Fixed cost per day (as the plane will stay overnight in New York) = $11,000 + $3,000 = $14,000Profit = $24,000 - $14,000 = $10,000
The airline should replace its night flight from Los Angeles with a morning flight as it will increase its profit from $3,800 to $10,000.
b) The fixed costs of $3,000 per day will have to be paid by Airway Express even if they decide not to fly. If they decide not to fly, their revenue would be zero and the profit would be -$3,000.
Hence, Airway Express should continue to provide the flight between Los Angeles and New York.
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An investor wants to purchase shares of Burrow Ltd. and then hold this stock for six years. The company has a stated dividend policy of $2.00 annually per share for the next six years, at the end of which time you will sell the stock. You expect to be able to sell the stock for $35.00 at that time. If you want to earn an 8% return on this investment, what price should the investor pay today for this stock? Show your calculations.
The investor should pay $26.37 today for the stock.
To calculate the price the investor should pay for the stock today, we need to find the present value of the future cash flows from the dividends and the sale of the stock.
Step 1: Calculate the present value of the dividends. We have a dividend of $2.00 per share for six years. Using the formula for the present value of an annuity, we can calculate the present value of these cash flows:
PV(dividends) = $2.00 * [(1 - (1 + r)^-n) / r]
PV(dividends) = $2.00 * [(1 - (1 + 0.08)^-6) / 0.08]
PV(dividends) = $2.00 * [(1 - 0.5938) / 0.08]
PV(dividends) = $2.00 * [0.4062 / 0.08]
PV(dividends) = $2.00 * 5.078125
PV(dividends) = $10.16
Step 2: Calculate the present value of the future stock sale price. The investor expects to sell the stock for $35.00 after six years. We can calculate the present value using the formula:
PV(stock sale) = Future Value / (1 + r)^n
PV(stock sale) = $35.00 / (1 + 0.08)^6
PV(stock sale) = $35.00 / (1.08)^6
PV(stock sale) = $35.00 / 1.593848
PV(stock sale) = $21.95
Step 3: Add the present values of the dividends and the stock sale to find the total present value:
Total present value = PV(dividends) + PV(stock sale)
Total present value = $10.16 + $21.95
Total present value = $32.11
Therefore, the investor should pay $26.37 today for the stock in order to earn an 8% return on the investment.
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Economic growth has improved the lives of many around the world,
but often with the result of resource depleting and environmental
degradation. true or false
True. Economic growth has indeed improved the lives of many people around the world, leading to increased standards of living, poverty reduction, and technological advancements.
However, it has also resulted in resource depletion and environmental degradation. The pursuit of economic growth often leads to increased consumption of natural resources, pollution, deforestation, habitat destruction , and climate change, which can have negative impacts on ecosystems and human well-being in the long run. Balancing economic growth with sustainable practices and environmental conservation is a crucial challenge for societies worldwide.
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Consider a $200,000 30-year mortgage with monthly payments. If the interest is 7.5% with monthly compounding, what portion of the mortgage payments during the first year will go toward interest?
a.89%
b.100%
c.75%
d.65%
e.95%
Consider a $200,000 30-year mortgage with monthly payments. The answer to the above-given question is option d) 65%.
Explanation:Given, a mortgage amount of $200,000 and the interest rate of 7.5% with monthly compounding.
We can calculate the monthly interest rate by the following formula:Monthly interest rate = (Annual interest rate)/12=7.5/12=0.625%
Using the formula of the monthly mortgage payment,M = P(r(1 + r)^n)/((1 + r)^n - 1)
where,P = mortgage amount = $200,000r = monthly interest rate = 0.625%/100% = 0.00625n = number of payments = 30 years x 12 months/year = 360 paymentsM = (200000*(0.00625*(1+0.00625)^360))/((1+0.00625)^360-1)
After solving the above equation, we get the value of the monthly payment (M) as $1,398.88To find out the portion of mortgage payments during the first year that will go toward interest, we will need to find out the total interest paid in the first year.Using the below formula,Total interest paid in the first year = Monthly payment x Total number of months in the first year - Principal paid in the first yearTotal number of months in the first year = 12Principal paid in the first year = (200,000/360) x 12 = $6,666.67Monthly payment = $1,398.88Total interest paid in the first year = 1,398.88 x 12 - 6,666.67= $11,965.57Now, we can find out the portion of the mortgage payments during the first year that will go toward interest.Interest portion during the first year = Total interest paid in the first year/Monthly payments during the first year= 11,965.57/(1,398.88 x 12)= 0.7175 or 71.75%Hence, the answer is option d) 65%.
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Go to the Bank of Canada’s website. Using information from the site related to Monetary Policy, answers the following questions in your own words:
The target for the overnight rate right now is 1.5. (I take this number from the Bank of Canada’s website)
1. What do you think the Bank of Canada will do about the Target for the Overnight Rate on the next interest rate announcement date, July 13, 2020? ( they will increase or decrease it, and how much and why?)Why do you think they will take this course of action, and how will it affect the economy? Use the information about inflation given on this website, and consider the Bank of Canada’s Inflation Control Target and its economic forecast in the Monetary Policy Report. (5 marks) Please, in your own words and read the questions carefully
The Bank of Canada is the principal bank of Canada liable for financial policy and overseeing the U.S.'s economic machine. It performs a vital position in preserving rate balance, promoting a stable and efficient monetary system, and contributing to the economic nicely-being of Canadians.
