Imagine you own your own business. How would you evaluate opportunity costs and comparative advantage when making business decisions?

Look up a Production Possibilities Frontier (PPF) graph. What role does the production possibility frontier (PPF) model have in making business decisions regarding specialization and trade?

Answers

Answer 1

Answer:

Opportunity cost is the probable benefit that an individual misses out on when choosing a particular option over an alternative. In the case of comparative advantage, the opportunity cost for one company is lesser than that of another. The company with the lower opportunity cost offers the least potential benefit which was lost leading to a comparative advantage.

In business and economics, the production possibility frontier (PPF)—also called the production possibility curve (PPC) or the transformation curve—visualizes the different possible quantities of two different goods that may be produced when there is limited availability of a certain resource that both need to be produced.

hope that helps you

Explanation:


Related Questions

The prices of vehicles often increase during tax season, when tax refunds are distributed. Using supply and demand, explain why prices for vehicles increase in tax season.

Answers

Due to tax refunds being received the demand for cars goes up because people see an opportunity to buy a new car. The increase in demand then drives the price up. More demand = more value

The demand for vehicles increases as a result of tax refunds since more people regard them as a chance to purchase a new vehicle. The price rises as a result of the increased demand. More demand equals higher value.

Why You Should Buy a Car during Tax Season?

One of the most annoying aspects of being a working adult is taxes. It can be frustrating to compile all the required paperwork for submitting a tax return and can take hours out of your day. The worry of not knowing if you would owe money is another factor. The simple, lovely tax return, however, is one aspect of tax season that the majority of tax-filing adults look forward to.

Auto dealerships take a chance and purchase fresh inventory toward the end of the preceding year. This entails stocking typical dealerships' shelves with fresh merchandise in an effort to market the newest products.

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3 reason why loading and unloading a school bus is dangerous?

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It is dangerous because the bus could brake the things could get stuck and the bus is to big

Q #2. Consider a closed economy with the following equations C = 200+ 0.16Y₁ I = 800 - 40 r G = 1000 L = 0.5Y - 60 r M/P= 700 tax rate = 0.50 (where, C = consumption, I = investment, G = government spending, L = demand for money, real money supply. Yd= disposable income, Y = output/income, r interest rate) find a) Autonomous spending. A (2 point).​

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Explanation:

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Price controls on rents are frequently implemented by governments in an effort to protect renters from high housing prices. Differentiate the type of price control used from other potential price controls, and then formulate reasons as to why governments should be careful when implementing these types of controls.

Answers

The two primary varieties of price restrictions are known as price ceilings and price floors respectively.

What exactly are these pricing controls?

Price control is a technique that the government uses to guarantee that the price of a product or service on the market does not become too high or cheap.

Price controls may be broken down into two categories: price ceilings and price floors. Price floors and ceilings are used to determine the lowest and maximum amounts of a product's price, respectively. Price ceilings are used to determine the maximum amount of a product's price.

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In computing the cost of merchandise sold,does each of the following items increase or decrease that cost? (a) Transportation costs,(b) beginning merchandise inventory, (c) purchase discounts, (d) Ending merchandise inventory​

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Answer: option (d)

Explanation:

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ . price taking point shutdown point marginal point opportunity margin

Answers

If a firm's revenues do not cover its average variable costs, then that firm has reached its shutdown point.

What is average variable costs?

The average variable cost refers to the variable cost per unit of goods or services produced by a firm.

Average variable cost is total variable cost divided by variable input. Variable input is the input that varies with the output. For example, labor is an example of a variable input.

Average variable cost equals:

1.Average total cost minus average fixed cost.

2. Price of the variable input times the quantity of the variable input.

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Which of the following is an important consideration in setting up the proper environment to complete tasks on time a limited distractions be free from distractions see a club the workspace or D working whenever time allows

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An important consideration in setting up the proper environment is to be free from distractions. Option B. This is further explained below.

What is the environment?

Generally, the environment in which a human, animal, or plant lives or functions, either temporarily or permanently.

In conclusion, It is essential to remove any potential sources of distraction before beginning the process of creating the ideal atmosphere.

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Discuss authority and responsibility in principles of management

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Answer:

Authority of a manager is the right way of commanding subordinates, issuing orders, and getting the team to comply with them. Further, it is the right of the manager to make decisions and to act or refrain from acting based on his perception of the organization's objectives

Explanation:

Journal entry for accounting.

