Hello, I need some advice on the case below. I need to know some arguments for how Kant's ethics applies to this case, and why other people who believe in the Kantean theory of ethics would also support the arguments. I need to use Kants theory to determine if this is morally correct or incorrect.

Casino Gambling on Wall Street Case 4.5 Casino Gambling on Wall Street

CDO stands for “ collateralized debt obligation,” and before the financial meltdown of 2008, hardly any nonspecialists were familiar with this arcane acronym. A CDO is a collection of individual debts ( for example, home mortgages) that are bundled together in one investment pool. That pool can then be divided into different sections ( or “ tranches”), representing different degrees of risk, and sold to investors. An individual lender, such as a credit card company, may put together a CDO, or an investment firm may create a CDO from a package of loans from different lenders. Although abused during the housing bubble, CDOs perform a useful economic function. They allow lenders to focus on loan origi-nation and investors to buy interest- earning securities. 86 What serves no obvious economic function, however, are so- called synthetic CDOs, which represent a bet on the of a package of loans owned by others. For exam-ple, Goldman Sachs brokered a synthetic CDO, known as Abacus- 2007 AC1, based on the performance of a group of subprime loans. But unlike a normal CDO, a synthetic like Abacus contains no actual bonds or mortgage loans; it merely references assets owned by other people. As with other synthetic CDOs, one side of the option was betting the value of a bundle of assets ( owned by other people) would rise; the other side of the option that it would fall. In principle, it’s no different from wager-ing on the Yankees vs. the Dodgers or on a cricket fight. “ With a synthetic CDO, it’s a pure bet,” says Erik F. Gering, a former secu-rities lawyer and now a law professor at the University of New Mexico. “ It is hard to see what the social value is.” In the two years before the financial meltdown of 2008, over $ 100 billion in synthetic CDOs were issued, and ­everyone agrees that, by increasing the instability of the system, they were an important factor in that crisis. Moreover, their use represents a shift in the culture of investment banks from a focus on finding the most produc-tive allocation of savings to an emphasis on maximizing profit through proprietary trading and arranging casino- like wagers for market participants. For these reasons, many business writers and financial experts are critical of syn-thetic CDOs and other purely speculative derivatives, believing that they should be severely limited or even pro-hibited. However, companies like Goldman Sachs and oth-ers make $ 20 billion a year putting them together, and these firms lobbied strongly and successfully to see that the financial reform bill of 2010 didn’t significantly restrict them. In their defense, one industry insider says, “ I believe that synthetic CDOs have a very useful purpose in facilitat-ing the management of risk. . . . Such instruments facilitate the flow of capital.” But it is difficult for even the heartiest champion of syn-thetic CDOs to defend the Abacus- 2007 AC1 deal with a straight face. Goldman Sachs put it together for hedge fund tycoon John Paulson based on a group of lousy mortgage loans that he had selected for the sole purpose of betting that their value would go down. As with any synthetic CDO, of course, Goldman Sachs needed to find investors who would take the opposite position, which it did— the two largest being ABN Amro and IKB Deutsche Industriebank— and it was paid $ 15 million for closing the deal. Those companies, however, were not told that Paulson was betting against them nor that he had selected the underlying subprime mortgages only because he believed they were sure to lose value. And, sure enough, Abacus- 2007 AC1 soon produced a $ 1.5 bil-lion loss for ABN and an $ 840 million loss for IKB— but a $ 1 billion gain for Paulson. Goldman Sachs’s defenders say that ABN and IKB were sophisticated investors who should have known what they were doing and that who is on the other side of a CDO is not something that is routinely disclosed. So perhaps ABN and IKB deserved what they got— after all, one might argue, they had no real business undertaking a synthetic CDO as opposed to underwriting or ­insuring actual subprime loans. But, still, it’s hard to square Goldman Sachs’s treatment of them with the principle displayed on the company’s website: “ Our client’s interests always come first.” Goldman Sachs, of course, is not the only financial institution to manipulate its customers. The Securities and Exchange Commission has accused Citigroup, for exam-ple, of putting together a package of mortgage backed securities without telling investors that it was betting against them— that the fund was designed to fail. When it did, Citi earned $ 160 million while its investors lost $ 700 million. On the other hand, spread across the country are thousands of small community banks and not- for- profit credit unions. Believing that their job is to serve the com-munity, they often take a personal interest in their cus-tomers, making loans to local businesses, lending small sums to individuals who have fallen into financial trouble, or bending over backwards to help those who can’t keep up their mortgage payments. “ They support you person-ally,” says one customer. “ Customers . . . can walk in and talk to the president,” adds another, “ and know he isn’t sucking in their money and betting against them on pro-prietary securities.”