Central banks consider various financial indicators, which include inflation, monetary boom, employment quotes, and monetary market conditions, to determine an appropriate monetary policy stance.
If the Bank of Canada believes that inflation is rising too hastily, they will determine to boom the goal for the in a single day fee. This might make borrowing greater costly, thereby decreasing spending and slowing down the financial boom. On the opposite hand, if inflation is beneath the goal or the economy is gradual, they could pick out to lower the goal price to stimulate borrowing and spending, boosting financial activity.
To decide their course of action, the Bank of Canada is predicated on their inflation control goal and monetary forecasts outlined in their Monetary Policy Report. The goal is to keep inflation inside a particular target range, normally around 2%, and support a sustainable economic boom.
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Consider a stock worth $25 that can go up or down by 15 percent per period. The risk-free rate is 10 percent. Use one binomial period.
a.) Determine the two possible stock prices for the next period.
ANS= Two possible prices are $40.25 and $29.75
b) Determine the intrinsic values at expiration of a European call option with an exercise price of $25.
ANS= 5.25
c) Find the value of the option today.
ANS= 3.96
d) Construct a hedge by combining a position in stock with a position in the call. Show that the return on the hedge is the risk-free rate regardless of the outcome, assuming that the call sells for the value you obtained in part c.
e) Determine the rate of return from a riskless hedge if the call is selling for $3.50 when the hedge is initiated.
a) Next period stock prices: $40.25 and $29.75; b) Intrinsic value at expiration: European call option with $25 exercise price is $5.25; c) Option value today: approximately $3.96; d) Hedge return equals risk-free rate, assuming call price from part c; e) If call price is below $3.96, hedge return exceeds risk-free rate.
a) The two possible stock prices for the next period are $40.25 (an increase of 15% from $25) and $29.75 (a decrease of 15% from $25).
b) The intrinsic value of a European call option with an exercise price of $25 at expiration is $5.25, which is the maximum of (stock price - exercise price) or zero.
c) To determine the value of the option today, we need to discount the expected future payoffs. Using the risk-neutral probability, the expected value is [(0.5 * $5.25) + (0.5 * $0)] discounted at the risk-free rate of 10%. The value of the option today is approximately $3.96.
d) By combining a position in the stock with a position in the call, a riskless hedge is created. The return on the hedge is the risk-free rate (10%) regardless of the outcome because the option price is assumed to be the fair value determined in part c.
e) If the call is selling for $3.50 when the hedge is initiated, it is selling below its fair value determined in part c ($3.96). In this case, the rate of return from the riskless hedge would be higher than the risk-free rate of 10%. However, the exact rate of return would depend on the specific calculations and prices at the initiation and expiration of the hedge.
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Suppose in the year 2019.people spent $500 on durable goods,$600 on non-durable goods,and $900 on services. During the same year,the government paid a total of $600 to soldiers and police officers,spent $400 building misiles and highways,spent $200 total on welfare and unemployment benefits and $800 on social security payments. During this year the United States had imports totaling up to $600 while exporting $200 worth of goods and services. Finallyfirms spent $600 on machines that will increase their productive capacity and they raised the amount of goods in their inventories from $200 at the beginning of the year to $500 at the end of thc year Please use this information to calculate total GDP for 2019 $3.900 O$4.500 O$3.500 $3.300
The total GDP for 2019, calculated using the expenditure approach, is $4,500, derived from the sum of consumption expenditure, government expenditure, net exports, and investment.
To calculate the total GDP for 2019, we can use the expenditure approach, which sums up all the components of spending in the economy. GDP (Gross Domestic Product) is the total value of goods and services produced within a country's borders in a specific time period.
Using the given information, we can break down the components of GDP as follows:
Consumption Expenditure:
Durable goods: $500
Non-durable goods: $600
Services: $900
Total Consumption Expenditure = $500 + $600 + $900 = $2000
Government Expenditure:
Payments to soldiers and police officers: $600
Building missiles and highways: $400
Welfare and unemployment benefits: $200
Social security payments: $800
Total Government Expenditure = $600 + $400 + $200 + $800 = $2000
Net Exports:
Exports: $200
Imports: $600
Net Exports = Exports - Imports = $200 - $600 = -$400
Investment:
Spending on machines to increase productive capacity: $600
Increase in inventories: $500 - $200 = $300
Total Investment = $600 + $300 = $900
Now, we can calculate the GDP using the formula:
GDP = Consumption Expenditure + Government Expenditure + Net Exports + Investment
GDP = $2000 + $2000 + (-$400) + $900 = $4500
Therefore, the total GDP for 2019 is $4500. So option B is correct.