Answers

1. The number of shares outstanding at the end of the period is 19,604 shares.

2. The total paid-in capital is $726,100.

What is the total paid-in capital?

The total paid-in capital is the sum of the total common stock at par value and the paid-in capital in excess (that is, the excess received over the par value).

Data and Calculations:

Par value = $25

Total Common Stock = $490,100 ($230,000 + $127,000 + $53,100 + $80,000)

Number of outstanding shares = 19,604 ($490,100/$25)

Thus, the number of outstanding shares can be determined by dividing the total value of the common stock by the par value.

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Suppose that actual inflation is 3 percent, the Fed's inflation target is 2 percentage points, and unemployment rate is 2 (which is 2 percent below the Fed's full-employment target of 4 percent). According to the Taylor Rule, what value will the Fed want to set for its targeted interest rate?


Instructions: Enter your answer rounded to 1 decimal place.

Answers

The employees rate would be 4% depending on how many days and how many hours they are working the Taylor rule would be 15

If you buy a house for $150,000 and anticipate that the market value of the home will increase at 5 percent a year, how much will the house be worth in 14 years?

Answers

The house will be worth $296,989.70 after 14 years.

The future worth of the house is computed as

= Present worth x (1 + rate of increase)^time

Given,

= 150,000 x (1 + 5%)^14

= $296,989.70

The present value formula is PV=FV/(1+i)n, where you divide the future value FV by a factor of 1 + I for each period between the present and future dates. Input these numbers in the present value calculator for the PV calculation: The future value sum FV. A number of time periods (years) t, which is n in the formula.

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Bearcat uses $1,200 of supplies in 2021. Record the adjusting entry for supplies at its year-end of December 31.

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The adjusting entry is to debit "supplies expense" for $1,200 and a to credit "supplies" for $1,200.

What is an adjusting entry?

This refers to the journal entry that occurs at the end of a reporting period to record any unrecognized income or expenses for the period.

Hence, in this case, the adjusting entry is to debit "supplies expense" for $1,200 and a to credit "supplies" for $1,200.

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Which of the following are required, to perform an “authenticated” scan that only targets “severity 5” vulnerabilities? (choose all that apply)

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To perform an “authenticated” scan that only targets “severity 5” vulnerabilities you require a Target host. This is further explained below.

What is Target host?

Generally, Any domain from which a request to Target is made is referred to as a host. On a website, the location is almost always the most important element.

In conclusion, You'll need a Target host if you want to run a "authenticated" scan that only looks for "severity 5" vulnerabilities.

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Many individuals have been to a corner market in a city and noticed soggy lettuce, a moldy cucumber or other far from fresh produce being offered to that community in that specific area. Until now, many may not have known that this is what is referred to as a Food Desert. Why is it that we do not see similar grocery stores in these areas as we do in more rural communities? As a result, what does this do to the health and well-being of the thousands of people living in that community? Discuss Food Deserts in this Discussion Thread focusing on why they exist in the first place and how we can improve the situation for generations to come.

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The cucumbers are see threw and the flight of the agent is in sight which means 7)
7(6)•5

Food deserts are areas where people have limited access to affordable and nutritious foods. The lack of access to healthy food in food deserts can have several negative health consequences. People who live in food deserts are more likely to be obese and have diabetes, and other chronic diseases. They are also more likely to have poor overall health.

They are a major issue affecting millions of people in the United States, particularly in low-income, inner-city, and rural areas.

There are several reasons why food deserts exist. One reason is that grocery stores are less likely to locate in low-income areas because they are seen as less profitable.

This is due to several factors, including the fact that people in these areas tend to have less disposable income, and they may also be more likely to use food stamps or other forms of government assistance to purchase food.

Another reason for food deserts is that zoning laws in some cities make it difficult for grocery stores to locate in certain areas. For example, some cities have zoning laws that restrict the size of stores that can be built in certain areas. This can make it difficult for grocery stores to build large enough stores to be profitable.

There are several things that can be done to improve the situation in food deserts. One is to provide financial incentives to grocery stores to locate in these areas.

Another is to change zoning laws to make it easier for grocery stores to build in these areas. Additionally, community gardens and farmers' markets can help to provide people in food deserts with access to fresh, healthy food.

