SuffiEffi (which stands for Sufficient and Efficient) is a manufacturing company that sells its products to one major customer (a large distributor) who later retails the products through a number of stores. At the beginning of each year, the customer provides an aggregate purchase order for 12 months which will then be divided into smaller individual orders randomly according the projected demand of the distributor. SuffiEffi has agreed that the distributor will place the individual orders anytime so long it gives three days lead time before the due date of delivery. SuffiEffi is very happy with the business deal since it provides certainty of the sales volume for a year. The products are made by a series of five processes where each process uses one dedicated machine. The production manager is satisfied to see that all machines never have less than 100% utilisation rate. This is because the production manager has decided that, in addition to meet the customer’s orders, the company must keep safety stock equivalent to one week of the full capacity of each machine (under normal 8 hours production shift), including raw materials and finished products. As such, overtime is often used for meeting the targeted outputs, and, on average, SuffiEffi uses 25% of the maximum overtime hours that it sets for the production system. The decision is based on the production manager’s determination to serve customers’ demands at 100% service level, and the manager is happy to see that SuffiEffi’s warehouse is always nearly full with ready-stock. The company’s trucks are also always ready in front of the warehouse to deliver customer’s orders. SuffiEffi is also determined to provide the best customer service in terms of quality, especially in handling customer complaints on defective products. To minimise customer complaints, the company provides extra products (around 10%) in each delivery in the hope that they will be sufficient to compensate for the number of defective products that might be found in the delivery batch. In addition, SuffiEffi always provides a quick response in replacing the defective products with the good ones, should the defective products exceed the faulty products. This strategy so far has been effective in reducing customer complaints. The raw material used to make the products is purchased from one supplier that is located not far from SuffiEffi’s factory with whom it has maintained a long-term relationship. However, the quality of the raw material delivered is not very good which often requires SuffiEffi to consume twice as much of the raw material necessary in making the products. The purchasing manager has identified an alternative supplier that can offer better quality raw material (it is also certified to ISO 9001 standard); however, the price is 15% higher than the current supplier, which causes a concern that changing the supplier will increase operational costs. SuffiEffi’s management team considers that the company has been doing well so far, but it also welcomes suggestions for potential improvement.
Analyse the information presented in the case study and answer the following questions: a. Identify the competitive dimensions that are applicable to SuffiEffi and evaluate the company’s operational performance in those dimensions (2 marks) b. Analyse the operations management of SuffiEffi and identify any problems that can impact on the company’s operational performance (2 marks) c. Provide the recommendations for SuffiEffi to solve the problems that you have identified as well as the areas for potential improvement in the company’s operations? (2 marks)
Demonstrate your understanding on the theories or the concepts of operations management with their application in your analysis and recommendations made in this case study.
Answers
a. The competitive dimensions applicable to SuffiEffi are quality, delivery speed, flexibility, cost, and customer service.
b. Potential problems in SuffiEffi's operations management include excessive overtime, high safety stock, reliance on defective product compensation, and poor raw material quality.
a. The competitive dimensions applicable to SuffiEffi are:
1. Quality: The company focuses on providing high-quality products and addressing customer complaints promptly.
2. Delivery speed: SuffiEffi aims to meet customer demands by maintaining a ready stock, utilizing overtime, and ensuring quick response in replacing defective products.
3. Flexibility: The company adapts to individual orders placed by the distributor and maintains safety stock to meet fluctuating demand.
4. Cost: SuffiEffi considers the cost implications of factors like overtime, safety stock, and potential supplier change.
5. Customer service: The company strives to provide excellent customer service by minimizing complaints and ensuring satisfaction.
b. Analysis of SuffiEffi's operations management reveals potential problems:
1. Excessive overtime: The reliance on overtime to meet targeted outputs may indicate inefficiencies or capacity constraints in regular production hours.
2. High safety stock: While safety stock is important, maintaining it at one week's full capacity for each machine may result in excess inventory and increased holding costs.
3. Dependence on defective product compensation: Relying on extra products to compensate for defects suggests quality control issues that need to be addressed.
4. Poor raw material quality: Consuming twice as much raw material due to poor quality indicates a potential waste and cost issue.
c. Recommendations for SuffiEffi:
1. Improve production efficiency: Identify and address bottlenecks to reduce the reliance on overtime and increase regular production capacity.
2. Optimize safety stock: Analyze demand patterns and adjust safety stock levels to minimize excess inventory while ensuring customer service levels.
