Question & Answer

Using the IS/MP model analyse how a lower bound on real interest rates might cause the economy to enter a deflationary spiral following a significant decrease in aggregate expenditure.

Identify the factors affecting the premium paid on a put option. Describe how each factor affects the size of the premium. (LO2)

What is a carryover basis as it relates to property received by a corporation in a §351 transaction?  What is the purpose of attaching a carryover basis to property received in a §351 transaction?

There are 20 correct answers in the following multiple choice questions (some questions have multiple answers that are correct). To attain a perfect score on the quiz, all correct answers must be given. Each correct answer is worth 1 point. Each omitted answer or wrong answer reduces the score by 1 point, and each additional answer beyond the correct number of answers reduces the score by 1 point. Percentage score on the quiz is based on the total number of correct answers. 6.1 Which of the following properties or characteristics are inconsistent with the metals (two correct answers): (a) good thermal conductivity, (b) high strength, (c) high electrical resistivity, (d) high stiffness, and (e) ionic bonding? 6.2 Which one of the metallic elements is the most abundant on the earth: (a) aluminum, (b) copper, (c) iron, (d) magnesium, or (e) silicon? 6.3 The predominant phase in the iron-carbon alloy system for a composition with 99% Fe at room temperature is which one of the following: (a) austenite, (b) cementite, (c) delta, (d) ferrite, or (e) gamma? 6.4 A steel with 1.0% carbon is known as which one of the following: (a) eutectoid, (b) hypoeutectoid, (c) hypereutectoid, or (d) wrought iron? 6.5 The strength and hardness of steel increases as carbon content (a) increases or (b) decreases? 6.6 Plain carbon steels are designated in the AISI code system by which of the following: (a) 01XX, (b) 10XX, (c) 11XX, (d) 12XX, or (e) 30XX? 6.7 Which one of the following elements is the most important alloying ingredient in steel: (a) carbon, (b) chromium, (c) nickel, (d) molybdenum, or (e) vanadium? 6.8 Which one of the following is not a common alloying ingredient in steel: (a) chromium, (b) manganese, (c) nickel, (d) vanadium, (e) zinc? 6.9 Solid solution alloying is the principal strengthening mechanism in high-strength low-alloy (HSLA) steels: (a) true or (b) false? 6.10 Which of the following alloying elements are most commonly associated with stainless steel (two best answers): (a) chromium, (b) manganese, (c) molybdenum, (d) nickel, and (e) tungsten? 6.11 Which of the following is the most important cast iron commercially: (a) ductile cast iron, (b) gray cast iron, (c) malleable iron, or (d) white cast iron? 6.12 Which one of the following metals has the lowest density: (a) aluminum, (b) magnesium, (c) tin, or (d) titanium.? 6.13 Which of the following metals has the highest density: (a) gold, (b) lead, (c) platinum, (d) silver, or (e) tun gsten? 6.14 From which of the following ores is aluminum derived: (a) alumina, (b) bauxite, (c) cementite, (d) hematite, or (e) scheelite? 6.15 Which of the following metals is noted for its good electrical conductivity (one best answer): (a) copper, (b) gold, (c) iron, (d) nickel, or (e) tungsten? 6.16 Traditional brass is an alloy of which of the following metallic elements (two correct answers): (a) aluminum, (b) copper, (c) gold, (d) tin, and (e) zinc? 6.17 Which one of the following metals has the lowest melting point: (a) aluminum, (b) lead, (c) magnesium, (d) tin, or (e) zinc?

An electric discharge machining operation is being performed on two work materials: tungsten and zinc. Determine the amount of metal removed in the operation after one hour at a discharge amperage = 20 amps for each of these metals. Use U.S. Customary units and express the answer in in3/hr. From Table 4.1, the melting temperatures of tungsten and zinc are 6170°F and 420°F, respectively.

