Suppose you manage a local grocery store, and you learn that a very popular national grocery chain (Whole Foods or Walmart) is about to open a store just a few miles away. Use the model of monopolistic competition to analyze the impact of this new store on the quantity of output your store should produce (Q) and the price your store should charge (P). What will happen to your profits? Please show graphically and explain your reasoning in detail. For example, how and why do profits change? How can that be seen on the graph?

What could you do to defend your market share against the new store?

1. *The following another set of data that looking at how long it takes to get to work. Let x= commuting distance (miles) and y= commuting time (minutes)

1. Give a scatterplot of this data and comment on the direction, form and strength of this relationship.
2. Determine the least-squares estimate equation for this data set.
3. Give the r², comment on what that means.
4. Give the residual plot based on the least-squares estimate equation.
5. Test if this least-squares estimate equation specify a useful relationship between commuting distance and commuting time.

answer all questions

Rachel bought a car from the Beautiful Used Car Agency under a written contract. She purchased the car in reliance on Beautiful's agent's oral representations that it had never been in a wreck and could be driven at least two thousand miles without adding oil. Thereafter, Rachel discovered that the car had, in fact, been previously wrecked and rebuilt, that it used excessive quantities of oil, and that Beautiful's agent was aware of these facts when the car was sold. Rachel brings an action to rescind the contract and recover the purchase price. Beautiful objects to the introduction of oral testimony concerning representations of its agent, contending that the written contract alone governed the rights of the parties. Decision on the objection?

You are considering opening a drive-in movie theater and running it for ten years. You have spent after-tax $10,000 researching the land that will be used for theater, but if you take the project you expect to incur another immediate after-tax expense of $20,000 as you work with a consulting firm to decide how to most efficiently run the business.

The project entails an immediate $100,000 capital expenditure, which can be depreciated over 10 years. You expect to sell this capital investment for $25,000 at the end of the ten year project. Working capital expenses for the project are $50,000 immediately, $40,000 incurred two years from today, both of which are fully recovered in ten years (at the end of the project).

The project’s operating costs are expected to be $100,000 for each of the first five years and then (starting between t=5 and t=6) grow at -5% per year through the end of the project (i.e., through t=10). You expect the project’s revenues to start at $100,000 starting one year from today and remain constant for the life of the project.

1. (1 points) To determine the discount rate for the project, you have found an all-equity firm with a risk level similar to the company you’re starting. That firm’s equity has a standard deviation of returns of 35% and a correlation with the stock market of 0.8. The risk free rate is 4%, the expected market returns are 9.5% and the standard deviation of market returns is 28%. What is your estimated cost of capital?
2. (7 Points) You decide to use 10% as the project’s opportunity cost of capital (ignore your answer from part a). Your expected tax rate is 25%. What is the project’s NPV?
3. (2 points) You find out that the government is interested in buying the capital investment from you at the end of the project. Instead of selling it for $25,000 at the end of the project, the government will commit today to buying the capital from you for $75,000 post-tax ten years from today. You trust the government and think that this sale is risk free should you take the project. To what extent (if any) should the above information factor in to your decision regarding whether or not to open the theater? Does it change the NPV in any way, if so how? (hint: think of the capital investment as its own project – how will this affect the cash flows and/or the discount rate)

The car dealer gave Unicorn a $2,000 cash discount off the $31,000 list price. However, Unicorn paid an additional $6,000 to equip the car with a more luxurious interior and high tech lighting so it would have greater appeal. Unicorn Company expected the car to have a five-year useful life and a $5,000 salvage value. Unicorn also expected to use the car for 150,000 miles before disposing of it. Unicorn used the car, and it was driven 50,000 / 10,000 / 40,000 / 30,000 / 20,000 miles during each use year respectively. Unicorn sold the car on January 1, 2020, for $7,500 cash. (SHOW ALL CALUCUALTIONS)

1. What is the cost of the car that Unicorn Company will record?

1. Under the straight line method of depreciation, how much depreciation expense will Unicorn have each year of the car’s use?

1. Under the double declining balance method of depreciation
   1. What is the percentage depreciation Unicorn will use?

1. At the end of the first year, how much depreciation expense will Unicorn have for the car?

1. At the end of the first year, what will be the book value the car?

1. At the end of the second year, how much depreciation expense will Unicorn have for the car?

1. At the end of the second year, what will be the book value the car?

1. Under the units of production method of depreciation
   1. How much depreciation will Unicorn have for each mile driven of the car?

1. How much depreciation expense will Unicorn have in the last three years under this method?

1. When Unicorn sold the car, what did it recognize as a gain or loss and for how much? Show calculation in proper format and put into the accounting equation.

The U.S. Department of Agriculture defines a food desert as a census tract in which a sizable percentage of the tract's population resides a long distance from the nearest supermarket or large grocery store. Below are fabricated data for ten census tracts. The independent variable is percent low-income residents, the dependent variable is the distance (in miles) between each tract and the nearest grocery store. The hypothesis: In a comparison of census tracts, those with higher percentages of low-income residents will be farther from the nearest grocery store than will tracts having lower percentages low-income residents.

