Question #6. Independent cases:

A. On January 1, Nets Company paid $48,000 for a new delivery truck. It was estimated that the truck would be driven 100,000 miles during the next 5 years, at which time it would have a salvage value of $3,000. During the first and second years, the odometer registered 22,000 and 40,000 miles, respectively. Calculate the depreciation expense Nets Company needs to record at the end of year I & end of year 2. Nets Company uses the Units of Production method to account for depreciation. What is the book value of the truck at the end of 2^nd year.

B. On Jan. 1, 2004, Cav Co., which uses straight-line depreciation, purchased equipment for $60,000 with a useful life of 7 years and $4,000 salvage value. On April 1, 2008, the equipment was sold for $30,000 cash. What gain or loss should Cav recognize as a result of this disposition? Indicate the impact of the disposition on the income statement & balance sheet.

C. On Nov. 1, 2005, GoodTaste Magazine received $36,000 of annual magazine subscriptions. On Dec. 31, 2005, the end of fiscal year, Management of GoodTaste decided to recognize the $36,000 as revenues for the year 2005. Do you agree with GoodTaste Management? Explain. How should GoodTaste Magazine report this in its financial statements as of Dec. 31, 2005?

3. Consider the following situation and answer the subsequent questions to the best of your engineering ability and judgment. a. There are two Schultz Creek watersheds, East and West. The East drains into unincorporated communities east of Flagstaff, and the West drains into the City of Flagstaff itself. The key point about ‘unincorporated’ is that this means these residents did not live in a city or town, and for some infrastructure aspects like storm drainage, there were no requirements or regulations. Prior to 2010 both of these watersheds were heavily forested and due to almost a hundred years of fire suppression instead of fire management, both watersheds had accumulated thick, water-absorbing masses of pine needles and decomposed pine needles on the forest floor. This prevented the watersheds from ‘delivering’ runoff to its streams in normal years because all of the precipitation was stored in the pine needle layers, sometimes referred to as ‘duff’. Only in heavy snow and rain years, about once every 5-7 years, would the streams flow, instead of every one or two years. i. The East Schultz Creek Watershed is approximately 14 square miles in area. The West is about 6 square miles in area. Assume that the following hydrologic soil group percentages hold for both watersheds prior to 2010: 5% HSG D, 8% HSG C, 15% HSG B, and the rest is HSG A, due to the extensive duff in the watershed.

A firm specializes in leasing apartments to students attending a nearby college. The firm has several apartment blocks (each block has 100 apartments) in different locations and distances from the campus. The firm has estimated a regression model to understand the effect of three variables on the demand for its apartments. The results obtained from the regression model is provided below.

Regression Results

where:

(a). Interpret the coefficients and statistical significance of each of the three variables (P, B, and D) [3 marks]

(b). Compute the price elasticity of demand for rental units priced at $375, located 2 miles from campus and with a schedule of 6 bus services per hour? [2 marks].

(c). The firm mangers are considering introducing their own bus service in apartment blocks under-served by public transportation. How will the regression results be of use, and what other factors will the firm need to consider when making this decision for the firm to maximize profits? [2 marks]

A car rental company allows its customers to pick up a rental car at one location and return it to any of its locations. Currently, two locations (1 and 2) have 16 and 18 surplus cars, respectively; and four locations (3, 4, 5, and 6) each need 10 additional cars. Because 34 surplus cars are available at locations 1 and 2 combined, and 40 cars are needed at locations 3, 4, 5, and 6 combined, some locations will not receive as many cars as they need. Management wants to make sure all surplus cars are sent where they are needed, and that each location needing cars receives at least five. Management wants to do this with the lowest total miles added to the cars. The distance (in miles) from locations 1 and 2 to the other locations are summarized in the following table:

(1.1) Formulate a linear programming model for this problem

(1.2) Create a spreadsheet model for this problem and solve it using Solver. Submit your Excel file on iLearn.

(1.3) What is the optimal solution?

(1.4) Which location is receiving the fewest cars?

(1.5) Suppose location 6 must have at least eight cars shipped to it. What impact does this have on the optimal objective function value?

Which technology is better?

(1)

a technology that involves high initial cost but lower future annual operating costs

(2)

a technology that is cheaper in initial cost but higher future annual operating costs

A. Always (1) Technology

B. Always (2) Technology

C. Depends. Need to evaluation a life-cycle cost

For every penny that the price of gasoline goes up, the U.S. Postal Service (USPS) experiences a monthly fuel cost increase of $8 million. State what assumptions you need to make to answer this question: "How many mail delivery vehicles does the USPS have in the United

States?”

A. Gasoline price before the increase

B. Gas consumption (miles per

gallon) of the average delivery vehicle

C. Total number of miles driven each year by the average delivery vehicle

D. Total number of drivers employed by the USPS

E. Annual repair and maintenance expenses per average delivery

vehicle

Assume that your employer is a manufacturing firm that produces several different electronic consumer products. What are three nonmonetary factors (attributes) that may be important when a significant change is considered in the design of the current bestselling product?

A. Aesthetics

B. R&D expenses incurred for the design

C. Safety

D. Advertising costs

E. Quality in terms of consumer expectations

Given below are likely returns in case of shares of Sun Ltd. and Moon Ltd. In the various economic conditions. Both shares are presently quoted at Rs. 100 per share.

Economic Condition       Probability         Returns of Sun Ltd.(%)    Returns of Moon Ltd.(%)

High Growth                      0.3                                100                                        150

Low Growth                       0.4                                110                                        130

Stagnation                         0.2                                120                                          90

Recession                           0.1                                140                                          60

Compute – Expected Return and Standard Deviation for both stocks and provide your suggestion for suitable investment.

( The answer should be a min of 800 Words with a theory explanation )

Let X and Y be independent discrete random variables with the following PDFs:

(a) Show work to find the PDF h(w) = P[W=w] = (f*g)(w) (the convolution) of W = X + Y

(b) Show work to find E[X], E[Y] and E[W] (note that E[W] = E[X]+E[Y])

An Oxxo has a small parking lot with three spaces reserved for customers. If the store is open cars arrive and use a space with an average rate of 2 per hour. For n = 0, 1, 2, 3, the probability P n of that there are exactly n spaces occupied is P 0 = 0.1, P 1 = 0.2, P 2 = 0.4, P 3 = 0.3.
a) Describe the interpretation of this parking lot as a queuing system, that is, describe the parameters indicated. What level of service is provided?
b) Determine the basic performance measures: L and W of this queuing system.

Question 4