A forest product company likes to develop a wood pellet manufacturing plant in Maryland and has the following cost information on five likely destinations (table below). The expected sale price of wood pellets per bag is $5. a. Please find out which location is preferable in terms of BEP_x and/or BEP_$? b. What should be the minimum out level the company should target to earn some profit? c. Using the locational break-even analysis (cross-over quantity with minimum cost), can you identify any other location that may be more profitable? d. What should be the minimum quantity of output at the new location for maximizing profit?

Henry Jones is the owner of True Adventure Vacations, Inc. He is considering the purchase of computer equipment that will facilitate airline and hotel accommodations. He paid a consultant a $20,000 fee to identify the best computer system and to identify the best computer system and to identify related costs of the project. The computer will cost $300,000. Installation will cost $20,000 and training of personnel will cost $10,000. He will incur $50,000 in advertising costs to kick off the new improved services that will feature worldwide accommodations. He projects that there will be a $200,000 increase in sales annually over the 5 year life of the project. Costs are 60% of sales. The computer has a five year useful life and a salvage value of $30,000. Jones will use straight line depreciation. Working capital investment is $10,000 and will be fully recovered at the termination of the project in five years.

1. What is the annual after-tax cash flow for this project over the next five years? The tax rate is 34%.
2. What is the NPV of the project if the discount rate is 12%?

The electric field near the surface of Earth points downward and has a magnitude of 130 N/C.

(a) Compare the upward electric force on an electron with the downward gravitational force.

____upward force/ downward force

(b) What magnitude charge should be placed on a penny of mass 6 g so that the electric force balances the weight of the penny near Earth's surface?

C

a) Describe how a circular turn (or a circular coil) constitutes a dipole magnet.

b) Consider a solenoid of N turns with a radius r and length l, and carrying a current I. What is the magnitude of magnetic field inside the solenoid (but not near the ends)? Does this magnitude depend on distance the center of the solenoid? ?

c) What is the magnitude of magnetic field outside the solenoid (but not near the ends)?

1.   Tony signed up and paid $1200 for a 6-month painting course on June 1 with Master Piece Painting (MPP). As of August 1, MPP's accounting records would indicate

    A. $400 of revenue, $800 of deferred revenue

   B. $1,200 of revenue, $1,200 of cash

   C. $400 of revenue, $800 of accounts receivable

   D. $800 of revenue, $400 of accounts receivable

2. On July 15, 2016, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $90,000. The system included finely tuned scales that fit into EverFresh's automated assembly line, Ortiz's proprietary software modified to allow the weighing system to function in EverFresh's automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods or services separately, it would charge $60,000 for the scales, $10,000 for the software, and $30,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2016, and the calibration service commenced on that date. Assume that the scales, software, and calibration service are all separate performance obligations. How much revenue will Ortiz recognize in 2016 for this contract?

   A. $74,250

   B. $90,000

C. $63,000

   D. $0

3.   On June 1, Lucy & Bros. received an order for 500 cupcakes. Lucy delivered the cupcakes to the client on June 25. A $50 deposit was received on June 5 and the remaining $450 was paid on June 30. Lucy likely would recognize revenue on

  A. June 1.

   B. June 30.

   C. June 5.

   D. June 25.

4.   In 2015, Solid Construction Co. (SCC) began work on a two-year fixed-price contract project. SCC uses the percentage-of-completion method to account for such projects and provides you with the following information (dollars in millions):

Accounts receivable (from construction progress billings)               $37.5

Actual construction costs incurred in 2015            $135

Cash collected on project during 2015     $105

Construction in progress, 12/31/15          $207

Estimated percentage of completion during 2015              60%

What's the amount of gross profit on the project recognized by SCC during 2015?