It is important to address the issue of food deserts because they have a significant impact on the health of millions of people. By taking steps to improve access to healthy food in these areas, we can help to improve the health and well-being of generations to come.

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is natalie davis actively involved in the decisions of the business woolworths​

Answers

Yes.

Natalie Davis was appointed managing Director of Woolworths supermarket on October 2012.

Natalie joined the group in July in 2015 as director of customer transformation food group.

3.
(a)
(b)
(c)
What is Standard Cost?
Explain the two components of Standard Cost Variance.
State two advantages and two disadvantages of Standard Costing.

Answers

Answer:

The Standard course duration is the normal duration of the course for a full-time student.

advantages =Standard Costing is used to minimize costs, improve quality, and increase efficiency. It also enables managers to compare actual results with expected results

disadvantage =Standard costs are usually associated with a manufacturing company's costs of direct material, direct labor, and manufacturing overhead. The disadvantages include that implementing a standard costing system can be time consuming, labor intensive, and expensive.

Lands’ end allows customers buying shirts to choose from a variety of fabrics and types of collar and sleeve based on the customer’s specific measurements, capitalizing on new technologies to mass customize its products and services. This is an example of:.

Answers

This is an example of Micromarketing.

What is Micro Marketing?

As the name suggests, micromarketing is marketing on a small scale. It is a form of target marketing as well. That means you deliberately develop material that will speak to your targeted client niche rather than putting out advertisements and content with the intention of appealing to everyone. Micromarketing is far more specialized than standard marketing, and its straightforward definition is "targeted marketing to a niche or particular group."

Therefore, Lands’ end allows customers buying shirts to choose from a variety of fabrics and types of collar and sleeves based on the customer’s specific measurements, capitalizing on new technologies to mass customize its products and services, which is an example of Micro-Marketing.

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9. How is planning made any why is it important ? Explain .

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Planning is made through a psychological process of rendered thoughts and ideas. Planning is important because for starters, it is a good way of gathering things in one’s mind and having mental organization. It is better to have things planned out than procrastinated because then, stress levels rise, efficiency is slower, and the accuracy of things that go on significantly depletes. Without planning, most of us would not survive because we would be so caught up in what is happening in the moment and how that affects us that we would not be able to process an idea or, as we’re referring to here, a plan. If you need any help, let me know and I will gladly assist you.

2. Max z = 3X1 + 5X2+ 4X3 S.t.2X1 +3X2 ≤ 18 2X1 + X2 ≤ 10 3X1 + 2X+4X3 ≤ 15 X1, X2, X3 ≥ 0
Required: Solve the problem and interpret the result?

Answers

The interpretation of the result is that the maximum value of the objective function is 29

How to solve and interpret the result?

The objective function is given as:

Max z = 3x₁ + 5x₂+ 4x₃

The constraints are:

2x₁ +3x₂ ≤ 18

2x₁ + x₂ ≤ 10

3x₁ + 2x₂ +4x₃ ≤ 15

x₁, x₂, x₃ ≥ 0

Subtract the second inequality from the first

2x₁ - 2x₁ + 3x₂ - x₂ ≤ 18 - 10

Evaluate the like terms

2x₂ ≤ 8

Divide by 2

x₂ ≤ 4

Substitute 4 for x₂ in 2x₁ +3x₂ ≤ 18

2x₁ +3*4 ≤ 18

This gives

2x₁ + 12 ≤ 18

Evaluate the like terms

2x₁ ≤ 6

Divide by 2

x₁ ≤ 3

Substitute 4 for x₂ and 3 for x₁ in 3x₁ + 2x₂ +4x₃ ≤ 15

3*3 + 2*4 +4x₃ ≤ 15

This gives

17 +4x₃ ≤ 15

Evaluate the like terms

4x₃ ≤ -2

Divide by 4

x₃ ≤ -0.5

From the constraints, we have:

x₁, x₂, x₃ ≥ 0

So, we set all negative values to 0

This means that:

x₃ ≤ 0

Substitute these values in the objective function

Max z = 3 * 3 + 5 * 4 + 4 * 0

Evaluate

Max z = 29

Hence, the interpretation of the result is that the maximum value is 29

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4. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the
government. Why might this be so?

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Although hyperinflation is a periodic event for developed economies, it has happened many times throughout history in nations such as China, Germany, Russia, Hungary, and Argentina.