3. Enhance quality control: Work closely with the supplier to improve raw material quality, reducing the need for excessive consumption and minimizing waste.
4. Invest in supplier change: Evaluate the benefits of switching to the alternative supplier offering better quality raw material, considering the impact on operational costs and overall product quality.
Applying operations management concepts, SuffiEffi can focus on process improvement, inventory management, quality control, and supplier relationship management to enhance its operational performance and achieve competitive advantages.
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Related Questions
In 2016 based on people ages 15-74 the Swedish adult non-institutionalized population was about 7. 3 million, the labor force was 5. 2 million, and the number of people employed was 4. 8 million. According to these numbers, the Swedish labor force participation rate and unemployment rate were about
a. 71. 2% and 7. 7%
b. 71. 2% and 5. 5%
c. 65. 8% and 7. 7%
d. 65. 8% and 5. 5%
Answers
According to these numbers, the Swedish labor force participation rate and unemployment rate were about option a: 71.2% and 7.7%.
To calculate the labor force participation rate and unemployment rate, we need to use the following formulas:
Labor Force Participation Rate = (Labor Force / Adult Non-Institutionalized Population) * 100
Unemployment Rate = (Unemployed / Labor Force) * 100
Given the information provided:
Adult Non-Institutionalized Population = 7.3 million
Labor Force = 5.2 million
Number of People Employed = 4.8 million
Using the formulas above, we can calculate the rates:
Labor Force Participation Rate = (5.2 million / 7.3 million) * 100 = 71.23%
To calculate the number of unemployed people, we subtract the number of employed people from the labor force:
Unemployed = Labor Force - Number of People Employed
Unemployed = 5.2 million - 4.8 million = 0.4 million
Unemployment Rate = (0.4 million / 5.2 million) * 100 = 7.69%
Rounding these values to one decimal place, we find that the labor force participation rate is approximately 71.2% and the unemployment rate is approximately 7.7%.
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write the basic processes of project planning.
Answers
Project planning is a critical step in managing a successful project. It involves defining the scope, objectives, and requirements, as well as setting deadlines, allocating resources, and identifying risks.
Here are the basic processes of project planning:
Define Project Scope: This involves outlining the project's purpose, goals, and deliverables. Clearly defining the scope helps avoid scope creep and ensures the project remains on track.Develop Project Objectives: Establish measurable and achievable objectives that align with the project's purpose. Objectives help guide the project team and provide a basis for evaluating progress.Identify Stakeholders: Determine the individuals and organizations directly or indirectly affected by the project. Engage with stakeholders to gather their input, expectations, and concerns.Establish Project Requirements: Gather and document the specific needs, expectations, and constraints for the project. These requirements serve as a reference for decision-making and help avoid misunderstandings.Develop a Project Schedule: Create a timeline for the project by defining the start and end dates of each task, dependencies between tasks, and milestones. The schedule helps ensure timely project completion and enables monitoring of progress.Allocate Resources: Identify the human, financial, and material resources required for the project, and allocate them appropriately. Proper resource allocation helps prevent delays and cost overruns.Identify and Assess Risks: Evaluate potential risks, including their likelihood and impact on the project. Develop strategies to mitigate or address these risks to minimize their impact on the project's success.Establish Communication Channels: Determine the communication methods and frequency for sharing project updates, progress, and issues with stakeholders and team members. Effective communication helps maintain engagement and resolve issues promptly.Create a Monitoring and Control Plan: Develop a plan to track project performance and progress, comparing it against the objectives and schedule. This plan enables proactive adjustments to stay on track and achieve project success.Learn more about project planning:
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in order to be considered a small business by the small business administration, what two conditions must be met?
Answers
The business must have fewer than 1,500 employees and a relatively low annual revenue.
Which two key categories best describe small businesses?
Partnerships and sole proprietorships are the most basic legal structures for small enterprises. Taxes are handled on the owner's or associates' personal tax returns, and neither is required to register with the state.
Two requirements must be fulfilled in order for a business to be classified as a small one by the SBA. Less than 1,500 workers must be employed by the company, and its yearly sales must be modest.
Therefore, These forms work best in situations where there is minimal capital property or risk of litigation.
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12. Which of the following is NOT a liability?
O bank loans
O overhead costs
O capital
O employee salaries
Answers
Answer:
overhead costs
capital
Answer:
capital
Explanation:
it is not a liability
when planning a video campaign with a consideration goal, what should your bidding solution optimize toward?
Answers
When planning a video campaign with a consideration goal, your bidding solution optimize toward views.