   A. $160 million

   B. $48 million

   C. The answer can't be determined from the given information.

   D. $72 million

5. On October 1, 2015, Justice Company purchased equipment from Naples Inc. in exchange for a noninterest-bearing note payable in five equal annual payments of $500,000, beginning October 1, 2016. Similar borrowings have carried an 11% interest rate. The equipment would be recorded at

A. $1,847,950.

   B. $2,225,000.

   C. $2,115,270.

   D. $2,500,000.

6.   Gimme Auto Loan Department wishes to know the payment required at the first of each month on a $10,500, 48-month, 11% auto loan. To determine this amount, Gimme would

     A. multiply $10,500 by the present value of an ordinary annuity of 1.

   B. divide $10,500 by the future value of an ordinary annuity of 1.

   C. multiply $10,500 by the present value of 1.

   D. divide $10,500 by the present value of an annuity due of 1.

Explain in detail the difference between "Partenrship" and "Corporation" as used in the construction industry and give at least 2 construction companies with each form of business ownership.

Read and comment:

$2500: “A Fair Price for Hamilton”

NY Times, 23 October 2016

1. Gregory Mankiw

Consumers of goods and services do not typically wish that producers charged higher prices. But that was exactly my desire on a recent trip to New York City.

The story begins with a basic mismatch: I am a big fan of theater, and I live just outside Boston. While Boston is a good city for the arts, it is not the mecca that New York is. Unfortunately, I’m in New York only a few times every year. But when my professional or personal life takes me into the city, I always try to squeeze a play into my schedule.

That occurred most recently over Columbus Day weekend. I was in New York visiting colleges with my wife and younger son, who is a high school senior. Most colleges don’t give tours on Sunday, so we had Sunday afternoon free — perfect timing to see a matinee.

We had no doubt about what we wanted to see. “Hamilton” had received rave reviews from both critics and our friends who had seen it. We had much enjoyed “In the Heights,” an earlier musical by Lin-Manuel Miranda, the genius behind “Hamilton.” And as an economist, I have always viewed Alexander Hamilton, the first Treasury secretary, as one of the most important and intriguing founding fathers.

You may have heard that “Hamilton” tickets are hard to come by. The show is so popular that tickets from the theater sell out quickly and far in advance. On a recent episode of“Saturday Night Live (Links to an external site.)Links to an external site.” that Mr. Miranda was hosting, the television show’s producer, Lorne Michaels, jokingly asked him about getting “Hamilton” tickets. Mr. Miranda demurred.

We, however, had no problem getting tickets. Two weeks before our trip, I logged into StubHub, the online ticket marketplace owned by eBay. I found the performance we wanted, located some great seats and within a few minutes was printing our tickets.

The rub is the price. Including StubHub’s fee, I paid $2,500 a ticket, about five times their face value. Such a large markup is not unusual (Links to an external site.)Links to an external site..

Now, at this point, some people might object to this price. Terms like “scalping” and “price gouging” are pejoratives used to demonize those who resell tickets at whatever high prices the market will bear.

To be sure, most people can’t easily afford paying so much for a few hours of entertainment. That is indeed lamentable. The arts expand our horizons, and in a perfect world, everyone would have the opportunity to see a megahit like “Hamilton.”

Yet there is another way to view the situation. It was only because the price was so high that I was able to buy tickets at all on such short notice. If legal restrictions or moral sanctions had forced prices to remain close to face value, it is likely that no tickets would have been available by the time my family got around to planning its trip to the city.

High prices are a natural reflection of great demand and scant supply. In a free market, in which private individuals can engage in mutually advantageous gains from trade, they are inevitable until demand subsides or supply expands.

The comedian Jay Leno (Links to an external site.)Links to an external site. learned this lesson some years ago. In 2009, while the economy was suffering through the Great Recession, Mr. Leno, a car enthusiast, generously performed two free “Comedy Stimulus” shows for unemployed workers near Detroit.

Yet zero is not, as economists put it, the equilibrium price to see a live performance by Jay Leno. Some of the unemployed who received free tickets tried to turn around and sell them on eBay for about $800. When Mr. Leno learned about this, he objected, and eBay agreed to take down offers to resell the tickets.

But why should Mr. Leno have objected? Some unemployed workers, presumably short on cash, thought that the $800 in their pockets was more valuable than an evening of laughs. Similarly, the ticket buyers would voluntarily give up their $800 for a seat. The transaction makes both buyer and seller better off. That is how free markets are supposed to work.

The only person made worse off by the sale is, perhaps, Mr. Leno himself. He wanted to be seen performing before an audience of the unemployed. Doing a show for higher-income residents of Michigan might not be viewed as altruistic, even if it left the unemployed better off. In other words, Mr. Leno’s objection to the eBay resale was arguably a rationally self-interested act in that the resale impeded his ability to appear selfless to others and, even, to himself.