What rate is hyperinflation?

It refers to a condition where the prices of goods and services rise uncontrollably over a defined period of time. In general, the term is employed when the rate of inflation grows at more than 50% a month. Typically, hyperinflation is triggered by a very quick change in the money supply.

What is hyperinflation in history?

Hyperinflation is the immediate, massive, and unmanageable increase in prices. In Hungary just after World War II, prices folded every 15 hours. More recently, in Zimbabwe, prices creased every day. In the uneasy Yugoslavia of the 1990s, inflation hit 50% a year.

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Yes, Hyperinflation are unlikely to occur if the central bank stands independent of the government.

What is Hyperinflation ?

Yes, Hyperinflation are unlikely to occur if the central bank stands independent of the government.

In economics, hyperinflation exists as a very high and typically accelerating inflation. It fast erodes the real value of the local currency, as the expenses of all goods increase. This causes individuals to minimize their holdings in that currency as they usually switch to more durable foreign currencies.

Hyperinflation represents a general rise in prices in an economy as high, unsustainable and out-of-control.Hyperinflation naturally arise when governments utilize the printing of money to invest a lot of their expenditures. This stands highly improbable if the central bank that manages the money supply exists independent of the govt.Though hyperinflation exists a rare incidence for designed economies, it has been brought place several times all through history in countries like Germany, China, Russia, Argentina, & Hungary.

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As the attorney representing the 100 plaintiff employees, give the presiding judge three reasons why the company should be held liable for wrongful termination.
2) As the attorney representing the company, give the presiding judge three reasons why the company should not be held liable for wrongful termination

Answers

1)Three reason stated by an attorney on behalf of 100 plaintiff employee regarding why the company was held liable for the termination of  100 employees as follow :

1. The dismissal of the employee is avoidable and termination is not being made due to any faults by the employee.

2. No proper notice is served on employees or no opportunity of being heard is given to any employee.

3. Appropriate compensation has not been given to the employee and 30 days' salary will be given when the employee forgoes his right to go to court against the company.

2) Three reasons stated by an attorney of the Company in front of the presiding judge are as follows:

1. The company has restructured its business as a result of a restructuring plan. Hence future business does not require excess manpower.

2. Company has given the option to employees to opt for a 1-month salary. So that they can search for his job within one month.

3. Computer technology or automation by a computer system is eating out the job of mankind.

3)Considering the above case I would like to take the side of 100 employees as they have not been given sufficient time to search for their next job as well as the company has also not been given any other benefit.

The company might have taken such a restructuring plan to eliminate such 100 employees due to their age or any other factor.

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Darling company estimates that total factory overhead costs will be $130,000 for the year, direct labor hours are estimated to be 26,000 a. For darling company, determine the predetermined factory overhead rate using direct labor hours as the activity base. Per direct labor hour b. During may, darling company accumulated 890 hours of direct labor costs on job 200 and 530 hours on job 305. Determine the amount of factory overhead applied to jobs 200 and 305 in may. Prepare the journal entry to apply factory overhead to both jobs in may according to the predetermined overheed rate.

Answers

In order to calculate the Total factory overhead costs: -

We Know,

Predetermined Factory Overhead Rate =  Total Factory Overhead Costs / Direct Labor HoursFactory overheads applied to Job 305 =  Predetermined overhead rate × Direct labor hours

Statement showing Computations

Particulars                                                           Amount

    a)

Estimated total factory overhead costs         620,000.00 Direct labor hours                                              80,000.00   Predetermined factory overhead rate = 620,000 / 80,000                                             7.75

    b)

Factory overhead applied to Job 200           = 2500 × 7.75                                                      19,375.00 Factory overhead applied to Job 305 = 3000 × 7.75                                                      23,250.00  

JOURNAL ENTRY                             Dr.                      Cr.

Work in Process Dr.                                42,625.00  

To Factory Overhead                                                             42,625.00

Therefore, Total factory overhead cost is 42,625.00.

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Which of the following failed to stop the widespread fraud at Wells Fargo

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The widespread fraud at Wells Fargo was not stopped by E. employees' ethics training.

What is employees' ethics training?

Ethics training enables employees to identify and deal with ethical problems.

Occasionally, employees make decisions involving choices or bringing outcomes that may be evaluated as good or bad, right or wrong.

