Terry Lamoreaux has homes in both Sydney, Australia and Phoenix, United States. He travels between the two cities at least twice a year. Because of his frequent trips he wants to buy some new, high quality luggage. He's done his research and has decided to go with a Briggs & Riley brand three-piece luggage set. There are retails stores in both Phoenix and Sydney. Terry was a finance major and wants to use purchasing power parity to determine if he is paying the same price no matter where he makes his purcahse. a. If the price of the 3-piece luggage set in Phoenix is $850 and the price of the same 3-piece set in Sydney is $930, using purchasing power parity, is the price of the luggage truly equal if the spot rate is A$1.0941/S? b. If the price of the luggage remains the same in Phoenix one year from now, determine what the price of the luggage should be in Sydney in one-year time if PPP holds true. The US Inflation rate is 1.15% and the Australian inflation rate is 3.13%. Assumptions Price of 3-Piece Luggage set in USS Price of 3-Piece Luggage set in AS Spot exchange rate, (AS/S) US inflation for year (per annum) Australian inflation for year (per annum) What is the spot rate as determined by PPP? .9597 1.1121 1.0941 1.1155 Value 850.00 930.00 1.0941 1.15% 3.13%
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- Dalin’s Luggage: Sydney to Denver. Dalin Chen owns homes in Sydney, Australia, and Denver, United States. She travels between the two cities at least twice a year. Because of her frequent trips, she wants to buy some new high-quality luggage. She has done her research and has decided to purchase a Briggs and Riley three-piece luggage set. There are retail stores in Denver and Sydney. Dalin was a finance major and wants to use purchasing power parity to determine if she is paying the same price regardless of where she makes her purchase. If the price of the three-piece luggage set in Denver is USD850 and the price of the same three-piece set in Sydney is AUD930, using purchasing power parity, is the price of the luggage truly equal if the spot rate is AUD1.0941 = USD1.00? If the price of the luggage remains the same in Denver one year from now, determine the price of the luggage in Sydney in one year’s time if PPP holds true. The U.S. inflation rate is 1.15%, and the Australian…Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information. 1. 2. 3. 4. 5. Five used vans would cost a total of $75,000 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation. Ten drivers would have to be employed at a total payroll expense of $48,000. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,000, Maintenance $3,300, Repairs $4,000, Insurance $4,200, and…Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information. 1. Five used vans would cost a total of $75,551 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation. 2. Ten drivers would have to be employed at a total payroll expense of $48,300. 3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,200, Maintenance $3,300, Repairs $3,800, Insurance…
- John Snow has recently retired, and he received a large lump sum settlement from his employer. He would like to invest this money to achieve a stable long term income. He is considering investing in the following two companies: Allied Grocers (AG) are a 3-year-old online grocery retailer that specializes in delivering a wide selection of quality food products through an online platform. Beta Solutions (BS) is an established 10-year-old electronics company that is known for selling the most innovative electronic products and software solutions. Selected financial data for 2019 AG BS Average total assets 1,500,000 4,000,000 Average # of common shares outstanding (no preferred shares) 10,000 10,000 Dividends paid 10,000 50,000 Current Market price per share $95 $165 Net sales 1,300,000 6,300,000 Cost of goods sold 900,000 4,200,000 Gross profit 400,000 2,100,000 Operating Expenses: Administrative…Billy Bob just paid cash for a run-down bed & breakfast in upstate New York. He plans to refurbish it and then start a heavy duty marketing campaign to bring in the tourists. Your task is to help him figure out how many rooms he has to rent each night to break even. Here are the key assumptions you will need to complete the analysis: -Billy Bob’s cost of just keeping the B & B open for business in $500.00 per day. (Rent and Utilities) -He has 10 rooms available to rent. -He calculates the variable cost of renting a room to be $20.00. (Maid Service, towel and sheet cleaning) -He figures he can rent a room for $125.00 per night. 1. Assuming he rents all 10 rooms, what is Billy-Bob's total fixed cost per day. (Remember fixed cost is the cost that doesn’t vary with sales or production.) 2. Assuming Billy Bob rents all 10 rooms, what is his variable cost for the day? (Remember variable costs changes with sales and production). 3. What is Billy Bob’s total cost for the day when he…Comparing payments and APRs of financing alternatives. Because of a job change, Finn McBryde has just relocated to the southeastern United States. He sold his furniture before he moved, so he’s now shopping for new furnishings. At a local furniture store, he’s found an assortment of couches, chairs, tables, and beds that he thinks would look great in his new two-bedroom apartment; the total cost for everything is $6,400. Because of moving costs, Ben is a bit short of cash right now, so he’s decided to take out an installment loan for $6,400 to pay for the furniture. The furniture store offers to lend him the money for 48 months at an add-on interest rate of 6.5 percent. The credit union at Finn’s firm also offers to lend him the money—they’ll give him the loan at an interest rate of 6 percent simple, but only for a term of 24 months. Compute the monthly payments for both of the loan offers. Show your work. Determine the APR for both loans. Which is more important: low…
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- Because of a job change, Seth Armstrong has just relocated to the southeastern United States. He sold his furniture before he moved, so he's now shopping for new furnishings. At a local furniture store, he's found an assortment of couches, chairs, tables, and beds that he thinks would look great in his new two-bedroom apartment; the total cost for everything is $6,400. Because of moving costs, Seth is a bit short of cash right now, so he's decided to take out an installment loan for $6,400 to pay for the furniture. The furniture store offers to lend him the money for 48 months at an add-on interest rate of 6.5 percent. The credit union at Seth's firm also offers to lend him the money - they'll give him the loan at an interest rate of 10 percent simple, but only for a term of 24 months. Compute the monthly payments for the loan from the furniture store. Round the answer to the nearest cent. $ per month Compute the monthly payments for the loan from the credit union. Round the…Kimberly wants to use her knitting skills to make a little extra money so she can enjoy a theatre weekend with her besties. She's got the pattern down for a hat, scarf, and mittens, but she realizes that her available time is limited. She should be able to sell as many of any item as she can make (they all sell for $14), but she wants to make sure she's making the best use of her time. See below for cost and time information. Time (minutes) Cost of yarn (per unit) Hat Scarf 20 $5 $7 30 Mittens Contribution margin per minute $ 40 $3 Calculate the contribution margin per unit of the scarce resource for each item. (Round answers to 2 decimal places, e.g. 15.25.) Hat $ Scarf Which item should Kimberly focus on in order to maximize her profitability and resources? $ MittensFor Michelle, one of the most exciting aspects of landing a full-time job was being able to buy a different car! Even though she will be working in an urban area, she will need a reliable vehicle to travel to client locations outside the city. Michelle is trying to decide if she should buy a new vehicle or a slightly used vehicle, or lease a new(er) vehicle. She has had her eye on a dazzling blue SUV; it stares at her every time she drives by the lot. But she's not sure if she can justify its cost. Here are the costs and benefits she has gathered for each of these options: Monthly payment Time frame Warranty Full coverage insurance Operating cost Expected mileage per year Safety features $470 Buy New 6 years Excellent for 100,000 miles $210 per month $0.20 per mile 13,500 Maximum $330 Buy Used 4 years Excellent for next 40,000 miles only $160 per month $0.20 per mile 13,500 Moderate Lease Midnight-Blue SUV $280 plus $2 per mile if over 10,000 miles per year 2 years Excellent for length…