Although I don’t object to ticket resales above face value, and I think it is pernicious when others do, I was saddened by my “Hamilton” transaction in one important way. About 80 percent of what I paid went to the ticket reseller, rather than to Mr. Miranda and his investors.

In the past, Mr. Miranda has objected (Links to an external site.)Links to an external site. to the automated software that quickly buys as many tickets as it can, so they can be resold at a profit. But there is an easy way to put these resellers out of business: The theater can charge higher prices to begin with.

Such a move would surely increase the show’s profitability. From my standpoint as a theater consumer, that’s a good thing. Future talents like Mr. Miranda would find it easier to fund their innovative theater projects. And with more projects funded, those consumers who don’t buy “Hamilton” tickets — perhaps deterred by its uniquely high prices — would find a greater variety of other shows from which to choose.

1. GREGORY MANKIW is a professor of economics at Harvard.

Apex Art has been requested to prepare a bid on 500 pieces of framed artwork for a new hotel. Winning the bid would be a big boost for sales representative Jason Grant, who works entirely on commission. Sonja Gomes, the cost accountant for Apex, prepared the bid and calculated full product Costs of $121,000. Based on the company policy of pricing at 125% of full cost, Gomes gives Grant a figure of $151,200 to submit for the job.

Grant is very concerned. He tells Gomes that at that price, Apex has no chance of winning the job. He confides that he spent $500 of company funds to take the hotel’s purchasing agent to a basketball playoff game where the purchasing agent disclosed that a bid of $145,000 would win the job. He hadn’t planned to tell Gomes because he was confident that the bid she developed would be below that amount. Gomes reasons that the $500 he spent will be wasted if Apex doesn’t capitalize on this valuable information. In any case, the company will still make money if it wins the bid at $145,000 because it is higher than the full cost of $121,000.

Gomes suggests that if Grant is willing to use cheaper materials for the frame, he can achieve a bid of $145,000. The artwork has already been selected and cannot be changed, so the entire amount of the reduction in cost will need to come from framing materials.

A note regarding the bidding process:

The hotel would announce that it is seeking bids from suppliers interested in providing the artwork. The hotel would specify their requirements and a deadline for submitting bids. All interested companies, such as Apex Art, would submit bids in sealed envelopes. After the deadline has passed, the hotel company would unseal the bids and, assuming that at least one supplier submitted a bid within their maximum price (this is the info that Grant obtained from the purchasing agent which is not normally known to the bidders) would award the job. Generally, but not necessarily, the job is awarded to the company with the lowest bid.

Approaches to Ethical Decision Making

There is a large body of work stretching back thousands of years that discusses ethics. The list below is not intended to be either comprehensive or exhaustive. It is intended merely to provide a basic roadmap of the approaches that are commonly applied to business situations.

Long Term Self-interest (Egoism) - You should never take any action that is not in your or your organization’s long-term self-interest.

Personal Virtue - You should never do anything that is not honest, open, and truthful and that you would not be glad to see in the newspaper or TV.

Religious Injunction - You should never take an action that is unkind or that harms a sense of community.

Government Requirements - The law represents the minimal moral standards of society, so you should never take any action that violates the law.

Utilitarian Benefits - You should never take an action that does not result in greater good for society.   (cost vs. benefit analysis)

Individual Rights – You should never take an action that infringes on others’ agreed upon rights.

Justice - You should never take an action that would result in an unfair sharing of benefits or obligations.

Stakeholders are persons or groups with a legitimate interest in a company. Choose one or more as the most significant (but not all of them).

Questions:

1. State and describe the issues, if any, which may potentially violate ethical principles. Whose interests could be jeopardized due to the potential unethical behavior that you identified? Provide reasons why these stakeholders’ interests can be jeopardized.

2. What is Gomes’ rationale after Grant confides in her? Discuss the alternative courses of action that Gomes can take and the possible outcomes.

3. What should Gomes do, and why? Elaborate.

4. What can you conclude if Grant were to take Gomes’ suggestions, and what could be the consequences? What could be the possible consequences for taking the suggestion that you recommend?