The purpose of ethics training is to eliminate ethical misconduct.

Answer Options:

A. a whistle-blower policy

B. a statement by the CEO

C. a self-reporting policy

D. bonuses for stopping fraudulent behavior by other

E. employees' ethics training

Unfortunately, the widespread fraud at Wells Fargo was not stopped by E. employees' ethics training.

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b) Upscale hotels in the United States recently cut their prices by 20 percent in an effort to bolster dwindling occupancy rates among business travelers. A survey performed by a major research organization indicated that businesses are wary of current economic conditions and are now resorting to electronic media, such as the Internet and the telephone, to transact business. Assume a company’s budget permits it to spend $5,000 per month on either business travel or electronic media to transact business. Graphically illustrate how a 20 percent decline in the price of business travel would impact this company’s budget set if the price of business travel was initially $1,000 per trip and the price of electronic media was $500 per hour. Suppose that, after the price of business travel drops, the company issues a report indicating that its marginal rate of substitution between electronic media and business travel is 1. Is the company allocating resources efficiently? Explain

Answers

It is to be noted that the company is not allocating resources efficiently. See the attached image for the Graphically illustration required.

What is allocation of resources?

This is simply the ability to efficiently distribute resources across all aspects of production.

What is the proof that the company is misappropriating resources?

MRS is the gradient of the budget line is defined by the change in the Y axis divided by the change in the x axis.

In other words, MRS is the number of units of x that a customer is ready to give up in exchange for units of y.

Note that
the MRS fo the budget line is:

-dy/dx

= -10.6/6.25

= -1.6, that is media 1.6 units of media is given for every unit of business travel.

However, the corporation claims that the MRS is -1, which indicates that for every unit of business trip, they give away one unit of media. In other words, they are paying a price equal to the cost of business travel, resulting in a resource misappropriation.

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At year-end (December 31), Chan Company estimates its bad debts as 0.80% of its annual credit sales of $831,000.
Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $416
account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount
previously written off.
Prepare Chan's journal entries for the transactions.

Answers

Answer:At year-end (December 31), Chan Company estimates its bad debts as 0.80% of its annual credit sales of $831,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $416 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare the journal entries for these transactions. View transaction list 1 Record the estimated bad debts expense. 2 Wrote off P. Park's account as uncollectible. 3 Reinstated Park's previously written off account 4 Record the cash received on account. Credit Note :· journal entry has been entered Record entry Clear entry View general journal

what is the Industry structure of BDMS

Answers

Explanation:

Structure of Database Management System is also referred to as Overall System Structure or Database Architecture but it is different from the tier architecture of Database. The database system is divided into three components: Query Processor, Storage Manager, and Disk Storage

Essay on What Unique Things Would Separate You From Other Applicants Applying For This Money?

Answers

Unique Things that would Separate you from Other Applicants when applying for a loan are:

Proof of income. Investment statements. Employment history.

How can an applicant be outstanding when applying for a loan?

When applying for a loan, there are different criteria that would be followed, by the financial institutions.

One of this is Proof of income, this will be checked to know how much you earn, and this will help to determine the amount of loan that can be granted to you.

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What unique things would separate you from other applications applying for this money

Answers

The unique things that would separate the person from other people that are applying include

well-written essaygood educational backgroundvolunteering work that the person may have engaged in.

What are the required things that the person applying should have?Good educational backgroundVolunteering works would be an added advantageA well-written essayHave good characters and there should be no previous issues that show that the person had broken a law.

Therefore, the above statement would be beneficial for the person applying for the money.

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how to write memo cash flow statement problems and solutions

Answers

1. Start with the Opening Balance

For the first month, start with the total amount of cash your business has in its bank accounts.

2. Calculate the Cash Coming in (Sources of Cash)

Figure out all the money you expect to take in during the month. Only include actual money you will be receiving, not the sales you have made. For example, if you signed a contract for $100,000 over the next six months but are only receiving $15,000 of it this month, you would only count $15,000 for now because that would be the cash you have on hand.

Count everything coming in, including all collections of previous sales you made on credit, any transfers of your own personal money into the business, and any loans you might have taken during the period. Basically, you will include every single dollar coming into your business, whether from operations (sales of your goods or services), investments (sales of assets such as business equipment or land), or financing activities (equity you and/or shareholders are providing, or loans).
Add the figure you’ve arrived at in Step 2 to your opening balance from Step 1 to get your total cash balance for the period.

