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Norma-Jean [14]
3 years ago
5

Chris Suit is administrator for Lowell Hospital. She is trying to determine whether to build a large wing on the existing hospit

al, a small wing, or no wing at all. If the population of Lowell continues to grow, a large wing could return $150,000 to the hospital each year. If a small wing were built, it would return $100,000 to the hospital each year if the population continues to grow. If the population of Lowell remains the same, the hospital would encounter a loss of $85,000 with a large wing and a loss of $45,000 with a small wing. Unfortunately, Suit does not have any information about the future population of Lowell.
Business
1 answer:
nalin [4]3 years ago
5 0

Answer:

A) Expected monetary value (EMV) is how much money you should expect to receive from different options. The EMV of both options are:

  • EMV large wing = (50% x $150,000) - (50% x $85,000) = $75,000 - $42,500 = $32,500
  • EMV small wing = (50% x $100,000) - (50% x $45,000) = $50,000 - $22,500 = $27,500

Since the EMV of the large wing is higher, then the large wing is the best alternative.

B) If the likelihood of the population growing reduces to 40% and the likelihood that it will remain unchanged increases to 60%, then the new EMVs for both options are:

  • EMV large wing = (40% x $150,000) - (60% x $85,000) = $60,000 - $51,000 = $9,000
  • EMV small wing = (40% x $100,000) - (60% x $45,000) = $40,000 - $27,000 = $13,000

Now the EMV of the small wing is higher, then the small wing is the best alternative.

C) EVPI is the expected value of perfect information, that means how much you are willing to pay to get the information you need to avoid any possible loss or increase your gains.

EVPI = EVwPi - highest EMV

EVwPi = (highest possible outcome of situation 1 x probability of situation 1) + (highest possible outcome of situation 2 x probability of situation 2)

  • situation 1 is the wing being built, and the highest possible outcome is $150,000 when the population grows.
  • situation 2 is not building anything at all, and the highest possible outcome is $0 when the population doesn't grow.

EVwPi = ($150,000 x 40%) + ($0 x 60%) = $60,000

EVPI = $60,000 - $13,000 = $47,000

This means that Chris would be willing to pay a maximum of $47,000 to know the perfect information about what investments should be carried out by the hospital.

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solong [7]

Answer:

TRUE

Explanation:

Kleister Company:

1. Issues bonds for $100 million - INFLOW

2. Repays a long-term notes payable of $10 million. - OUTFLOW

3. The company also repurchases its own shares for $12 million - OUTFLOW

4. Issues stock dividends with a market value of $5 million. - NOT A CASH FLOW

It is therefore true that Net cash flow from financing activities will be: $78 million [100 million - 10 million - 12 million] since the dividends are stock dividends not cash dividends

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Only variable costs can be differential costs. Do you agree? Explain.
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I do not agree with the given statement that is "Only variable costs can be differential costs.".

The difference in the costs of two alternative decisions is referred to as differential cost.

When a company is faced with several similar options, it must make a decision by selecting one and discarding the other.

Variable costs in cost accounting are costs that vary according to how much a company produces.

Variable costs are typically proportional to output.

As a result, the cost difference between two alternatives, rather than the fixed and variable nature of costs, is relevant for decision-making.

Hence, I disagree with the statement given in the question.

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5 0
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Eric enjoys making pizza. When he makes pizza for his friends, sometimes Eric cares about how the pieces are distributed, and so
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Answer:

equity:

-He cuts the pie into eight equal slices.

-He cuts the pie into many slices so that everyone gets a piece.

Efficiency:

-He lets one person eat the whole pie.

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Explanation:

Equity deals with distribution i.e to ensure things are equally distributed

While

Efficiency is trying to make sure things are completely used up i.e act of preventing waste

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3 years ago
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-Dominant- [34]

Answer:

$5000

Explanation:

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Notice that encumbrances are set aside funds for a purpose, therefore upon ordering, encumbrances balance would increase, and Elm would have passed the following entry

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