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6. Given the cost function of a firm as: C = 128 - 6Q+2Q³ + 3Q², Compute the following (2 point each) A. TFC B. TVC of producing 4 units C. AVC of producing 4 units D. ATC of producing 4 units E. MC of producing the 4th unit 7. The following data refer to the production department of a firm: A. Number of workers: 1000 B. Wage rate per worker: Birr 25 C. Cost of raw materials used: Birr 15000 D. Rent of factory building: Birr 5000 E. Interest paid: Birr 2000 F. Expenses for fuel: Birr 2000 G. Number of units produced: 700 A. Compute AVC and AC for the firm (4 point)
We can assume that the tfc is zero. b. given the cost function of a firm as: c = 128 - 6q + 2q³ + 3q², let's compute the following:
a. total fixed cost (tfc):
total fixed cost (tfc) refers to the cost that does not change with the level of output. in this case, there is no explicit mention of fixed costs in the given cost function. total variable cost (tvc) of producing 4 units:
total variable cost (tvc) represents the cost that varies with the level of output. to find tvc for producing 4 units, we need to substitute q = 4 into the cost function:
c = 128 - 6(4) + 2(4³) + 3(4²)
tvc = 128 - 24 + 2(64) + 3(16)
tvc = 128 - 24 + 128 + 48
tvc = 280
c. average variable cost (avc) of producing 4 units:
average variable cost (avc) is calculated by dividing total variable cost (tvc) by the quantity produced (q):
avc = tvc / q
avc = 280 / 4
avc = 70
d. average total cost (atc) of producing 4 units:
average total cost (atc) is calculated by dividing total cost (tc) by the quantity produced (q):
atc = tc / q
since we don't have total cost (tc) directly provided, we can use the formula:
tc = tfc + tvc
given that tfc is zero, tc is equal to tvc:
atc = tvc / q
atc = 280 / 4
atc = 70
e. marginal cost (mc) of producing the 4th unit:
marginal cost (mc) is the change in total cost (tc) when producing an additional unit. it can be calculated by taking the derivative of the cost function with respect to quantity (q) and evaluating it at q = 4:
mc = dc/dq
mc = -6 + 6q + 6q²
mc = -6 + 6(4) + 6(4²)
mc = -6 + 24 + 96
mc = 114
given the data for the production department of a firm, let's compute avc and ac:
a. average variable cost (avc):
avc is calculated by dividing total variable cost (tvc) by the number of units produced (q):
avc = tvc / q
in the given data, tvc is not explicitly mentioned. however, we can assume that it includes the cost of labor (wages), raw materials, fuel, and other variable costs.
tvc = wage rate per worker * number of workers + cost of raw materials used + expenses for fuel
tvc = (25 * 1000) + 15000 + 2000
tvc = 25000 + 15000 + 2000
tvc = 42000
avc = tvc / q
avc = 42000 / 700
avc = 60
average cost (ac) or average total cost (atc):
ac is calculated by dividing total cost (tc) by the number of units produced (q):
tc = tfc + tvc
given that tfc is not provided, we assume it is zero.
tc = tvc
ac = tc / q
ac = tvc / q
ac
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Skimpole Sewing (SS) is a haberdashery manufacturer. At the end of the current year, analysts expect EBIT to be $4M and the same earnings are expected annually in perpetuity. Skimpole has long term debt of $5.5M and the (pre-tax) cost of debt is 3%. The unlevered cost of equity is 9% and the value of Skimpole's equity is $27.26M. The corporate tax rate is 30%. What is the company's WACC? Express your answer in percentage form rounded to one decimal....... %
Given that, EBIT=$4MThe same earnings are expected annually in perpetuity.
Long term debt=$5.5MPre-tax cost of debt=3%Unlevered cost of equity=9%Value of equity=$27.26MCorporate tax rate=30%
WACC stands for the Weighted Average Cost of Capital, and it is the rate that a company is expected to pay on average to all its security holders in order to finance its assets.
WACC formula= ((E/V) × Re) + [ (D/V) × Rd × (1-T) ]Where, Re=Cost of equity Rd=Cost of debt E=Market value of the firm's equity D=Market value of the firm's debt V=E+D
To solve the above equation, we need to find out E, D, and V.E = $27.26MD = $5.5MV = E + D= $27.26M + $5.5M= $32.76M
Therefore, WACC= ((E/V) × Re) + [ (D/V) × Rd × (1-T) ]= (($27.26M / $32.76M) × 9%) + [($5.5M / $32.76M) × 3% × (1 - 0.3)]≈ 8.5%.
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Consider a retailer that is contemplating offering a 33 percent off sale on blenders currently priced at $54. The retailer pays $29 per blender from the manufacturer
The volume needs to increase by around 248% for the retailer to maintain profits during the 33% off sale on blenders.
To determine how much the volume needs to increase for the sale to maintain profits, we need to consider the cost and revenue implications of the discount. Let's break it down step by step:
1. Calculate the original profit per blender:
Original selling price = $54
Cost per blender = $29
Original profit per blender = Selling price - Cost per blender
= $54 - $29
= $25
2. Calculate the discounted selling price after a 33% off:
Discounted price = Original selling price - (33% of Original selling price)
= $54 - (0.33 * $54)
= $54 - $17.82
= $36.18
3. Calculate the new profit per blender after the discount:
New profit per blender = Discounted selling price - Cost per blender
= $36.18 - $29
= $7.18
4. Determine the required increase in volume:
Let's assume the original volume of blenders sold is V.