A video campaign can be a highly effective way to reach out to potential customers and create a connection with your brand. When done well, a video campaign can leave a lasting impression and help customers remember your company long after they've seen the ad.
First, you need to come up with a creative and catchy concept that will capture people's attention. Second, you need to make sure your video is high-quality and professional-looking. Finally, you need to make sure your video is properly targeted to your audience. You need to
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Which Annotation tool provides the ability to convert the mouse icon when giving a presentation to better focus the
audience attention?
Arrow
O Ink Color
O Eraser
O Laser Pointer
Answers
Answer: I think it’s laser pointer. I’m taking the test right now.
Explanation:
Answer:
It's D laser pointer
Explanation:
Choose the option that best matches the description given.
I handle the basic management of our employees and am the face you see in the media.
a)shareholder
b)officer
c)board of directors
Answers
Answer:
I think c. board of directors
OFFICERRRRRRRRRRRRRRR
which of the following is the most likely explanation for inflation in the united states? increases in aggregate supply increases in aggregate demand decreases in aggregate supply decreases in aggregate demand
Answers
The most likely explanation for inflation in the United States is increases in aggregate demand. Therefore, the correct option is option 2.
Inflation is a sustained increase in the general level of prices for goods and services over a given period, usually a year. When the inflation rate rises, each unit of currency can buy fewer goods and services than before. Inflation is often used to measure changes in the cost of living in a nation, as well as a measure of economic activity.
In the United States, increases in aggregate demand is the most likely explanation for inflation. The aggregate demand curve (AD) is a graph that illustrates the connection between a nation's total demand for all products and services (the macroeconomy's total output) and the overall price level.
An increase in aggregate demand will cause the price level to rise and, as a result, inflation will occur. An increase in aggregate demand, in particular, results in demand-pull inflation, which is when prices rise as a result of increased demand. Other causes of inflation are decreases in aggregate supply and cost-push inflation, among other factors. Hence, the correct answer is option 2: increases in aggregate demand.
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Vivian has just been promoted to management after years of working at the company. She is very excited, but nervous to now be the boss of several of her colleagues. What would be good advice for her
Answers
Answer:
Trust her gut and stay calm under any circumstances
Regrading the management, the good advice for her would be take a learning orientation approach which engages in self-development.
What do you mean by the management?In order to achieve desired goals and objectives, a person or group of people must be challenged and managed, according to the concept of management.
In management, efficiency is the ability to complete tasks effectively and economically. In order to provide measurable results, tasks must be completed within predetermined deadlines.
All parties involved in the business, such as the government, consumers, and employees, should have their interests taken into account by management. For the organization, managers are in charge of setting and achieving goals.
Therefore, the regrading the management, the good advice for her would be take a learning orientation approach which engages in self-development.
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Imagine you’re working on an important project at work. You’re writing some content about space exploration for your client. Your client has promised to send you a list of approved encyclopedias or reference books that you can use for your article. However, you haven’t received it yet. Write an email asking the client to provide you with the list. Remember to follow the email etiquette you learned in this lesson: Address your recipient by name. Mention the subject of the mail in the subject line. Clearly state the purpose of your email in the first sentence. End with an appropriate complimentary close. Make sure that your language is formal and professional.
Answers
Answer:
Subject: Request List: Approved Reference Books for Space Exploration Article
Dear Mr. Jackson,
I am writing to request you to email me the list of approved reference books for the space exploration article. We had discussed some tentative suggestions in our previous meeting. We are a bit behind schedule with writing the article. The reference book list will be a great help to us. Thank you for your time in considering this request.
Sincerely Yours,
Janice Collins
Head Writer
Star Communications
2563 Maple Road
Sunny City, CA 4523
Tel: (123) 456-7890
THIS IS THE EXAMPLE ANSWER!
Match each law with its correct description.
Answers
Answer:
Not too sure but I think it goes 1.Fair credit billing act 2.Credit CARD act 3.Uniform commercial code 4.Truth in lending act.
Match the law terms and definition:
Truth in Lending Act - requires lenders to establish standardized disclosures regarding terms and how they calculate fees.
Through the meaningful disclosure of loan conditions, which enables customers to evaluate standardized credit terms more easily and intelligently, the Truth in Lending Act (TILA) aims to safeguard consumer protection and promote competition among financial institutions.
