FINANCIAL LEVERAGE EFFECTS

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $17 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $4.2 million with a 0.2 probability, $2 million with a 0.5 probability, and $0.9 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0.

RÔE = %

σ = %

CV =

Debt/Capital ratio is 10%, interest rate is 9%.

RÔE = %

σ = %

CV =

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $12 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 25%. The CFO has estimated next year's EBIT for three possible states of the world: $4.9 million with a 0.2 probability, $2.9 million with a 0.5 probability, and $700,000 with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

1. A) Provide a graphical illustration and interpretation of peak load pricing when there are two classes of visitors to Lory State Park (say high season and low season visitors). B) Discuss two policy alternatives available to manage visitors when demand can exceed capacity at times, but not always. C) Demonstrate graphically when the alternative results in (short term, seasonal) profits to the park. D) What might be done if the Park Service is a nonprofit government agency?

In a park: a 75 kg bicyclist rides 5.8 m/s north; a 24 kg dog runs 3 m/s east chasing a 3.3 kg squirrel running 2.6 m/s the same way; 200 kg park bench remains stationary; and a 43 kg child runs 1 m/s 45^◦ south of east. What is the magnitude of the total momenta of this park system?

Report the value in kg*m/s rounded to the nearest whole number.

] The average cost per night of a hotel room in San Francisco is $550 with a standard deviation is $150 based on a sample of 50 hotel room rates. a) Clearly state what the random variable in this problem is? b) What is an appropriate distribution to be used for finding the confidence intervals for this problem and why? c) Construct a 99% confidence interval estimate on the mean of all hotel room rates. d) What is the 90% confidence interval estimate? e) What is the 95% confidence interval estimate?

The operations and management systems in hotels contain the action, strategies and tactics to create a world class customer service experience that is needed for the productivity and development of your hotel. Cutting costs avoid high employee retention and increase reservations and customer stays. The critical factors are quality management, hotel occupancy rates, facilities planning, production planning, and inventory control. The most critical time of the role of operations is the night audit.Please write a 1 page essay explaining operations and management in the hotel industry.

suppose that the hotel acts as a monopolist whose manager chooses what quantity q of rooms to offer for rent. We want to determine the hotel’s optimal choice of quantity on game days.

Consider a hotel which can supply an unlimited number of hotel rooms at the constant marginal cost c = 20 per room per night, so that the hotel’s total cost function is given by C(q) = 20q.1 Assume that demand for hotel rooms in Tallahassee takes two possible values: on game days, demand is described by the demand curve q = 100 − p, while on non-game-days demand is described by the demand curve q = 60 − 2p.

Find the hotel’s total revenue on game days as a function of its quantity choice q. (Recall that total revenue equals price times quantity, where in this case price is described by the inverse demand curve.)

(e) Assuming the hotel maximizes profit, show that it will supply quantity q = 40 on game days.

(f) What will be the hotel price on game days? And what will be the hotel’s game-day profits?

(g) Still focusing on game days, graphically illustrate the demand curve, the hotel’s marginal revenue curve, and the hotel’s marginal cost curve. Indicate the hotel’s optimal quantity and price choices on the graph.

1. Briefly summarize the history of Sanskrit Language and its impact on Indian culture since the ancient time. Give at least one example of its impact(s) in the following areas: religion, music, dance, theater, and literature.

In a murder trial in Los Angeles, the prosecution claims that the defendant was cut on the left middle finger at the murder scene, but the defendant claims the cut occurred in Chicago, the day after the murders had been committed. Because the defendant is a sports celebrity, many people noticed him before he reached Chicago. Twenty-two people saw him casually, one person on the plane to Chicago carefully studied his hands looking for a championship ring, and another person stood with him as he signed autographs and drove him from the airport to the hotel. None of these 24 people saw a cut on the defendant’s finger. If in fact he was not cut at all, it would be extremely unlikely that he left blood at the murder scene.

(a) Because a person casually meeting the defendant would not be looking for a cut, assume that the probability is 0.7 that such a person would not have seen the cut, even if it was there. Furthermore, assume that the person who carefully looked at the defendant’s hands had a 0.4 probability of not seeing the cut even if it was there and that the person who drove the defendant from the airport to the hotel had a 0.6 probability of not seeing the cut even if it was there. Given these assumptions, and also assuming that all 24 people looked at the defendant independently of each other, what is the probability that none of the 24 people would have seen the cut, even if it was there? (Do not round intermediate calculations and round your final answer to 4 decimal places.)

Probability          

(b) What is the probability that at least one of the 24 people would have seen the cut if it was there? (Round your answer to 4 decimal places.)

Probability         

(c) Given the result of part b and given the fact that none of the 24 people saw a cut, do you think the defendant had a cut on his hand before he reached Chicago?

Yes or No

Scenario Suppose that a movie theater faces a downward sloping demand curve for popcorn and it increases the price of a container of popcorn from $4.00 to $4.80, which causes the count of containers sold to fall from 100 to 90.

Questions 1. What is the elasticity coefficient?

2. Is the demand relatively elastic or relatively inelastic?

3. Should the theater consider raising the price of popcorn further?

4. When a firm faces a downward sloping demand curve, should it ever price its product in the inelastic range of the demand curve (if it has such a range)? Explain why or why not.

5. When a firm is a monopolist (or the only seller of a product), should it price its product in the elastic or inelastic range of its demand curve? Explain.