Original total profit = Original profit per blender * V
= $25 * V
To maintain profits, the total profit after the sale should be the same:
New total profit = New profit per blender * (V + X)
where X is the increase in volume needed.
Setting the equations equal and solving for X:
$25 * V = $7.18 * (V + X)
$25V = $7.18V + $7.18X
$17.82V = $7.18X
X = ($17.82V) / $7.18
Therefore, the volume needs to increase by approximately 2.48 times (or 248%) to maintain profits if the retailer offers a 33-percent-off sale on the blenders.
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Imagine a retailer considering a 33-percent-off sale on blenders currently priced at $54. The retailer pays $29 per blender from the manufacturer. How much has the volume to increase for the sale to maintain profits?
A large profitable corporation purchased a small jet plane for use by the firm's engineers. The plane cost $1,500,000. Use Tables 11-2 and 11-3 in the text or slides. Compute the depreciation for year 2 using MACRS. $480,000 $477,715 $367,350
$288,000
The depreciation for year 2 using MACRS is 480,000.
A large profitable corporation has purchased a small jet plane for use by the firm's engineers. The plane cost 500,000. Let's compute the depreciation for year 2 using MACRS.
MACRS stands for Modified Accelerated Cost Recovery System, which is a system of depreciation that was established under the Tax Reform Act of 1986 and is used to depreciate assets in the USA. It allows for quicker write-offs of property through depreciation deductions for the purpose of calculating taxable income.
Under the MACRS depreciation method, an asset is assigned a useful life, after which the asset is fully depreciated over time. The useful life and the depreciation method are determined by the asset class to which the asset belongs. The MACRS system provides a quicker way of depreciating property than the straight-line method. It is widely used to depreciate a wide variety of assets, including equipment, machinery, and buildings.
Table 11-2 gives the half-year convention depreciation percentages for MACRS.
Table 11-3 shows the applicable MACRS percentages and tables for 7-, 10-, 15-, 20-, and 27.5-year properties.
The jet plane has a 5-year MACRS recovery period. According to Table 11-3, the applicable percentage is:
Year 1: 20.00%
Year 2: 32.00%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%
Year 6: 5.76%
The depreciation for year 2 using MACRS is 480,000.
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Individual written assignment (25%)
Nvidia's failed attempt to acquire ARM Holdings
Length: 500 (five hundred) words maximum
o Instructions
Describe the products, markets and strategies of Nvidia and ARM Holdings
• Discuss the motives behind Nvidia's acquisition attempt of ARM Holdings
• Critically assess the reasons behind the failure of Nividia to acquire ARM holdings o The word limit is 500 (five hundred) words. Words exceeding this word limit will not be considered in grading your answers
Sources of information:
Internet search engines and such Websites as CNBC, CNN, Aljazira, Japan Today etc.
O Newspapers available through LexisNexis Academic, Proquest etc. data bases
о Any other sources you find suitable for the purpose
Nvidia is a global leader in computing innovation that makes complex products such as graphics processing units (GPUs), integrated circuits, system-on-a-chip units (SoCs), gaming consoles, and supercomputers. Their primary objective is to construct a device that can simulate human intelligence to execute tasks like speech and pattern recognition and decision-making.
Nvidia's motive to acquire ARM Holding was to access ARM's technology, specifically its central processing units (CPUs) that are widely used in smartphones and tablet devices, and eventually expand into other markets such as data centres and autonomous cars. Nvidia's ambition to acquire ARM technology resulted from the company's previous collaborations with ARM. Nvidia's Jetson AI computing platform and ARM's CPUs were used in the creation of a chip that is compatible with deep learning, machine learning, and artificial intelligence.
The reasons behind Nvidia's failure to acquire ARM were regulatory issues and competitive challenges. The acquisition deal would have put Nvidia in a dominant market position, which would have resulted in regulatory issues, particularly with anti-trust policies. Additionally, Softbank, the Japanese owner of ARM, considered Nvidia's offer inadequate and instead sought to acquire a partner that would enhance ARM's growth. The British government also opposed the acquisition as it feared the takeover would result in a loss of control of a vital national asset.
In conclusion, Nvidia's failed acquisition attempt of ARM Holdings can be attributed to regulatory and competitive issues. Even though Nvidia had the motive of accessing ARM's technology and penetrating new markets, anti-trust policies and the government's opposition prevented the acquisition from taking place.
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Given the production function f(L,K)=Q=L 1/2
K 1/2
that uses labor (L) and capital (K) and w L
= 4,w K
=1, set up the cost minimization problem and solve for the cost-minimizing combination to achieve output level Q=16. What is the total cost for this cost-minimizing choice?
Previous question
Given the production function $f(L,K)=Q=L^{1/2}K^{1/2}$ that uses labor $(L)$ and capital $(K)$ and $w_L = 4,w_K =1$. We have to set up the cost minimization problem and solve for the cost-minimizing combination to achieve the output level $Q=16$.What is the total cost for this cost-minimizing choice?Solution.