3. Determine the Cash Going Out (Uses of Cash)
Now, count up and enter all of the payments you expect to make for the month. Include items such as inventory, rent, salaries, taxes, loan payments, etc. Take into account everything you’ll spend money on this month.
If you have an annual bill for something like insurance, but have to pay for it all at one time or twice a year, you would count the payment as an expenditure during the month(s) in which you pay it. (You should still budget for it monthly, but you’ll have to come up with the cash during the month it’s actually due.)

4. Subtract Uses of Cash (Step 3) from your Cash Balance (sum of Steps 1 and 2)
The number you’re left with will be how much cash you have left at the end of the month. It will also be your Opening Balance at the start of the next month. If the number is negative, it means you will have a shortfall-not enough cash to cover your expenses.


2.How to Use a Cash Flow Statement

The biggest benefit to analyzing your cash flow is the information it provides about how to handle your expenses. While your business may be profitable in the long run, you may still have periods where you don’t have the money to pay your bills. This is especially true for companies that do a lot of invoicing.

Not all customers pay on time, and sometimes, they don’t pay at all. Because cash flow ONLY counts the money you’ve actually received, it can be more realistic than your profit and loss statement when it comes to figuring out the financials of your operation.

When you see the figures in black and white, you’ll realize the periods in which you either have to cut the amount of money you’re spending or increase the money coming in-whether it’s by booking more business, getting paid faster, or getting a loan or a line of credit.

2. Mrs Marta is a financial executive with XYZ Enterprises. Although Mrs Msrts has not had any formal training in finance or accounting, she has a “good sense” for numbers and has helped the company grow from a very small company ($500,000 sales) to a large operation ($45 million in sales). With the business growing steadily, however, the company needs to make a number of difficult financial decisions in which Marta feels a little “over his head.” She therefore has decided to hire a new employee with “numbers” expertise to help her. As a basis for determining whom to employ, she has decided to ask each prospective employee to prepare answers to questions relating to the following situations she has encountered recently. Here are the questions.
a. In 2009, XYZ Enterprises negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were constructed on land owned by the company. On January 1, 2010, XYZ took possession of the leased property. 20-year lease is effective for the period January 1, 2010, through December 31, 2029. Advance rental payments of $800,000 are payable to the lessor (owner of facilities) on January 1 of each of the first 10 years of the lease term. Advance payments of $400,000 are due on January 1 for each of the last 10 years of the lease term. XYZ has an option to purchase all the leased facilities for $1 on December 31, 2029. At the time the lease was negotiated, the fair market value of the truck terminals and freight storage facilities was approximately $7,200,000. If the company had borrowed the money to purchase the facilities, it would have had to pay 10% interest. Should the company have purchased rather than leased the facilities?
b. Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $15,000 per year for 9 years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 11%. At the time the land was originally purchased, it cost $90,000. What is the fair value (Present value) of the note?

Answers

The Present Value of Lease is $6,449,579, the Fair value of the note is $83,055.75 and the cost of credit is 12.12%.

Present Value of Lease and fair value

Year        Cash flows PV Factors Discounted cash flow

0-9             800,000       6.75902     5,407,216

10-19           400,000      2.60590      1,042,360

20

Total                                                      6,449,579

Present Value of Lease = $6,449,579

Purchase price = $7,200,000

Based on the above cash flow the company should lease the facility based on the fact that the present value of cash payment  of the amount of $6,449,579 is lower that the purchase price of the amount of $7,200,000.

b. Fair value of the note

Using this formula

Fair value of the note=Amount×PVOA

Let plug in the formula

Fair value of the note=$15,000×5.53705

Fair value of the note=$83,055.75

c. Cost of credit

Using this formula

Cost of credit=Discount/(1-Discount)×360/Allowed payment day-Discounted day

Let plug in the formula

Cost of credit=1/(1-100)×360/30

Cost of credit =1/99×360/30

Cost of credit=0.1212×100

Cost of credit =12.12%

The cost of funds which is 10%  is lower than the cost of credit which means that the company should not continue the policy but should instead choose the lease.

Therefore the Present Value of Lease is $6,449,579, the Fair value of the note is $83,055.75 and the cost of credit is 12.12%.

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