Mackenzie is considering conducting her business, Mac561, as either a single member LLC or an S corporation. Assume her marginal ordinary income tax rate is 37 percent, her marginal FICA rate on employee compensation is 1.45 percent, her marginal self-employment tax rate is 2.9 percent (her other self-employment income and/or salary exceeds the wage base limit for the 12.4 percent Social Security tax portion of the self-employment tax), and any employee compensation or self-employment income she receives is subject to the .9 percent additional Medicare tax. Also, assume Mac561 generated $200,000 of business income before considering the deduction for compensation Mac561 pays to Mackenzie and Mackenzie can claim the full qualified business income deduction on Mac561’s business income allocated to her. Determine Mackenzie’s after-tax cash flow from the entity’s business income and any compensation she receives from the business under the following assumptions:   a. Mackenzie conducted Mac561 as a single-member LLC.       Amount Description (1) Business income $200,000   (1)   Deduction for 50% of S.E. taxes (2,678) (6)   × 50% (3) QBI deduction (39,464) [(1) + (2)] × 20% (4) Net income taxable business income 157,858 (1) + (2) + (3) (5) Income tax paid by owner 58,407 (4) × .37 (6) Self-employment tax 5,356 (1) × .9235 × .029 (7) Additional Medicare tax 1,662 (1) × .9235 × .009 additional Medicare tax (8) Total tax $65,425 (5) + (6) + (7) After-tax cash flow $134,575 (1)   – (8)     b.      Mackenzie conducted Mac561 as an S corporation and she received a salary of $100,000. All business income allocated to her is also distributed to her.     Amount Description (1) Business income before comp. $200,000   (2) Salary (100,000)   (3) FICA deduction (1,450) (2) × .0145 employer’s portion (4) Business income allocation and distribution to owner 98,550 (1) + (2) + (3) (5) QBI deduction (19,710) (4) × 20% (6) Net taxable business income 78,840 (4) + (5) (7) Income tax on net business income (29,171) (6) × .37 (8) Salary received 100,000 (2) (9) Income tax on salary (37,000) (8) × .37 (10) Additional Medicare tax on salary (900) (8) × .009 (11) FICA tax paid (1,450) (2) × .0145 employee’s portion After-tax cash flow $130,029 (4) + (7) + (8) + (9) + (10) + (11)     c.       Mackenzie conducted Mac561 as an S corporation and she received a salary of $20,000. All business income allocated to her is also distributed to her.       Amount Description (1) Business income before comp. $200,000   (2) Salary (20,000)   (3) FICA deduction (290) (2) × .0145 employer’s portion (4) Business income allocation and distribution to owner 179,710 (1) + (2) + (3) (5) QBI deduction (35,942) (4) × 20% (6) Net taxable business income 143,768 (4) + (5) (7) Income tax on net business income (53,194) (6) × .37 (8) Salary received 20,000 (2) (9) Income tax on salary (7,400) (8) × .37 (10) Additional Medicare tax on salary (180) (8) × .009 (11) FICA tax paid (290) (2) × .0145 employee’s portion After-tax cash flow $138,646 (4) + (7) + (8) + (9) + (10) + (11)     d.  Which entity/compensation combination generated the most after-tax cash flow for Mackenzie? What are the primary contributing factors favoring this combination?

For what reasons might GDP be a poor indicator of (i) the level of development of a country; (ii) its rate of economic development?

For the preceding problem, use the inverse lever rule to determine the proportions of liquid and solid phases present in the alloy.

For the preceding problem, use the inverse lever rule to determine the proportions of liquid and solid phases present in the alloy.

In what order are the loss limitation rules applied to limit partners’ losses from partnerships?

1.       : What types of analysis can managers perform to help them diagnose a company’s financial condition? How might a review of financial statements help managers diagnose other kinds of performance problems as well?

Presented below is information from Perez Computers Incorporated. July 1 Sold $20,000 of computers to Robertson Company with terms 3/15, n/60. Perez uses the gross method to record cash discounts. 10 Perez received payment from Robertson for the full amount owed from the July transactions. 17 Sold $200,000 in computers and peripherals to The Clark Store with terms of 2/10, n/30. 30 The Clark Store paid Perez for its purchase of July 17. Instructions Prepare the necessary journal entries for Perez Computers.

How can adaptive expectations of inflation result in clockwise Phillips loops? Why would these loops not be completely regular?

In a §351 exchange, how does the tax treatment differ in cases where liabilities are assumed with a tax-avoidance purpose versus where liabilities assumed exceed basis?

A flux-cored arc-welding process is used to join two low alloy steel plates at a 90° angle using an outside fillet weld. The steel plates are ½ in thick. The weld bead consists of 55% metal from the electrode and the remaining 45% from the steel plates. The melting factor of the steel is 0.65 and the heat transfer factor is 0.90. The welding current is 75 amps and the voltage is 16 volts. The velocity of the welding head is 40 in/min. The diameter of the electrode is 0.10 in. There is a core of flux running through the center of the electrode that has a diameter of 0.05 in and contains flux (compounds that do not become part of the weld bead). (a) What is the cross-sectional area of the weld bead? (b) How fast must the electrode be fed into the workpiece?

Kelly Company had cash receipts from customers in 2014 of $142,000. Cash payments for operating expenses were $97,000. Kelly has determined that at January 1, accounts receivable was $13,000, and prepaid expenses were $17,500. At December 31, accounts receivable was $18,600, and prepaid expenses were $23,200. Compute (a) service revenue and (b) operating expenses.