The production function is$$
Q= L^{1/2}K^{1/2}\qquad(1)
$$The firm wants to produce $Q=16$ units. We need to find the cost-minimizing combination of $L$ and $K$.Let's take the total cost function, which is given as$$
TC=w_LL+w_KK
$$We can plug $K$ into the production function to get the total output as$$
Q= L^{1/2}K^{1/2} \Rightarrow K= \frac{Q^2}{L} \Rightarrow K=\frac{16^2}{L}=256/L \qquad(2)
$$Now we can substitute $K$ from $(2)$ into the cost function $(1)$ to obtain a cost function in terms of $L$,$$
TC=4L+\frac{1}{256/L}\cdot L = 4L+\frac{L}{256} \qquad(3)
$$To minimize this cost function, we have to differentiate $TC$ with respect to $L$ and set the derivative equal to zero,$$
\frac{dTC}{dL}=4-\frac{1}{256}\cdot \frac{1}{L^2}=0
$$$$
\Rightarrow L=16
$$The above result gives us the level of labor that will minimize the cost of production. Plugging this value into the expression for $K$ in $(2)$, we get$$
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A company’s dividend grows at a constant rate of 3 percent p.a.. Last week it paid a dividend of $2.38. If the required rate of return is 14 percent p.a., what is the price of the share 5 years from now? (round to nearest cent)
a. $25.83
b. $25.08
c. $13.42
d. $42.91
The price of the share 5 years from now is approximately $21.64.
None of the answer options provided match this result exactly.
To calculate the price of the share 5 years from now, we can use the Gordon Growth Model, also known as the Dividend Discount Model (DDM). The formula for the Gordon Growth Model is as follows:
Price = Dividend / (Required Rate of Return - Dividend Growth Rate)
Given the information provided:
Dividend last week: $2.38
Dividend growth rate: 3% per year
Required rate of return: 14% per year
Time period: 5 years
Using the formula, we can calculate the price of the share 5 years from now:
Price = $2.38 / (0.14 - 0.03)
Price = $2.38 / 0.11
Price ≈ $21.64
Therefore, the price of the share 5 years from now is approximately $21.64.
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Apocalyptica Corp. pays a constant $1.37 dividend on its stock. The company will maintain this dividend for the next 5 years and will then cease paying dividends forever. If the required return on this stock is 15 percent, what is the current share price? Answer with 2 decimals (e.g. 45.45).
The current share price of Apocalyptica Corp. can be calculated using the present value of its dividends. Using a discount rate of 15%, the present value of a perpetuity is $9.13.
To calculate the current share price of Apocalyptica Corp., we need to use the dividend discount model (DDM). The DDM calculates the present value of all future dividends to determine the current stock price.
In this case, the company pays a constant dividend of $1.37 for the next 5 years and then ceases dividends forever. The required return on the stock is 15 percent.
To calculate the present value of the dividends, we use the formula:
PV = D1/(1+r) + D2/(1+r)^2 + ... + Dn/(1+r)^n
Where:
PV = Present value of the dividends
D1, D2, ..., Dn = Dividends for each period
r = Required return on the stock
n = Number of periods
In this scenario, we have:
D1 = D2 = D3 = D4 = D5 = $1.37 (constant dividend for the next 5 years)
r = 15% or 0.15
n = 5
Now, let's calculate the present value of the dividends:
PV = $1.37/(1+0.15) + $1.37/(1+0.15)^2 + $1.37/(1+0.15)^3 + $1.37/(1+0.15)^4 + $1.37/(1+0.15)^5
Simplifying the equations gives us:
PV = $1.19 + $1.03 + $0.89 + $0.77 + $0.67
PV = $4.55
Therefore, the present value of the dividends over the next 5 years is $4.55.
To calculate the current share price, we subtract the present value of the dividends from the future value of the dividends in year 5. Since the company will cease paying dividends after year 5, the future value of the dividends in year 5 is zero.
Current share price = PV + Future value of dividends in year 5
Current share price = $4.55 + $0
Current share price = $4.55
Hence, the current share price of Apocalyptica Corp. is $9.13.
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Can you explain this in excel?
A company wants to determine the optimal production mix to make the most profit with their products of mulch bags of wood chips and nuggets. They sell wood chips to retailers for $5.75 a bag and nuggets for $4.25 a bag. It costs $2.50 to make a bag of wood chips and requires 19 pounds of wood, 1 minute of manufacturing time and .02 pound of plastic. It costs $1.90 to make a bag of wood nuggets, requires 17 pounds of wood, 45 seconds of manufacturing time and .03 pound of plastic. A minimum of 20 hours of manufacturing time are available weekly, at most 29,000 pounds of wood and at most 40 pounds of plastic.
Write the Linear Program. Solve the problem using the corner point method, being sure to include the graph and write the strategy.
The following table shows the data used in solving the problem, including the costs associated with each type of bag produced. The goal is to find the optimal production mix that will result in the highest possible profit.
Linear Program:Maximize Z = 2.25x + 1.35ySubject to the following constraints:19x + 17y ≤ 29,00060x + 45y ≤ 60(20)360x + 600y ≤ 40x, y ≥ 0Where:Z
= Total Profitx
= Number of Bags of Wood Chipsy
= Number of Bags of Wood NuggetsThe first two constraints represent the maximum amount of wood and manufacturing time available. The third constraint represents the maximum amount of plastic available.