A recent study shows that 18% of adults in the US do not use the Internet. Suppose that 12 adults are randomly selected in the US.

a)Construct the PMF of X, the number of adults who don't use internet in this group.

b)What is the expected value and standard deviation of X?

c)What is the probability that at least 1 of the adults uses the Internet?

5. The Economist observed the following: In Argentina, many loans were taken out in US dollars” this had catastrophic consequences for borrowers once the peg collapsed.” What does it mean that Argentina’s “peg collapsed”? Why was the end of the peg (fixed exchange rate regime) catastrophic for borrowers in Argentina who had taken loans in US dollars?

Zeile Company began operations on January 2, 2016. It employs 9 individuals who work 8‐hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate.  

Zeile Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. Additional information is as follows:    2016 2017 Actual Hourly Wage Rate (2016) $15.00 (2017) $18.00

Projected Future Pay Rates Used to Accrue Vacation Pay (2016) $16.00 (2017) $18.50

Vacation Days Used by Each Employee (2016) 0 (2017) 9 Sick Days Used by Each Employee (2016) 4 (2017) 5 Instructions  

(a) Prepare journal entries to record transactions related to compensated absences during 2016 and 2017.  

(b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016, and 2017.

Zeile Company began operations on January 2, 2016. It employs 9 individuals who work 8‐hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be taken after January 15 of the year following the year in which they are earned. Sick days may be taken as soon as they are earned; unused sick days accumulate.  

Zeile Company has chosen not to accrue paid sick leave until used, and has chosen to accrue vacation time at expected future rates of pay without discounting. Additional information is as follows:    2016 2017 Actual Hourly Wage Rate (2016) $15.00 (2017) $18.00

Projected Future Pay Rates Used to Accrue Vacation Pay (2016) $16.00 (2017) $18.50

Vacation Days Used by Each Employee (2016) 0 (2017) 9 Sick Days Used by Each Employee (2016) 4 (2017) 5 Instructions  

(a) Prepare journal entries to record transactions related to compensated absences during 2016 and 2017.  

(b) Compute the amounts of any liability for compensated absences that should be reported on the balance sheet at December 31, 2016, and 2017.

Who gains and who loses from import restrictions?

Leverage Benefits: You have finished your MBA and taken job at a small manufacturing company that specializes in restoring old fj-40 Land Cruisers and the Series II and III Land rovers (the classic safari vehicles you see in movies). With baby boomers retiring and fulfilling pent up dreams the business cannot keep up with demand for these classic rugged 4-wheel drive vehicles. The owners would like to expand but tell you they only have about half cash to pay for the expansion, which would cost about $600,000. You ask them why they don’t just borrow the other half. They say it is too expensive, especially compared to the cost of retained earnings. Current loans from the bank would cost 7% to 8%. The company is every profitable and the expansion would have a positive NPV at discounts up to 18% or 20%. The company’s tax rate is 30%.

A. Do you agree with the owners that debt is expensive compared to retained earnings?

B. Make a brief argument for why the owners should borrow and pursue this opportunity.

Lynn Price recently completed her MBA and accepted a job with an electronics manufacturing company. Although she likes her job, she is also looking forward to retiring one day. To ensure that her retirement is comfortable, Lynn intends to invest $3,000 of her salary into a tax-sheltered retirement fund at the end of each year. Lynn is not certain what rate of return this investment will earn each year, but she expects each year’s rate of return could be modeled appropriately as a normally distributed random variable with a mean of 12.5% and standard deviation of 2%. (this problem requires the use of Analytic Solver Platform)

If Lynn is 30 years old, how much money should she expect to have in her retirement fund (expected value) at age 60? Answer this question by using the appropriate Psi Statistical function

What is the probability that Lynn will have more than $1 million in her retirement fund when she reaches age 60? Answer this question by using the appropriate Psi Statistical function

