Answer: a) increase in the demand for Kindles.
Explanation: the substitution effect for substitute goods gives that, if the price of good A rises, the demand for good B rises. Since a substitute good is a good that can be used in place of another, they are goods that a consumer perceives as similar or are comparable, in such a way that having more of one good causes the consumer to desire less of the other good. From the viewpoint of price, and given that consumers always prefer to spend less in instances where two goods are substitutes, it then means that Kindle can be used and preferred in place of Nooks given that the price of Nooks had gone up. Therefore, increasing the price of Nooks causes a corresponding increase in the demand for Kindles.
<u>Solution and Explanation:</u>
Breakeven point = Fixed cost divide by Contribution margin
Contribution margin = Sales minus Variable cost.
Fixed cost
Particular Amount
Salaries $5000
Utilities $1100
Depreciation $1200
Maintenance $780
Total Fixed cost = $8,080.
Variable cost =Maid services plus Other cost = $7 plus $13 = $20
Contribution = $40 minus $20 = $20.
Breakeven point in number = $8080 divide 20 = 404 rented rooms per month.
Breakeven point in $ = Breakeven point rented rooms × rent cost.
=> 404 rooms multiply $40 = $16,160.
If the European Union put a quota on American jeans only allowing a small portion to be imported the demand for the jeans would rise even though the supply would not follow that. When there is a small limit on something that consumers want, the price usually goes up because they know they will sell the items regardless and in this case that may happen. The price of jeans will rise, the demand will rise, but the supply will not.
Answer:
3.5%
Explanation:
We will apply asset pricing model to calculate cost of equity (required rate of return). The capital asset pricing model is stated as below:
Cost of equity = Risk-free rate + Beta x Market risk premium
Putting all the number together, we have:
Cost of equity (Beale) = 5.5% + 1.8 x (9% - 5.5%) = 11.8%
Cost of equity (Foley) = 5.5% + 0.8 x (9% - 5.5%) = 8.3%
Cost of equity (Beale) - Cost of equity (Foley) = 11.8% - 8.3% = 3.5%
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<em>Note: You can also do quick calculation as below:</em>
<em>Cost of equity (Beale) - Cost of equity (Foley) = (Beta of Beale - Bete of Foley) x Market risk premium = (1.8 - 0.8) x (9% - 5.5%) = 3.5%</em>
Answer:
January 1, 202x, bonds issued at a discount
Dr Cash 441,361
Dr Discount on bonds payable 18,639
Cr Bonds payable 460,000
amortization of bond discount = ($441,361 x 4%) - ($460,000 x 3.5%) = $17,654.44 - $16,100 = $1,554.44
June 20, 202x, first coupon payment
Dr Interest expense 17,654.44
Cr Cash 16,100
Cr Discount on bonds payable 1,554.44