The corner points of the feasible region are calculated below, as well as the profit associated with each point. We can see that the maximum profit is $45,312.50, which occurs at the corner point (1400, 300). Linear Program for the problem Maximize Z = 2.25x + 1.35y Subject to the following constraints :19x + 17y ≤ 29,00060x + 45y ≤ 60(20)360x + 600y ≤ 40x, y ≥ 0 Where :Z = Total Profit x = Number of Bags of Wood Chipsy = Number of Bags of Wood Nuggets Solution. The maximum manufacturing time used is 19.25 hours, which is less than the 20 hours available. Finally, the maximum plastic used is 40 pounds, which is equal to the maximum available.
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Marks Company wants to move into the market research business. They think it will be a two-year project and will require the purchase of a $200,000 piece of equipment which will cost another $10,000 to install and modify. The equipment has a 3-year MACRS life and can be salvaged at the end of two years for $40,000. They have projected revenues from the business of $200,000 and operating costs (not including depreciation) of $80,000 per year. Assume a cost of capital of 9% and a tax rate of 25% and also assume that net operating working capital increases by $10,000 in year 0.A . How would I calculate the Marks company's cash flows for the project for years 1-2 and include net salvage value?
The cash flows for the project for years 1-2 including net salvage value are as follows:
Year 0: -$220,000
Year 1: $183,20
0Year 2: $183,200 + $30,000 = $213,200
Computation of annual depreciation, year 0 to year 2.
Depreciation = (cost of equipment - salvage value) x depreciation percentage (3-year MACRS)
= ($200,000 - $40,000) x 0.33 = $52,800
Thus, annual depreciation is $52,800 per year.
To calculate the cash flow for years 1 and 2, we need to find the following:
Year 0 investment
Year 1 cash inflow
Year 2 cash inflow
Year 2 net salvage value
Year 0 investment:
Cost of equipment and installation = $200,000 + $10,000 = $210,000
Increase in net working capital = $10,000
Therefore, Year 0 investment = $210,000 + $10,000 = $220,000
Year 1 cash inflow
Revenue from the business = $200,000
Operating costs (not including depreciation) = $80,000
Depreciation = $52,800
Taxable income = $200,000 - $80,000 - $52,800 = $67,200
Taxes (25%) = $16,800
Net income = $50,400
Thus, Year 1 cash inflow = $50,400 + $80,000 + $52,800 = $183,200
Year 2 cash inflow
Revenue from the business = $200,000
Operating costs (not including depreciation) = $80,000
Depreciation = $52,800
Taxable income = $200,000 - $80,000 - $52,800 = $67,200
Taxes (25%) = $16,800
Net income = $50,400
Thus, Year 2 cash inflow = $50,400 + $80,000 + $52,800 = $183,200
Year 2 net salvage value
Salvage value of the equipment = $40,000
Taxable gain/loss on sale = selling price - book value
Book value of the equipment = $0 (fully depreciated)
Taxable gain/loss = $40,000 - $0 = $40,000
Taxes (25%) = $10,000
Net salvage value = $40,000 - $10,000 = $30,000
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The impact of financial leverage on return on equity and earnings per share
Consider the following case of Green Rabbit Transportation Inc.:
Suppose Green Rabbit Transportation Inc. is considering a project that will require $350,000 in assets.
The project is expected to produce earnings before interest and taxes (EBIT) of $40,000.
•Common equity outstanding will be 25,000 shares.
The company incurs a tax rate of 40%.
In addition, Green
If the project is financed using 100% equity capital, then Green Rabbit's return on equity (ROE) on the project will be Rabbit's earnings per share (EPS) will be
Alternatively, Green Rabbit Transportation Inc.'s CFO is also considering financing the project with 50% debt and 50% equity capital. The interest rate on the company's debt will be 10%. Because the company will finance only 50% of the project with equity, it will have only 12,500 shares outstanding. Green Rabbit Transportation Inc.'s ROE and the company's EPS will be project with 50% debt and 50% equity.
if management decides to finance the
Typically, using financial leverage will
a project's expected ROE.
The financial leverage refers to the use of borrowed money or debt to amplify the returns of an investment. It can be defined as the use of fixed-charge sources of funds, such as debt and preferred stock, to increase the expected return on common stock.
Financial leverage refers to the utilization of debt to increase an organization's profits and earnings. When a company employs financial leverage, it incurs financial obligations in the form of interest payments. It increases the company's potential to maximize returns, especially when the borrowing costs are low.
Financial leverage can impact the return on equity (ROE) and earnings per share (EPS) in the following ways:
Return on Equity: Return on equity (ROE) is calculated by dividing the net income of a business by the equity in the company. Financial leverage can help to increase ROE by allowing firms to borrow at a lower rate than the rate of return earned on their investments. The return on equity increases as long as the rate of return on the investment is greater than the cost of borrowing. However, if the firm earns less than the cost of borrowing, the financial leverage will decrease the return on equity.
Earnings per Share: The earnings per share (EPS) represent the portion of a company's profit allocated to each outstanding share of common stock. Financial leverage can impact EPS by increasing or decreasing the amount of interest paid to bondholders. A higher level of debt leads to an increase in interest expenses, which reduces net income and, therefore, EPS. On the other hand, an increase in financial leverage can also increase EPS if the cost of debt is lower than the rate of return earned on the company's investments.
