ACCT224 Assignment 3

.docx

School

Centennial College *

*We aren’t endorsed by this school

Course

123

Subject

Finance

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by LieutenantJackal3054

GURLEEN KAUR 301318741 ASSIGNMENT 3 ANSWER 1 Based on the information provided, we will analyse the costs and advantages connected with this choice to determine whether Honda Motor Company should offer a $2000 rebate on its minivan. 1. **Rebate Cost:** Honda would pay $2,000 per vehicle for the additional 15,000 vehicles sold (out of a total of 55,000). Total Rebate Cost: $2000 multiplied by 15000 is $30,000,000. 2. **Profit Margin:** Honda makes $6,000 each vehicle in profit. Total Revenue Increased by $6,000 * 15,000 = $90,000,000 Benefits include: 1. **Increased Sales Revenue:** - Honda will make more money from sales after moving from 40,000 to 55,000 automobiles. Additional Sales Revenue is equal to $28,000 (price with rebate) multiplied by 15 to equal $420,000,000**.Net Benefit: Net Benefit is calculated as follows: Additional Sales Revenue - Total Rebate Cost Net Benefit is equal to $420,000,000 minus $30,000,000, or $390,000,000. This research shows that the $2000 rebate would result in a net gain of $390,000,000. As a result, from a financial standpoint, it seems wise for Honda Motor Company to grant the refund because it results in a sizable net advantage. ANSWER 3 a) We will compute the value of both alternatives, $5000 in cash and 100 shares of the company's stock, to help you decide which form of the bonus you should choose and how much it will be worth. First Choice: $5,000 in Cash This option has a $5000 value, which is clear. Choice 2: 100 shares of the business's stock 100 shares of the company's stock are valued as follows: Shares x Current Stock Price equals Stock Value Number of Shares x Current Stock Price equals Value of Stock. We may determine the worth of 100 shares by using the current stock price of $63 per share: Value of Stock = 100 Text Shares multiplied by $63text each share equals $6300

Given that the value of the stock in this instance is higher than the value of the cash bonus ($5000), receiving 100 shares of the company's stock is more valuable than receiving the cash bonus ($5000). I'll select the 100 firm shares because their worth ($6300) exceeds that of the $5000 cash incentive. b) You must evaluate the prospective future performance of the company's shares to determine the potential future stock price. Choosing the stock bonus could be more advantageous if you think the stock price will rise significantly over the course of the holding period of one year. Review the company's financial standing, future growth possibilities, business plans, and any planned events or announcements that might have an impact on the stock price. A promising future could make the stock option more alluring. Risk Tolerance: Take your financial status and risk tolerance into account. The $5000 cash bonus might be the safer option if you prefer a guaranteed cash sum and have a lower risk tolerance. Assess the diversity of your assets as well as your total financial portfolio. The cash bonus may be a wise choice for diversification if you already have a sizable percentage of your portfolio invested in the business or the sector. Market volatility: Take into account the current market circumstances and volatility. You can choose the cash incentive for stability and immediate liquidity if the market is very erratic or unclear. ANSWER 4 a) Savings Account Arbitrage: Assume you have $10,000 to deposit. At Bank One (5.5% interest rate): After one year, you would have $ 10 , 000 × 1.055 = $ 10 , 550 $10,000×1.055=$10,550. At Bank Two (6% interest rate): After one year, you would have $ 10 , 000 × 1.06 = $ 10 , 600 $10,000×1.06=$10,600. You can deposit your money in Bank Two and earn a higher return of $600. Arbitrage Gain for Savings = $ 10 , 600 − $ 10 , 550 = $ 50 $10,600−$10,550=$50 Loan Arbitrage: Assume you borrow $10,000. At Bank One (5.5% interest rate): After one year, you would owe $ 10 , 000 × 1.055 = $ 10 , 550 $10,000×1.055=$10,550. At Bank Two (6% interest rate): After one year, you would owe $ 10 , 000 × 1.06 = $ 10 , 600 $10,000×1.06=$10,600. You can borrow from Bank One and repay at Bank Two, saving money on interest. Arbitrage Gain for Loans = $ 10 , 550 − $ 10 , 600 = − $ 50 $10,550−$10,600=− $50 b) Increased Loan Demand: Bank One offers loans at a lower interest rate (5.5%) than Bank Two (6%). Bank One is likely to witness an increase in loan demand given that clients often want the lowest interest rates feasible on loans. All other things being equal, borrowers will favour Bank One for loans due to the lower interest rate. Increase in Deposits: Compared to Bank One (5.5%), Bank Two (6%) offers a greater interest rate on savings. In order to maximise their profits, savers typically aim for the highest interest rates on their investments. Therefore, Bank Two is expected to experience a spike in deposits when customers choose to do so in order to benefit from the higher interest rate on deposits there.