Match the law terms and definition:
Truth in Lending Act - requires lenders to establish standardized disclosures regarding terms and how they calculate fees.Fair Credit Billing Act: allows consumers to exercise their rights regarding disputes and billing errors.Uniform Commercial Code: a set of laws that govern US commercial transactions.Credit CARD Act: prohibits unfair and abusive credit practices and ensures the transparency of fees.As a result, the significance of the law terms and definition are the aforementioned.
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what statement best illustrates an example of economic specialist
Answers
Federal Income Taxes
6. Find the tax for each exercise. Use the tax table to do these exercises.
Taxable Income
Filing status
$13,585
$13,800
$13,978
$23,049
$23,200
2.
b.
C.
d.
e.
Single
Married filing jointly
Head of household
Married filing separately
Married filing jointly
Tax
Answers
The federal profits tax prices continue to be unchanged for the 2021 and 2022 tax years: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The profits brackets, though, are adjusted barely for inflation. Read on for extra about the federal profits tax brackets for Tax Year 2021 (due April 15, 2022) and Tax Year 2022 (due April 15, 2023).
What is the distinction between income tax and federal tax?Federal earnings taxes are gathered by the federal government, while country profits taxes are accrued by means of the individual state(s) where a taxpayer lives and earns income. (It can get problematic if you stay in one state and work in another, which has took place extra frequently at some stage in the pandemic.)
The top 50 percent of all taxpayers paid 97 percentage of all individual earnings taxes, whilst the backside 50 percent paid the ultimate 3 percent. The top 1 percentage paid a higher share of individual profits taxes (38.8 percent) than the backside 90 percent blended (29.2 percent).
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https://brainly.com/question/1593514#SPJ9alex is an aml compliance officer at a private insurance company. he has been asked by fincen to provide the agency with a copy of the company's aml policy. what should alex do?
Answers
Refuse but offer to meet with an FINCEN official to explain the company's AML policy.
What is an AML?Financial institutions can prevent money laundering by preventing criminals from engaging in transactions that would otherwise be used to conceal the source of funds associated with unlawful activity. This is done via the use of anti-money-laundering (AML) rules and procedures.AML compliance strategies must be developed and implemented by financial institutions, including broker-dealers, among other things, according to the Bank Secrecy Act. The FINRA Rule 3310 anti-money laundering regulation also applies to Members.Anti-money laundering, commonly referred to as anti-money laundering, is the execution of transactions with the ultimate goal of turning money received unlawfully into money earned legitimately. AML regulations for financial service companies are getting more and stricter. They must be stopped from supporting terrorism and/or money laundering.Learn more about Anti-money-laundering refer to :
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An employee's individual differences, perceptions of change, and actions and inactions make up that employee's ______.Multiple choice question.leadership stylecharacteristicsadaptabilityemployment status
Answers
An employee's individual differences, perceptions of change, and actions and inactions make up that employee's characteristics.
A good employee of a company often has the following characteristics:
1. Dedication - A dedicated employee shows a sort of passion and loyalty towards his work
2. Confidence - A developed confidence enables an employee to face challenges at work and come up with solutions
3. Reliability - Reliable employees are very important in the workplace who can finish their tasks without the need of much supervision by authorities
4. Teamwork - Being a team player is important in the workplace as he will be more reliable and be able to come up with strong solutions by learning from the team and listening to their opinions
5. Leadership - Leadership qualities can also help you guide your team members toward developing skills of their own. this characteristic also helps make an employee self-confident
Thus, an employee's individual differences, perceptions of change, and actions and inactions make up that employee's characteristics.
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Alfred has plotted revenue and cost graphs for his pastry business. He’s testing a number of cost assumptions against his business’s revenue.
Answers
Cost decreases and revenue increases to about $6 per pastry. Cost and revenue both decrease after about $6.
What is Cost and Revenue in economics?
In business economics, the two key concepts are cost and income. Every firm strives to reduce expenses and increase revenue in order to generate the most profit.
Cost is the amount of money that each business has invested to produce a certain good or service.
The cost of a product is the monetary value assigned to the raw materials, labour, and other resources utilised to produce it in any firm.
Money serves as the production system's input in this instance so that the desired good or service can be obtained. Estimating costs during business planning for a firm, project, or product is crucial for ensuring profitability.
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If the stock turnover rate for your industry is 3, how many months' worth of inventory should you keep in stock at all times? (a) 2. (b) 3, (c) 4,
(d) 9.
Answers
Answer:
2
Explanation:
Suppose that the federal reserve decides to decrease the money supply with a $300 sale of treasury bills. Complete the tables that represent the financial position of the federal reserve and commercial banks after this open-market operation. Be sure to use a negative sign for reduced values.
