Question 1 Read and reflect on the assigned readings for the week (chapter – 3,4) and write what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter. Also, provide a graduate-level response to each of the following questions:
- American businesses have often been criticized for short-term thinking that places too much emphasis on payback period and ROR. When Honda started making cars in the early 1970s, for example, the chief executive officer stated that the firm would be â€œwilling to accept an ROR no greater than 2% or 3% for as long as it took to be recognized as the best car maker in the world.â€ In light of the success of many Japanese firms, is the criticism of American business justified?
- Most countries have a progressive income tax system whereby each dollar earned in incrementally higher tax brackets is taxed at an increasingly higher rate. Do you think that a flat tax system would be more fair? How about a proportional tax system? Explain your answer.
Question 2 Activity I: A young engineer decides to save $240 per year toward retirement in 40 years.
- If he invests this sum at the end of every year at 9%, then how much will be accumulated by retirement time?
- If by astute investing the interest rate could be raised to 12%, then what sum could be saved?
- If he deposits one fourth of this annual amount each quarter ($60 per quarter) in an interest bearing account earning a nominal annual interest rate of 12%, compounded quarterly, how much could be saved by retirement time?
- In part (c), then what annual effective interest rate is being earned?
Activity II: Maurice Micklewhite has decided to replant his garden. Show him what the cost is of making an erroneous decision at various stages of the project, starting with conceptual design and ending with the ongoing maintenance of the garden.