Differentiate between committed costs and discretionary costs. Be sure to present two examples of each and explain which of the two cost types would likely be cut should a company encounter financial difficulties.
What will be an ideal response?
A committed cost is a fixed amount that stems from an organization's ownership or use of facilities, and its basic organizational structure. Property taxes, rent, and salaries of top management are examples of committed costs.
A discretionary cost, also a fixed amount, occurs as a result of a management decision to spend a particular amount of money for some purpose. Examples are advertising, training, promotion, and contributions to charitable organizations.
The distinction between committed and discretionary costs is that committed costs can be changed only by major decisions with long-term implications. Discretionary costs can be changed in the short run and, thus, are cost-cutting targets should an organization encounter financial difficulties.
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Complete the Inclusive Mindset Scale in the Appendix. Evaluate your results. Do you feel that these results accurately reflect your Inclusive Orientation toward Diversity? Why?
What will be an ideal response?
DHF Company has a beta of 1.5 and is currently in equilibrium. The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%. Now the required return on an average stock increases by 30.0% (not percentage points). Neither betas nor the risk-free rate change. What would DHF's new required return be?
A. 14.89% B. 15.68% C. 16.50% D. 17.33% E. 18.19%
A company reports basic earnings per share of $4.50, cash dividends per share of $1.75, and a market price per share of $65.25. The company's dividend yield equals:
A. 2.73%. B. 14.82%. C. 6.75%. D. 2.68%. E. 3.67%.
Shoe Sunshine, Inc filed for bankruptcy protection under Chapter 11 and submitted a plan of reorganization within 120 days after filing for relief. Two of the classes of creditors voted against the plan. However, the bankruptcy judge considered the plan to be feasible, fair, and in the best interests of the creditors; it approved it in spite of these creditors' objections. This action by the
judge is called a "cramdown." Indicate whether the statement is true or false