Which of the following are ways that a firm can reduce cash flows in order to prevent managers from wastefully spending excess cash flows? Check all that apply.

Minimizing the amount of debt in the firm’s capital structure so that the firm can borrow money at a reasonable rate when good investment opportunities arise

Increasing the amount of debt in the firm’s target capital structure in the hope that higher debt-service requirements will force managers to be more disciplined

Funneling excess cash flows back to shareholders through higher dividends

Funneling excess cash flows back to shareholders through stock repurchases

Blue Ram Brewing Company currently has no debt in its capital structure, but it is considering using some debt and reducing its outstanding equity. The firm’s unlevered beta is 1.1, and its cost of equity is 11.80%. Because the firm has no debt in its capital structure, its weighted average cost of capital (WACC) also equals 11.80%. The risk-free rate of interest (rRFrRF) is 3%, and the market risk premium (RP) is 8%. Blue Ram’s marginal tax rate is 35%.

Blue Ram is examining how different levels of debt will affect its costs of debt and equity, as well as its WACC. The firm has collected the financial information that follows to analyze its weighted average cost of capital (WACC). Complete the following table.

Hula Enterprises is considering a new project to produce solar water heaters. The finance manager wishes to find an appropriate risk adjusted discount rate for the project. The (equity) beta of Hot Water, a firm currently producing solar water heaters, is 1.4. Hot Water has a debt to total value ratio of 0.3. The expected return on the market is 0.08, and the riskfree rate is 0.07. Suppose the corporate tax rate is 30 percent. Assume that debt is riskless throughout this problem. (Round your answers to 2 decimal places. (e.g., 0.16)) a. The expected return on the unlevered equity (return on asset, R0) for the solar water heater project is %. b. If Hula is an equity financed firm, the weighted average cost of capital for the project is %. c. If Hula has a debt to equity ratio of 0.8, the weighted average cost of capital for the project is %. d. The finance manager believes that the solar water heater project can support 40 cents of debt for every dollar of asset value, i.e., the debt capacity is 40 cents for every dollar of asset value. Hence she is not sure that the debt to equity ratio of 0.8 used in the weighted average cost of capital calculation is valid. Based on her belief, the appropriate debt ratio to use is %. The weighted average cost of capital that you will arrive at with this capital structure is

New York City is the most expensive city in the United States for lodging. The mean hotel room rate is $204 per night (USA Today, April 30, 2012). Assume that room rates are normally distributed with a standard deviation of $55. a. What is the probability that a hotel room costs $225 or more per night (to 4 decimals)? b. What is the probability that a hotel room costs less than $140 per night (to 4 decimals)? c. What is the probability that a hotel room costs between $200 and $300 per night (to 4 decimals)? d. What is the cost of the 20% most expensive hotel rooms in New York City? Round up to the next dollar. $ or

Compute the following probabilities using your calculator. Assume Z is a standard normal random variable. Round all answers to three decimal places.

A. P(0<Z<1.85)P(0<Z<1.85)=

B. P(−1.15<Z<0.3)=

C. P(Z>−1.3))=

D. P(0<Z<2.35)=

E. P(−1.85<Z<0.7)=

F. P(Z>−1.2)=

Suppose the random variable xx is best described by a normal distribution with μ=29μ=29 and σ=3.4σ=3.4. Find the zz-score that corresponds to each of the following xx values.

Round answers to three decimal places

(a)  x=16.2
z=

(b)  x=33.4
z=

(c)  x=17.2
z=

(d)  x=38.6
z=

Find the following probabilities for the standard normal random variable z:

Round answers to three decimal places.

(a)  P(z≤2.21)=

(b)  P(z>−2.27)=

48.

{Exercise 4.31 (Algorithmic)}

Assume that we have two events, A and B, that are mutually exclusive. Assume further that we know P(A) = 0.7 and P(B) = 0.3.

If an amount is zero, enter "0".

1. What is P(A  B)?
   
   
2. What is P(A | B)?
   
   
3. Is P(A | B) equal to P(A)?
   - Select your answer -YesNoItem 3
   
   Are events A and B dependent or independent?
   - Select your answer -Events A and B are dependentEvents A and B are independentEvents A and B could be either dependent or independentItem 4
   
4. A student in statistics argues that the concepts of mutually exclusive events and independent events are really the same, and that if events are mutually exclusive they must be independent. Is this statement accurate?
   - Select your answer -YesNoItem 5
   
5. What general conclusion would you make about mutually exclusive and independent events given the results of this problem?
   - Select your answer -Mutually exclusive events are dependentMutually exclusive events are independentMutually exclusive events are either dependent or independent

Write it in P program. This is only one question with multiple parts, so please answer all the parts of the question, it is not much. Please also include a screenshot of your R program.

1. Generator 500 random numbers from the Binomial distribution with size=100, p=0.5 (define it X).
2. Standardize the vector X using the following equation (define it Z):

Z=(X-E(X))/sd(X)

Where E(X)= mean of B(n,p), which is np, sd(X) = standard deviation of B(n,p), which is sqrt(np(1-p)).

3. Make a histogram of Z and discuss the shape of the histogram.
4. Convince your answer from 3 using the method we have learned in the class.
5. Do the same thing for (n, p) = (100, 0.1), (100, 0.3), (100, 0.7), (100, 0.9), and draw 4 histograms of Z, and discuss about the shape of the histogram.

QUESTION ONE

1. Suppose the income increases from K50, 000 to K60, 000 and as a result consumption increases from K40, 000 to K47, 000 in Zambia. What is the marginal propensity to consume for the Zambian economy?                             [3 Marks]
2. Suppose the value of autonomous consumption is K40 000 and marginal propensity to consume is 0.6, estimate consumption at different levels of income: K0, K100, K200, K300, K400, and K500.                                               [6 Marks]
3. Given the consumption function in (b) above solve for the savings function and estimate savings at the different levels of income provided: K0, K100, K200, K300, K400, and K500.                                                                                          [8 Marks]
4. Fill the blank spaces.                                                                                       [8 Marks]

1) A well-known brokerage firm executive claimed that 30% of investors are currently confident of meeting their investment goals. An XYZ Investor Optimism Survey, conducted over a two week period, found that in a sample of 300 people, 34% of them said they are confident of meeting their goals.

Test the claim that the proportion of people who are confident is larger than 30% at the 0.10 significance level.

a) The null and alternative hypothesis would be:

H0:p≤0.3
H1:p>0.3

H0:p=0.3
H1:p≠0.3

H0:μ≥0.3
H1:μ<0.3

H0:μ≤0.3
H1:μ>0.3

H0:p≥0.3
H1:p<0.3

H0:μ=0.3
H1:μ≠0.3

2) The test is:

a) The test statistic is: _______ (to 3 decimals)

b) The p-value is: ________ (to 4 decimals)

c) Based on this we:

Reject the null hypothesis

or

fail to reject the null hypothesis