Attach the screenshots of your spreadsheet model and the distribution graph for the fund she will have at age 60

XYZ Company is a reputable manufacturer of various especially electronic items. Jay Carter, a recent MBA graduate, has been hired by the company in its finance department. On of the major revenue-producing items manufactured by the XYZ is smartphone. The company currently has one smartphone in the market and sells has been excellent. The smartphone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with newer models. The company can manufacture the new smartphone for $300 each in variable costs. Fixed costs for the operation are estimated to run $5.1 million per year. The estimated sales volume is 64,000, 106,000, 87,000, 78,000, and 54,000 unit per year for the next five years, respectively. The unit price of the new smartphone will be $485. The necessary equipment can be purchased for $31 million and will be depreciated on a seven-year MACRS schedule (Use Table A-1 below). It is believed the value of the equipment in five years will be $5.5 million. Net working capital for the smartphones will be one time at $5,000,000 at the beginning of the project (time zero). XYZ has a 35% corporate tax rate and required return of 12%. Jay was asked to prepare a report that answer the following questions: Part 1- (40 Points) 1. What is the project NPV? 2. What is the Project IRR? 3. What is the payback period of the project? 4. What is profitability index of the project? 5. How sensitive is the NPV to change in the price of the new smartphone (assume that the price goes done to $370)? 6. How sensitive is the NPV to change in the quantity sold (assume that quantity reduce by 10%)? Part 2- (25 Points) 1. What is a break-even (quantity)? 2. If the total interest payment be $150,000, what are the degrees of operating and financial leverage? Part 3- (25 Points) Assume that the company has the following capital structure: Debt $15,000,000 Preferred stock $7,5,000,000 Common stock $27,5,000,000 What will be the cost of capital if the company decide to raise the needed capital proportionally and with following costs? Please use the following information to calculate the weighted cost of capital: a. Bond: A 30-year bond with a face value of $1000 and coupon interest rate of 13% and floatation cost of $20 (Tax is 35%) b. Preferred stock: Face value of $35 that pays dividend $5 and floatation cost of $2 c. Common stock: Market value of $54 with floatation cost of $3.5. Last dividend was $6. The dividend will expect to grow at 7%. Part 4 (10 Points) Uses the new cost of capital, calculate the NPV and IRR?

XYZ Company is a reputable manufacturer of various especially electronic items. Jay Carter, a recent MBA graduate, has been hired by the company in its finance department.

On of the major revenue-producing items manufactured by the XYZ is smartphone. The company currently has one smartphone in the market and sells has been excellent. The smartphone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. However, as with any electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with newer models.

The company can manufacture the new smartphone for $300 each in variable costs. Fixed costs for the operation are estimated to run $5.1 million per year. The estimated sales volume is 64,000, 106,000, 87,000, 78,000, and 54,000 unit per year for the next five years, respectively.

The unit price of the new smartphone will be $485. The necessary equipment can be purchased for $31 million and will be depreciated on a seven-year MACRS schedule (Use Table A-1 below). It is believed the value of the equipment in five years will be $5.5 million.

Net working capital for the smartphones will be one time at $5,000,000 at the beginning of the project (time zero). XYZ has a 35% corporate tax rate and required return of 12%.

Jay was asked to prepare a report that answer the following questions:

1. What is the project NPV?
2. What is the Project IRR?
3. What is the payback period of the project?
4. What is profitability index of the project?
5. How sensitive is the NPV to change in the price of the new smartphone (assume that the price goes done to $370)?
6. How sensitive is the NPV to change in the quantity sold (assume that quantity reduce by 10%)?

Part 2- (25 Points)

1. What is a break-even (quantity)?
2. If the total interest payment be $150,000, what are the degrees of operating and financial leverage?

Assume that the company has the following capital structure:

What will be the cost of capital if the company decide to raise the needed capital proportionally and with following costs? Please use the following information to calculate the weighted cost of capital:

1. Bond:

A 30-year bond with a face value of $1000 and coupon interest rate of 13% and floatation cost of $20 (Tax is 35%)

2. Preferred stock:

Face value of $35 that pays dividend $5 and floatation cost of $2

3. Common stock:

Market value of $54 with floatation cost of $3.5. Last dividend was $6. The dividend will expect to grow at 7%.

Uses the new cost of capital, calculate the NPV and IRR?