3) The Ocean Pacific fleet has just decided to use a pole-and-line method of fishing instead of gill netting to catch tuna due to a concern for endangered species that can become caught in fishing nets. Ocean Pacific is limited in the short run to the current fleet of boats, and has decided to conduct a series of experiments to determine the impact of changing the crew size. The results of these experiments follow. Number of Fishermen Daily Tuna Catch (lb) 0 0 1 50 2 110 3 200 4 350 5 490 6 565 7 600 8 625 9 610

a) At what point (what number of fishermen) does diminishing returns occur?

b) Suppose the market price of tuna is $3.50/pound. How many fishermen should the company use if the daily wage rate is $100? (Hint: Calculate MRP for each fisherman at $3.50.)

c) Suppose a glut in the market for tuna causes the price to fall to $2.75/pound. At this new price, how many fishermen should the company now use if the daily wage rate remains at $100?

d) Suppose the price of tuna rises to $5.00/pound. At this new price, how many fishermen should the company now use if the daily wage rate remains at $100? e) In the long run, Ocean Pacific could acquire more boats or sell some of their existing boats. What factors might influence the decision whether to acquire boats, sell boats, or remain at the current number of boats? Explain.

Consider a team that chooses attendance Q(measured in millions) to maximize profit. Let the inverse demand curve be  

            P = 100 – 20Q

        which has the associated marginal revenue function equal to

            MR = 100 – 40Q

        Also, let the total cost function be given by

            TC = 50 + 4Q

        for which the marginal cost is MC= 4. Find the team’s optimal output, price, and profit.

1. Consider the following combination strategy: Long in a December $115 call, premium = $8 and long in a December $115 put, premium = $4.25.

1. What type of strategy is this and what type of price expectations does it suggest?
2. Evaluate the payoff at maturity for 100 share contracts if the prices are $100 and $125 per share.
3. Diagram the payoff profile for the strategy. Label the break-even prices (including premia).

Which is cheaper: eating out or dining in? The mean cost of a flank steak, broccoli, and rice bought at the grocery store is $13.04. A sample of 100 neighborhood restaurants showed a mean price of $12.65 and a standard deviation of $2 for a comparable restaurant meal.

B)

A sample of the various prices for a particular product has been conducted in 16 stores which were selected at random in a city. The following prices were noted, in GBP:

The prices of the product in pounds sterling are given in the table below.Perform a hypothesis test to determine if there is a relationsip between patients being given anti-viral drugs and developing pneumonia. Use a 1% level of significance.

The observed values are presented below.

95, 108, 97, 112, 99, 106, 105, 100, 99, 98, 104, 110, 107, 111, 103, 110

1- Calculate a 95% confidence interval to estimate the actual mean price of the product in the city (1dp)

2- is it reasonable to assume that the average price for this product is £100?state your reason

3- what size sample would need to be taken to estimate the population mean price within £1? n=

What is the price per share based on the equity free cash flow model?

Year 1:

Revenue: 630

Fixed costs: 120

Variable costs: 200

Additional investments in NWC: 10

Additional investments in operating long-term assets: 70

Depreciation: 60

Interest expenses: 35

Newly issued debt: 25

Principal repayment: 15

Cost of equity, Rs: 0.14

Corporate tax rate: 0.40

Growth rate per year:

from year 1 through year 5: 0.12

After year 5: 0.05

Market value:

Short-term debt: 100

Long-term debt: 600

Preferred Stock:

Market price per share: 10

Number of shares: 10

Common Stock:

Market price per share: 18

Number of shares: 100

a. $16.39*

b. $13.09

c. $15.33

d. $14.21

Consider the three stocks in the following table. P_trepresents price at time t, and Q_trepresents shares outstanding at time t. There are three time points 0, 1, and 2.

a) Form an equally weighted portfolio in stocks A, B, C at time 0 and hold it to time 1.

Calculate the portfolio return from 0 to 1.

Keep two decimal places.

b) Form an equally weighted portfolio in stocks B, C (No Stock A) at time 1 and hold it to time 2.

Calculate the portfolio return from 1 to 2.

Keep two decimal places.

Suppose there are two lakes located on a stream. Clean water flows into the first
lake, then the water from the first lake flows into the second lake, and then water from the second
lake flows further downstream. The in and out flow from each lake is 500 liters per hour. The first
lake contains 100 thousand liters of water and the second lake contains 200 thousand liters of water.
A truck with 500 kg of toxic substance crashes into the first lake. Assume that the water is being
continually mixed perfectly by the stream.

a) Find the concentration of toxic substance as a function of time in both lakes.
b) When will the concentration in the first lake be below 0.001 kg per liter?
c) When will the concentration in the second lake be maximal?

Suppose there are two lakes located on a stream. Clean water flows into the first lake, then the water from the first lake flows into the second lake, and then water from the second lake flows further downstream. The in and out flow from each lake is 500 liters per hour. The first lake contains 100 thousand liters of water and the second lake contains 200 thousand liters of water. A truck with 500 kg of toxic substance crashes into the first lake. Assume that the water is being continually mixed perfectly by the stream.

a) Find the concentration of toxic substance as a function of time in both lakes.

b) When will the concentration in the first lake be below 0.001 kg per liter?

c) When will the concentration in the second lake be maximal?