Answers
The monetary base is a liability, whereas Treasury notes are assets.
tables that represent the financial position of the federal reserve and commercial banks after this open-market operation:
A $ 300, B $ 300, C $ -300, D $ 300
a negative sign use for reduced values.
What do we mean by asset?A resource having economic worth that a person, business, or nation owns or manages with the hope that it will someday be useful is referred to as an asset. A company's balance sheet lists assets. They are acquired or produced to raise a company's value or improve the operations of the company. Physical commodities like equipment, real estate, raw materials, and inventories are considered assets. Intangible objects like patents, royalties, and other forms of intellectual property are also considered assets.
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How can the government promote socially responsible production? A. By reducing tariffs and other trade barriers B. By passing environmental-protection regulations C. By enforcing consumer-protection regulations D. By punishing anticompetitive business practices
Answers
Government can promote socially responsible production by passing environmental-protection regulations.
What is social responsibility?The purpose of social responsibility is to ensure companies complies with laws that guards the business environment.
It means that a company making profit where it operates should be socially responsible by giving out to the society.
Hence, government can promote socially responsible production by passing environmental-protection regulations.
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Answer:
Government can promote socially responsible production by passing environmental-protection regulations.
Explanation:
Norma's health insurance plan does not require Norma to get a doctor's
referral for any tests or specialist visits. Norma most likely has what type of
insurance plan?
A. PCP
B. Long-term
C. HMO
D. PPO
SUBMIT
Answers
Answer:
D. PPO
Explanation:
PPO is an acronym for the preferred provider organization. PPO is one of the insurance health plans and is most popular among the family and individual markets. Under the PPO plans, the insurance company provides the insured with a long list containing doctors and hospitals to seek care. The list is the provider's preferred network, where patients should go for services.
A member of a PPO plan is encouraged to use the insurer network of preferred doctors. Members do not require a primary care physician's referral to see any specialist in the preferred doctors' network.
Answer:
D.
Explanation:
Which person would most likely want to invest all of his or her savings in a
hedge fund?
A. A retiree who is most interested in keeping her deposits safe
B. A student who wants his money to grow as quickly as possible
C. A teacher who would like to have a diversified set of investments
D. A doctor who wants to avoid paying taxes on retirement income
SUBMIT
Answers
Answer:
C. A teacher who would like to have a diversified set of investments
Tickets to a fundraiser are $14 if purchased ahead of time and $25 if purchased at the door. The total amount raised from all ticket sales was $625. If eleven tickets were purchased at the door, how many tickets were purchased ahead of time?.
Answers
($14)(25)=$350
($25)(11)=$275
$350+$275= $625
How are securities issued by the state and local governments and corporate bonds similar ?
How are they different ?
Answers
Securities issued by the state and local governments and corporate bonds similar and they different in the sense that government bonds, corporate bonds are exposed to interest rate risk and they are different because one is been controlled by the government and others by private companies
What are Securities?Securities can be described as the fungible as well as tradable financial instruments that can be utilized when trying to raise capital in public and private markets.
It should be noted that this can be attributed to both the state and local governments and corporate bonds.
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The fact that an employee is having taxes withheld from their paycheck does not guarantee that their tax liability will be covered. What factor could cause an employee to have a withholding shortfall at the end of the year
Answers
One factor that could cause an employee to have a withholding shortfall at the end of the year is if they have additional income that is not subject to withholding.
When taxes are withheld from an employee's paycheck, it is based on the assumption that the income from that job is their only source of income.
However, if the employee has additional sources of income, such as rental income, investment gains, or freelance work, these additional earnings may not have taxes withheld. As a result, the employee's overall tax liability may be higher than what was withheld from their paycheck.
For example, let's say an employee has a full-time job and also earns rental income from a property they own. The taxes withheld from their paycheck are based on their full-time job's income alone. However, if the rental income is significant enough, it may push the employee into a higher tax bracket, resulting in a higher tax liability than what was withheld from their paycheck.
Therefore, the fact that an employee is having taxes withheld from their paycheck does not guarantee that their tax liability will be fully covered. Having additional income that is not subject to withholding can cause a withholding shortfall at the end of the year. It is important for employees to consider all sources of income and understand their overall tax liability to avoid any surprises when filing their tax return.
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"A customer in the 28% tax bracket has $4,000 of capital gains and $12,000 of capital losses. How much unused loss is carried forward to the next tax year?"