c) Bank One's interest rate is 5%. Increase in Loan Interest Rates: Bank One may decide to raise its loan interest rates in response to the surge in demand for loans brought on by the loans' lower interest rates. In an effort to maximise revenue and control the influx of borrowers, this is a usual response to strong demand. Possible Increase in Savings Interest Rates: Bank One may think about raising its savings interest rates to entice savers to choose their bank in order to compete with Bank Two and draw in more deposits. Bank 2's interest rate is 6%. Possible Reduction in Loan Interest Rates: In order to compete with Bank One, Bank Two may think about slightly lowering its loan interest rates. More price-sensitive borrowers may be drawn in with lower loan interest rates, however they would still try to strike a balance to sustain profitability. Maintaining or Modifying Savings Interest Rates: In order to keep clients and effectively compete with Bank One, Bank Two may decide to maintain or slightly modify its savings interest rates if it continues to draw a flood of deposits. Overall, both banks will probably strike a careful balance when increasing interest rates to maximise their income, draw in clients, and keep themselves competitive in the market. Interest rate modifications will ultimately be determined by a number of variables, including market conditions, the competitive environment, regulatory environment, financial performance, and the strategic objectives of each bank. ANSWER 10 We may use the present value calculation to determine how much you can borrow now (present value) to have $1,000 in a year while taking a 6% annual interest rate into account: The formula reads: "[textPresentValue = fractextFutureValue"[1 + text "Interest Rate")[text "Time"] provided values - Future Value of $1000 (FV). - The interest rate (r) is 6%, or 0.06 (in decimal form). - Duration (t): One year Fill in the formula using these values: [text Present Value = frac 1000 (one plus 0.06) one] [text|Present Value|approximately frac 1000 1.06|approximately 943.40] So, at a 6% annual interest rate, you can borrow about $943.40 today to get $1000 in a year. ANSWER 11 To calculate how much you will save in interest this year due to the reduction in the interest rate on your $12,000 loan, we'll first calculate the interest using both the original interest rate of 9% and the reduced interest rate of 7.5%, then find the difference. Given values: - Original loan amount ($P$): $12,000

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Related Questions

Please fully explain

1. Honda Motor Company is considering offering a $1,900 rebate on its minivan, lowering the vehicle's price from $30,100 to $28,200. The marketing group estimates that this rebate will increase sales over the next year from 39,000 to 53,800 vehicles. Suppose Honda's profit margin with the rebate is $5,470 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) million. (Round to one decimal place.) The benefit of the rebate will be $ Is it a good idea? (Select from the drop-down menu.) Offering the rebate (1) (1) does not does look attractive.

Your Question: QUESTION: 1. Work Related Car Expenes (3800 Km + 500 Km) * $0.72 per Km? May know which method are you choose cents per km method or logbook method? which method better? 2. why no medical levy ? 3. Work-related mobile phone expense? How to calculate? 4.Work-related car expense?How to calculate?

ss.3

Linda Baer has already saved $4 comma 3134,313 to buy a used vehicle. Ignoring taxes and assuming her money is invested in a money market account earning 44 percent compounded annually, how long will it take to buy a car that costs $6 comma 9056,905? Question content area bottom Part 1 Click on the table icon to view the FVIF table: LOADING... . Ignoring taxes and assuming her money is invested in a money market account earning 44% compounded annually, to save the money to buy a car that costs $6 comma 9056,905 will take enter your response here years. (Round to the nearest integer.)

For the following questions, let supply and demand be given by: It may help to draw those out. P QD = 40- 3 Qs = P20

22. Basiclang Company is assessing whether to sell its unused car parts for P27,000. The parts were previously purchased for P100,000. The company will incur refurbishing costs of P15,000 to be able to sell them. Which alternative should the company pursue? Group of answer choices b. a. The company is indiferrent c. Sell, there is an incremental benefit of P12,000 d. Sell, there is an incremental benefit of P27,000 e. Don’t sell, it will incur a loss of P73,000

Please help me solve both parts

Good morning, Please answer questions Patsy Smith is planning to sell her special knife for $15 per unit. She purchases units from alocal distributor for $6 each. She can return any unsold units for a full refund. Fixed costs forbooth rental, including lighting and security is $4500.Requireda) Compute the breakeven point in units sold. b) Suppose the unit purchased is $5 instead of $6, the fixed cost increases by $500, butthe selling price is unchanged. Compute the new breakeven point in units sold. c) Using the above data, explain how cost behaviour affects Patsy Smith’s decisionmaking?

all parts of the question please

Please include Excel formulas

None

please step by step answer

I need handwritten solution. Neat and clean correct solution would be upvoted. Thanks

Provide Solution of the question

S1.

1 ONLY.

Vipk

Car Rentals The cost C, in dollars, of a one-day car rental ismodeled by the function C1x2 = 0.35x + 45, where x is thenumber of miles driven.(a) What is the cost if you drive x = 40 miles?(b) If the cost of renting the car is $108, how many miles didyou drive?(c) Suppose that you want the cost to be no more than $150.What is the maximum number of miles that you candrive?(d) What is the implied domain of C?(e) Interpret the slope.(f) Interpret the y-intercept.

Please proper solution please and no image upload please no plagiarism

In the question we just looked at regarding the amount to charge per bike to increase profits by $3,000, why didn't we include the fixed cost in the calculation?

Give typing answer with explanation and conclusion Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $3,700 a piece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $36,000 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $4,400 each. If your cost of capital is 12 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? (Round your answers to the nearest dollar amount.)

QUESTION 1 An auto-parts company is deciding whether to sponsor a racing team for a cost of $3061679. The sponsorship would last for 11 years and is expected to have cash flows by $410714 per year. If the discount rate is 11.64%, what will be the change in the value of the company if it chooses to go ahead with the sponsorship?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:9781260013962

Author:BREALEY

Publisher:RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:9781337909730

Author:Brigham

Publisher:Cengage

Foundations Of Finance

Finance

ISBN:9780134897264

Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:Pearson,

Fundamentals of Financial Management (MindTap Cou...

Finance

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i...

Finance

ISBN:9780077861759

Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:McGraw-Hill Education

SEE MORE TEXTBOOKS