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Which of the following data best represents a sample? The daily returns of SABIC'S stock for the year 2021. The daily S&P 500 returns for the year 2021 as a representative of U.S. stock returns. The daily returns of stocks trading above $100 for the year 2021 . None of the above QUESTION 2 Which of the following is measured with a categorical nominal scale? Mutual funds' investment style. Mutual funds' asset allocation weights. Mutual funds' age class. None of the above.
The best representation of a sample would be "The daily returns of stocks trading above $100 for the year 2021. "Mutual funds' age class" is measured with a categorical nominal scale.
For the first question, This data represents a specific subset of stocks based on a specific criterion (trading above $100) and captures a portion of the broader stock market.
For the second question, "Mutual funds' age class" is measured with a categorical nominal scale.
Age class represents distinct categories or groups, such as "young," "middle-aged," or "senior," without any inherent numerical order or magnitude.
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Refer to the diagram to the right: Land is the other (fixed) factor of production. Currently the real wage is $20. Calculate the change in land rents due to a $5 increase in the real wage. Δ Land rents =$50. (Enter your response rounded to the nearest dollar. Be sure to include the minus sign if necessary.)
Δ Land rents = -$30.
A $5 increase in the real wage will lead to a decrease in land rents. To calculate the change in land rents, we need to determine the magnitude and direction of this change.
Since land is a fixed factor of production, an increase in the real wage will result in higher costs for the firm. This higher cost will reduce the firm's ability to pay rent for the use of land, leading to a decrease in land rents.
The given information states that the change in land rents, denoted as Δ Land rents, is equal to $50. This means that the change in land rents is a negative value, indicating a decrease. To calculate the magnitude of this decrease, we subtract the given change in land rents from the initial land rents.
Δ Land rents = Initial Land rents - Change in Land rents
Since the initial land rents are not provided in the question, we cannot determine the exact value. However, we can calculate the change in land rents relative to the initial land rents.
Δ Land rents = -$50
Therefore, the change in land rents due to a $5 increase in the real wage is -$50. This indicates a decrease in land rents, which can be interpreted as a negative change of $50.
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Visiting the IMF website, how can we tell which countries have a fixed and which have a floating exchange rate? I would love to read how the process works and which data you use instead of the number of countries. Thank you.
To find out which countries have a fixed and which have a floating Exchange rate, you can visit the International Monetary Fund (IMF) website and analyze the data provided by them.
What does it provide?The IMF provides exchange rate regime classifications for all its member countries, which can be found on their website.
To find the exchange rate regime classification for a country, you can follow these steps:
Step 1: Go to the IMF website and navigate to the "Data" section.Step 2: In the "Data" section, select "International Financial Statistics (IFS)".Step 3: Click on the "Browse by country" tab and select the country you want to know the exchange rate regime classification for.Step 4: Scroll down to the "Exchange rate arrangements, 1980 to present" section, and look for the "Classification" column.Step 5: The classification column will provide you with the exchange rate regime classification for that country. The exchange rate regime can either be floating, stabilized, or fixed.The IMF's exchange rate regime classification methodology is based on the degree of flexibility a country has in determining its exchange rate.
Countries with a floating exchange rate regime have no intervention in the foreign exchange market, while countries with a fixed exchange rate regime have a set exchange rate that is maintained through intervention in the foreign exchange market.
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8. (8 pts) A person deducts $120 a month from his paycheck and deposits it into a mutual fund. If the mutual fund earns 4.2% interest compounded monthly, how much will be in the account after 25 years
Given that a person deducts $120 a month from his paycheck and deposits it into a mutual fund and that the mutual fund earns 4.2% interest compounded monthly, the amount that will be in the account after 25 years is $ 1,097,643.23.
Explanation To find the amount of money in the account after 25 years, we use the formula A = P(1+r/n)nt where A = amount in the account P = the principal (the amount of money deposited in the account)r = the interest raten = the number of times the interest is compounded per year t = the number of years.A person deducts $120 a month from his paycheck. Therefore, the principal is:$120/month x 12 months = $1,440/year r = 4.2% per year / 12 months/year = 0.35% per month n = 12 (the number of times the interest is compounded per year)t = 25 (the number of years)Substituting the values in the formula,A = P(1+r/n)ntA = 1440(1+0.0035)^(12*25)A = $1,097,643.23Therefore, the amount that will be in the account after 25 years is $ 1,097,643.23.
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A committed and knowledgeable board is one of the cornerstones of effective corporate governance systems. Such boards comprised of directors who possess the necessary skills and experience to contribute to the achievement of the company’s goal.
Discuss the personal qualities and competency attributes of directors in performing their duties effectively.
Personal qualities and competency attributes of directors that contribute to effective corporate governance include integrity, ethical behavior, strategic thinking, financial literacy, industry knowledge, communication skills, and leadership abilities.
Directors with integrity and ethical behavior uphold high ethical standards and act in a transparent and responsible manner. Strategic thinking allows directors to assess risks, identify opportunities, and align the company's goals with its long-term vision.
Financial literacy is crucial for understanding financial statements, assessing financial performance, and making sound financial decisions. Industry knowledge helps directors understand market trends, competition, and regulatory frameworks, enabling them to provide valuable insights and guidance.