Remuneration plan    (LO2, 4, 5) Matahari Ltd manufactures and installs renewable energy systems. It has four divisions in Australia: Wind, Thermal Solar, Photo Voltaic (PV) and Installation. The company was listed on the Australian Stock Exchange in 2013. The CEO, William Smith, believes that divisional managers should be given a high degree of autonomy and held accountable for the performance of their divisions. He believes that if the divisions prosper then the company and its shareholders will prosper. Before the beginning of each financial year, William reviews performance and then sets a return-on-investment (ROI) target for each division for the coming year. ROI is defined as the operating profit as a percentage of the book-value of the assets employed. Targets are set in consultation with the respective divisional manager with due regard to the prevailing market conditions. William makes sure that the ROI target is challenging but achievable. Over the past 10 years, the ROI targets have tended to increase slightly each year. Key personnel within each division are awarded a performance bonus, if and only if, the ROI of that division exceeds the target. For the past 7 years, Matahari has been using a bonus and incentive scheme to motivate and reward key personnel. The scheme is based on the distribution of a bonus pool. The size of the bonus pool is 10% of Matahari’s residual income for the year and is capped at $1.5 million per year. The bonus pool is distributed to divisions on the basis of  the ROI achieved by each division. If a division does not reach its target, it does not receive a bonus. If a division achieves its target, it receives a bonus score equal to the division’s actual ROI less the division's target ROI, up to a maximum of 5.00 points. The bonus pool is then distributed according to each division’s score relative to the total bonus score. The bonus awarded to a division is then distributed to key personnel as determined by the divisional manager. William is disappointed that Chloe Lee, the manager of the PV Division, has not taken the opportunity to increase her division’s production capacity. The shareholders are supportive and would be happy to finance the expansion. William recalls that divisional managers have been reluctant to submit investment proposals on several occasions in the past. William has also found himself starting to think more about the suitability of the bonus system and underlying performance measures. A member of William’s business network has suggested that Matahari would benefit from the adoption of a balanced scorecard. William gets nervous when people start talking about non-financial measures; he thinks his focus on a small number of key financial measures has worked well to date and aligns with shareholder interests.            Required (a)   For the year ended 30 June 2019, Matahari’s residual income was $13 939 000. The target and actual ROI’s for each division are given in the Table below. Calculate the bonus awarded to each division by completing the Table below.     (b) State two key strengths of the existing bonus plan. (c) Identify one key weakness of the existing bonus plan and suggest a change that would alleviate the weakness.

The drive unit of a positioning table for a component insertion machine is based on a stepping motor and leadscrew mechanism. The specifications are for the table speed to be 25 mm/s over a 600 mm range and for the accuracy to be 0.025 mm. The pitch of the leadscrew = 4.5 mm, and the gear ratio = 5:1 (5 turns of the motor for each turn of the leadscrew). The mechanical errors in the motor, gear box, leadscrew, and table connection are characterized by a normal distribution with standard deviation = 0.005 mm. Determine (a) the minimum number of step angles in the stepping motor, and (b) the frequency of the pulse train required to drive the table at the desired maximum speed for the stepping motor in part (a).

: Identify specific benefits and limitations of planning.

1.            If you were a student interested in pursuing a career in project management how important do you think being a CAPM would be?

On a diagram like Figure A1.8 draw the graphs for the following equations:                      y = –3 + 4x                      y = 15 – 3x

1.    How might the teaching of a management course be designed to help people make the transition from individual performer to manager so as to prepare them for the challenges they will face as new managers?

According to rational choice theory, the money you’ve already spent – known as ‘sunk costs’ (see page 161) – should be excluded from decision making. However, there is considerable evidence that it does affect consumer behaviour. Using loss aversion, can you explain why this might be the case.

A perfectly competitive firm faces a price of £14 per unit. It has the following short-run cost schedule: Output 0 1 2 3 4 5 6 7 8 TC (£) 10 18 24 30 38 50 66 91 120 (a)  Copy the table and put in additional rows for average cost and marginal cost at each level of output. (Enter the figures for marginal cost in the space between each column.) (b)  Plot AC, MC and MR on a diagram. (c)  Mark the profit-maximising output. (d)  How much (supernormal) profit is made at this output? (e)  What would happen to the price in the long run if this firm were typical of others in the industry? Why would we need to know information about long-run average cost in order to give a precise answer to this question?

Explain how venture capital (VC) funds finance private businesses as well as how they exit from their participation in a firm. (LO1)