Answers
Answer:
$5,000
Explanation:
Given that:
A customer in the 28% tax bracket has $4,000 of capital gains and $12,000 of capital losses. How much unused loss is carried forward to the next tax year?
Capital gain = $4000
Capital loss = $12,000
Net loss = ( capital loss - capital gain)
Net loss = ($12,000 - $4,000)
Net loss = $8,000
Maximum net loss deductible from taxes In a year is $3000
Net loss - deductible
$8,000 - $3,000 = $5,000
Unused loss carried into the next year = $5,000
Scheduling a production shop. midwest parts supply (mps) is a fabricator of small steel parts that are sold as components to manufacturers of electronic appliances and medical equipment. in the mps fabrication department, steel sheets are subjected to a series of three main operations—cutting, trimming, and polishing—which must be completed in this order. each machine processes the jobs in the same order, so it is sufficient to specify a single job sequence in order to describe a schedule. no machine can process more than one job at a time.
this morning, ten jobs have been released to the shop by the erp system, and the production manager is interested in minimizing the time it takes to complete the entire schedule, usually referred to as the schedule makespan. the following table gives the number of hours required for each operation.
what sequence achieves the minimum makespan and what is the minimum length of a schedule?
Answers
The best scheduling to use to ensure that the ten jobs are done in the minimum amount of time is the SJFS.
What is Shortest Job First Scheduling?This refers to the type of scheduling that makes use of an algorithm to process the shortest time to complete execution and reduces the average awaiting time for other processes to execute.
Please note that your question is incomplete so I gave you a general overview to help you get a better understanding of the concept.
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Any christian guys wanna be friends?
Answers
Answer:
Explanation:
Im not a guy im a girl but can we still be friends
The prisoner's dilemma is a situation in which:
Group of answer choices
O players have difficulty in choosing a strategy based on trust.
O a firm's competitors ignores its action while making their own decisions.
O oligopolists behave irrationally.
O oligopolists attempt to maximize sales rather than profits.
O an oligopolist’s demand curve becomes perfectly inelastic.
Answers
The prisoner's dilemma is a situation in which: players have difficulty choosing a strategy based on trust.
In a prisoner's dilemma, the firm will settle on choices that will just help them without believing the other player in the game, which will hurt the general result.
The prisoner's dilemma presents what is happening where two gatherings, isolated and unfit to impart, should each pick between collaborating with the other or not. The most elevated prize for each party happens when the two players decide to co-work.
The prisoner dilemma is the most popular round of the systems in sociology. It assists us with understanding what oversees the harmony among participation and contest in business, legislative issues, and group environments.
Hence option (A) is correct.
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How important is money
Answers
Answer:
very important
Explanation:
money is a global income source for everyone. we all have different types but it is all still money. now say one country got rid of money and had people pay for stuff using other things. if china did that lots of different countries wouldn't be able to get stuff from there unless they had so much of that product they could just give it up.
Caspian Sea Drinks' is financed with 62.00% equity and the remainder in debt. They have 11.00-year, semi-annual pay, 5.94% coupon bonds which sell for 98.90% of par. Their stock currently has a market value of $24.18 and Mr. Bensen believes the market estimates that dividends will grow at 3.22% forever. Next year’s dividend is projected to be $2.77. Assuming a marginal tax rate of 26.00%, what is their WACC (weighted average cost of capital)?
4 decimal place answer.
Answers
The WACC for Caspian Sea Drinks is approximately 5.99%. This is calculated using the formula: WACC = (Equity/Total value) * Cost of equity + (Debt/Total value) * Cost of debt * (1 - Tax rate) = 5.99%.
The cost of equity is derived from the dividend growth rate and the current stock price, while the cost of debt is determined by the bond yield and market price.
To calculate the WACC, we need to determine the weights of equity and debt in the capital structure. Given that 62.00% is financed with equity, the remaining 38.00% is financed with debt. The cost of equity is derived from the dividend growth rate of 3.22% and the current stock price of $24.18.
Using the Gordon growth model, we can estimate the cost of equity as $2.77 * (1 + 0.0322) / $24.18 = 0.0572 or 5.72%. The cost of debt is determined by the bond price of 98.90% and its coupon rate of 5.94%. Using the bond yield formula, we find the cost of debt to be 5.99%. Lastly, considering a marginal tax rate of 26.00%, we apply the tax shield to the cost of debt. Plugging in the values into the WACC formula, we get WACC ≈ (0.62 * 0.0572) + (0.38 * 0.0599 * (1 - 0.26)) ≈ 0.0599 or 5.99%.
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