Answer:
The answer is: True
Explanation:
First of all, the classical dichotomy in economics assumes that real variables of the economy such as output of goods and services and real interest rates are not influenced by what happens to their nominal counterparts, such as the monetary value of output and nominal interest rate. It doesn´t consider inflation or the nominal supply, in other words money supply is neutral in the economy (because its value is adjusted to inflation).
The real problem with this theory, at least in the short run, is that in real life money supply, interest rates and inflation do affect the GDP of a country. When the money supply of an economy is increased then aggregate demand also increases. More money equals more demand. That happens because the prices of goods and services doesn´t adjust as fast as a change in the money supply. Also this theory doesn´t consider the monetary circuit theory about money being "created" by the banking system every time a loan is made.
When were talking about the Federal Money Reserve we can eliminate B)sell securities on the open market. Because they don't do that when they want to increase money supply. C and D will be eliminated because they don't help in this way either. So the correct answer is A)reduce the discount rate
Answer:
Explanation:
Bid price - $450,000
Contract cost 2016- $ 180,000
Contract cost in 2017 - $195,000
Gross profit = $75,000
Estimated cost to complete at 2016 - $200,000
Percentage completion in 2016 - 180000/380000* 100 =47 %
Revenue recognized in 2016 - 47% * 450,000 = 211,500
Gross profit = 211,500- 180,000 = 31,500
2017
Revenue recognized - 53% = $238,500
Cost $195,000
Gross profit $43,500
3)Completed contract method -
Income are recognized when contract is completed
2016 - No revenue generated / recorded
2017
Revenue - 450,000
Cost to date - 375,000
Gross profit - 75,000
4) When using the cost recovery method under IFRS , an equal amount of income and revenue is recognized in the early life time of the project
2016
Income - 180000
Cost- 180000
Gross profit - 0
2017
Income -450000
cost 375,000
Gross profit - $75,000
Answer:
False
Explanation:
The first part was true. A higher WACC results in a lower NPV simply because a higher discount rate results in a lower present value.
E.g. 100 / (1 + 6%)³ = 83.96, but if we increase r to 10%, then 100 / (1 + 10%)³ = 75.13
The second part is wrong because under the IRR method, the decision rule is very simple, all projects are accepted if their IRR is higher than the project's WACC (or discount rate). I.e. if hte project's WACC increases, so does the chance of the project being rejected because the IRR might be lower than the WACC.
Answer:
15.95 %
16.35 %
Explanation:
Stock A.
Given:
Return expectation r1 = 45%
Probability expectation p1 = 25%
Return expectation r2 = 25%
Probability expectation p2 = 14%
Return expectation r3 = 30%
Probability expectation p3 = 4%
Expected Rate of Return = r1p1 + r2p2 + r3p3.........
= (45% x 25%) + (25% x 14%) + (30% x 4%)
= 11.25% + 3.5% + 1.2%
= 15.95 %
Stock B.
Given:
Return expectation R1 = 45%
Probability expectation P1 = 30%
Return expectation R2 = 25%
Probability expectation P2 = 9%
Return expectation R3 = 30%
Probability expectation P3 = 2%
Expected Rate of Return = R1P1 + R2P2 + R3P3.........
= (45% x 30%) + (25% x 9%) + (30% x 2%)
= 13.5% + 2.25% + 0.6%
= 16.35 %