Why it is important to increase economic growth 4. Your rationale for the use of Reserve Requirements At the end of the game, you will be provided with this information to give to your instructor. Answer: Type your response here… I am choosing to lower the reserve and increase the economic growth rate using reserve requirements. The reserve requirements are intended to exert effects on the banking industry by making the banks have on hand a specified ratio of funds relative to what they have loaned out. Lower reserve requirements will result in more funds being available to loan out.
When a negative net present value is obtained, it is a sure indicator that the firm should not continue to invest in a project. NPV (0.34 -$2,000,000.00 -$900,000.00 -$1,200,000.00+$2,100,000.00+$2,100,000.00) -100,000.00 = $23,285,773.76 6. What is its internal rate of return? The internal rate of return is a form of a discount rate. The IRR allows the current value of all the cash flows to be equal to zero.
Since the Walton Work Wear line is in the production stage, its accumulated development costs should be capitalized. The Carroway Cool Top has not started it commercial production which would allow the development costs not to be amortized yet. Also interest costs on loans to generate financing for the R&D activates of a product can be capitalized rather than expensed. The capitalization of interest would allow CCL to reduce taxable income in the future when it is more profitable. I would recommend that CCL make the above changes immediately so that the financail statements are not incorrect.
If the IRR is less than the WACC, the project should be rejected, as it impoverishes the firm’s owners. If the IRR equals the WACC, it earns only normal profits (i.e., the owners’ opportunity costs) and accepting it is a matter of indifference. In this care the project’s IRR is 18.031 > 11.88%, therefore the IRR rule tells us the same as the NPV rule: this project will enrich the firm’s owners. We note in passing that in more advanced courses in finance you would learn about projects for which this rule cannot be used. Broadly speaking, they are projects whose cash flows changes sign more than once—e.g., from negative to positive to negative again.
It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock. Since the tax identity of Smithon corporation would have not ceased, it is not a favorable purchase for Mr. Jones. Ina a case where the tax identity of a firm does not cease not to exist, the tax aspects will remain the same and so will the existing tax schedule. So in this case it would mean that Mr. Jones would not be allowed to change the financial year to end on December 31. The buyer in cases where he can’t change the legal entity is in a non -benefice situation, the buyer is limited to follow the current tax basis on the company’s assets even if the buyer paid more for the
Additionally, if the quantity or quality of the assets productivity is increased capitalize cost of improvements or replacement to the asset account. It is also important to consider whether the item being repaired is already capitalized and being depreciated and whether it is being separately tracked or considered part of a larger asset. If the item is capitalized and being separately tracked, dispose of this asset on the books and capitalize the repair and maintenance addition. This avoids having the same asset on the books twice with both being depreciated. Moreover, Small Fries Inc. should not report the repairs and maintenance in their balance sheet as aggregate cost but instead designated the expense to each facility as each expense is incurred.
As stated in extract 1, it tells us that the goods we import are not made in the UK and so makes it impossible to replace the imports, therefore meaning that we still have to import goods, despite the high prices due to the low exchange rate of sterling. This is partnered with the fact that some suppliers (shown in extract 1) have agreed long term supply contract with cheaper overseas suppliers before the depreciation of the sterling and so they are now paying high prices. This may mean that these suppliers may have to increase the prices of these goods, therefore leading to cost push inflation due to trying to maintain a decent profit margin in the hope the demand for the good does not drop dramatically. However, it is stated that there still may be a large price differential with countries such as China and India, even after sterling's depreciation. On the other hand however, as stated in extract 1, line 8, volume of good imported has also increased by 16% and inflation has continued well above target.
Fewer companies are willing to enter the market because of the SOX requirements that make going public too costly. Plus, the maintenance required to stay public is too expensive for smaller companies, forcing companies to look elsewhere to raise capital. Rising costs persuade large numbers of companies to exit the public markets to sidestep SEC regulation, creates two problems. First, the overall economy could suffer because corporations limit investment projects due to the higher-cost sources of capital to fund potentially new operations. Second, financially stressed companies that go dark are the very companies’ shareholders need to monitor usually and where transparency is most important.
They have shown this by closing a few stores in a higher-crime-rate area because they were losing money, by only offering a very limited amount of health-conscience and organic products because they are high margin items and by declining to donate to the local food bank because of worries over lost revenues. Company Q is not displaying an obligation to its stakeholders; particularly the customers, community and employees by not maximizing a positive impact through ethical and philanthropic actions. In order for Company Q is improve their reputation they need to take on a socioeconomic approach to social responsibility. This approach focuses not only on profits but on the benefit of the business to society. Company Q can improve their social responsibility in three areas; customer satisfaction, community outreach and employee trust.
CanGo is not considering the major benefit of an IPO, which is increased capital that comes from investors. If CanGo does not take this form of increased capital into account it will limit their growth. Recommendation 3 Offer an IPO CanGo should offer an IPO, allowing for increased capital. By offering an IPO CanGo will able to take a big step in the right direction of expanding their new ventures. Investors investing in an IPO are aware that it takes time to see a solid return/profit when a company is expanding into new ventures and that risks are involved.