Census Tract                                                                   Percent-Low Income (x)                                                    Distance in Miles (y)

Tract 1                                                                                            0                                                                                      .2

Tract 2                                                                                            0                                                                                      .4

Tract 3                                                                                          10                                                                                      .5

Tract 4                                                                                          10                                                                                      .7

Tract 5                                                                                          20                                                                                      .8

Tract 6                                                                                          20                                                                                      1.0

Tract 7                                                                                          30                                                                                      1.1

Tract 8                                                                                          30                                                                                      1.3

Tract 9                                                                                          40                                                                                      1.4

Tract 10                                                                                        40                                                                                       1.6

(A.) What is the regression equation for this relationship? Interpret the regression coefficient. What exactly, is the effect of x on y? (Hint: The table gives information on the independent variable in ten-unit changes: 0 percent, 10 percent, 20 percent, and so on. Remember that a regression coefficient estimates change in the dependent variable for each one-unit change in the independent variable.)

(B.) Interpret the y-intercept. What does the intercept tell you exactly?

(C.) Based on this equation, what is the predicted value of y for census tracts that are 15 percent low-income? Census blocks that are 25 percent low-income?                                                                                                                        

Do heavier cars really use more gasoline? Suppose a car is chosen at random. Let x be the weight of the car (in hundreds of pounds), and let y be the miles per gallon (mpg).

Complete parts (b) through (e), given Σx = 296, Σy = 172, Σx² = 11,676, Σy² = 4006, Σxy = 5924, and

r ≈ −0.932.

(b) Verify the given sums Σx, Σy, Σx², Σy², Σxy, and the value of the sample correlation coefficient r. (Round your value for r to three decimal places.)

(c) Find x, and y. Then find the equation of the least-squares line  = a + bx. (Round your answers for x and y to two decimal places. Round your answers for a and b to three decimal places.)

(d) Graph the least-squares line. Be sure to plot the point (x, y) as a point on the line.

(e) Find the value of the coefficient of determination r². What percentage of the variation in y can be explained by the corresponding variation in x and the least-squares line? What percentage is unexplained? (Round your answer for r² to three decimal places. Round your answers for the percentages to one decimal place.)

(f) Suppose a car weighs x = 42 (hundred pounds). What does the least-squares line forecast for y = miles per gallon? (Round your answer to two decimal places.)
mpg

Gallatin Carpet Cleaning-the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $23.50 per hundred square feet.

The total cost of operating the company for the year is $370,000

1. Prepare the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. The company recently completed a 400 square foot carpet-cleaning job at the Flying N Ranch—a 53-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $94.00 (400 square feet @ $23.50 per hundred square feet). Calculate the customer margin

Do heavier cars really use more gasoline? Suppose a car is chosen at random. Let x be the weight of the car (in hundreds of pounds), and let y be the miles per gallon (mpg). x 26 47 30 47 23 40 34 52 y 30 20 23 13 29 17 21 14 Complete parts (a) through (e), given Σx = 299, Σy = 167, Σx2 = 11,983, Σy2 = 3765, Σxy = 5810, and r ≈ −0.909.

(b) Verify the given sums Σx, Σy, Σx², Σy², Σxy, and the value of the sample correlation coefficient r. (Round your value for r to three decimal places.)

(c) Find x, and y. Then find the equation of the least-squares line  = a + bx. (Round your answers for x and y to two decimal places. Round your answers for a and b to three decimal places.)

(d) Graph the least-squares line. Be sure to plot the point (x, y) as a point on the line.

(e) Find the value of the coefficient of determination r². What percentage of the variation in y can be explained by the corresponding variation in x and the least-squares line? What percentage is unexplained? (Round your answer for r² to three decimal places. Round your answers for the percentages to one decimal place.)

(f) Suppose a car weighs x = 40 (hundred pounds). What does the least-squares line forecast for y = miles per gallon? (Round your answer to two decimal places.)
mpg

For the test of significance questions, clearly indicate each of the formal steps in the test of significance.

Step 1: State the null and alternative hypothesis.
Step 2: Calculate the test statistic.
Step 3: Find the p-value.

Step 4: State your conclusion. (Do not just say “Reject H0” or “Do not reject H0”, state the conclusion in the context of the problem.)

Does using premium gas increase your miles per gallon? A study was conducted with nine vehicles that can run on regular gas to see if using premium gas will get better gas mileage. Each car in our sample was randomly filled first with either regular or premium gasoline, and the mileage for that tankful recorded. The mileage was recorded again for the same cars for a tankful of the other kind of gasoline. Is there evidence to suggest that using premium gas will increase your miles per gallon? (Use 10% significance level.)

Vehicle 1: Prem: 19 Reg: 20 Difference: -1

Vehicle 2: Prem: 35 Reg: 32 Difference: 3

Vehicle 3: Prem: 34 Reg: 33 Difference: 1

Vehicle 4: Prem: 18 Reg: 19 Difference: -1

Vehicle 5: Prem: 40 Reg: 37 Difference: 3

Vehicle 6: Prem: 26 Reg: 27 Difference: -1

Vehicle 7: Prem: 36 Reg: 33 Difference: 3

Vehicle 8: Prem: 28 Reg: 29 Difference: -1

Vehicle 9: Prem: 34 Reg: 31 Difference: 3

Mean: Prem: 30 Reg: 29 Difference: 1

St. Dev: Prem: 7.7 Reg: 6.1 Difference: 2.0