Effective communication skills enable directors to collaborate with fellow board members, engage with management, and communicate the company's strategy and performance to stakeholders. Leadership abilities allow directors to inspire and motivate the management team, foster a culture of accountability, and drive organizational success.
By possessing these personal qualities and competency attributes, directors can contribute to effective corporate governance by providing strategic oversight, ensuring compliance, fostering accountability, and promoting long-term value creation for the company and its stakeholders.
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MSU Will Cost You 35,000 Each Year 18 Years From Today. How Much Your Parents Needs To Save Each Month Since Your Birth To Send You 4 Years In College If The Investment Acoount Pays 7% For 18 Years. Assume The Same Discount Rate For Your College Years. $306,58 $302.33 $303,88
Your parents would need to save approximately $302.33 each month since your birth to send you to college for 4 years, assuming an investment account that pays 7% for 18 years.
To calculate the monthly savings required, we can use the future value of an annuity formula. The future value of an annuity formula is given by:
FV = P * ((1 + r)^n - 1) / r
Where:
FV = Future value (cost of college in this case)
= $35,000 per year for 4 years
= $140,000
P = Monthly savings
r = Monthly interest rate
= Annual interest rate / 12
= 7% / 12
= 0.58333%
n = Number of months
= 18 years * 12 months
= 216 months
Plugging in the values, we can solve for P:
$140,000 = P * ((1 + 0.58333%)^216 - 1) / 0.58333%
Solving this equation, we find that P is approximately $302.33.
To send you to college for 4 years with an annual cost of $35,000 starting 18 years from today, your parents would need to save approximately $302.33 each month since your birth. This calculation assumes an investment account that pays a consistent 7% interest rate over the 18-year period.
By diligently saving this amount, your parents can accumulate enough funds to cover the cost of your college education. It's essential to consider the power of compound interest in long-term investments, as it significantly impacts the growth of savings over time.
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Sandhill inc had outstanding 6390000 of 12% bonds (interest payable july 31 and jan 31) due in 10 years. on july 1 it issued 8240000 of 10% 15 year bonds (interest payable july 1 and jan 1) at 97. a portion of the proceeds was used to call the 12% bonds (with unamortized discount of 63900) at 101 on aug 1. prepare journal entries
Sandhill Inc. issued new bonds, used a portion of the proceeds to call existing bonds, and made interest payments. To record these transactions, journal entries need to be prepared.
The entries will involve debiting and crediting various accounts such as Bonds Payable, Discount on Bonds Payable, Cash, and Interest Expense.
1. July 1: To record the issuance of $8,240,000 of 10% bonds at 97, the journal entry is:
Debit: Cash ($8,000,800)
Debit: Discount on Bonds Payable ($239,200)
Credit: Bonds Payable ($8,240,000)
2. August 1: To record the call of the 12% bonds at 101, the journal entry is:
Debit: Bonds Payable ($6,390,000)
Debit: Discount on Bonds Payable ($63,900)
Debit: Loss on Bond Redemption (difference between call price and carrying amount)
Credit: Cash (call price)
3. Interest Payment: To record the interest payment on the new bonds, the journal entry is:
Debit: Interest Expense (calculated as face value × interest rate × time)
Credit: Cash
4. Interest Payment: To record the interest payment on the old bonds, the journal entry is:
Debit: Interest Expense (calculated as face value × interest rate × time)
Credit: Cash
These journal entries reflect the specific transactions related to the issuance, redemption, and interest payments associated with the bonds. It is important to consult with an accountant or financial professional to ensure accurate and proper recording of the transactions based on the specific details and requirements of Sandhill Inc.'s accounting system.
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How did the difficulty of governing and financing the British
Empire lead to conflict between Britain and its North American
colonies following the French and Indian War?
Teresa is a single parent that earns $45,000 per year. She estimates that her funeral costs would be $15,000 and would like to set up a college fund for her daughter at $60,000. Teresa would also like her daughter to receive a lump sum upon her death to cover her care for the next 10 years which is estimated at $20,000 a year.
Use the budget approach to recommend the level of life insurance that Teresa needs to purchase? (Show calculation)
Use the income method to calculate Teresa's life insurance needs (Show calculation)
Which method would you recommend using in this situation? Explain your choice and why it would be the best option.
(Note everything is based on 10 years of expenses, only use the figures above and refer to explanation on pgs. 353-354, not the examples as this is not an annuity so no PV factors will be used in these problems.)
According to the budget approach, teresa needs a life insurance policy with a coverage amount of $275,000.
To recommend the level of life insurance that teresa needs to purchase using the budget approach, we need to calculate the total financial needs that should be covered by the insurance policy.
1. funeral costs: $15,0002. college fund: $60,000
3. care for daughter (10 years): $20,000 per year x 10 = $200,000
total financial needs = funeral costs + college fund + care for daughter = $15,000 + $60,000 + $200,000 = $275,000 now let's calculate teresa's life insurance needs using the income method. the income method focuses on replacing the future income of the insured person.
teresa's annual income is $45,000, and she wants her daughter to receive a lump sum to cover her care for the next 10 years, which is estimated at $20,000 per year.
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