You are looking to buy a home under the following conditions. The bank will finance up to 95% LTV on a home with a FRM at 5.25% FOR 30 years (monthly payments) and that the maximum payment to income ratio is 28% and total obligations to income is 36%. What price of home should you be looking at and how much down payment will be required? Assume your annual salary is $44,000, property taxes are about $1,800/year, hazard insurance is $600/year, and PMI is $100/month. Additionally, you have a car loan which is $275/month, student loans totaling $125/month, and credit card debt is $100/month.

Question (2)

Required:

1. Assume ABC uses the Weighted – Average method calculate I-ending inventory, II-cost of goods sold andIII-gross profit.  

2. Assume ABC uses LIFOmethod calculate I-ending inventory, II-cost of goods sold andIII-gross profit.  

In a particular market there are several hundred firms, all of the firms produce an identical product, and it is easy to get in and out of the market. At the current market equilibrium we observe the following for a typical firm:

P=100

MC=100

ATC=75

1. Find the firm's marginal revenue
2. Is this firm maximizing profit? Explain how you can tell.
3. Find the firm's profit.
4. What two things must be true for a competitive market to be in a long run equilibrium?
5. Is this market in a long run equilibrium? Why or why not?
6. What do you expect to happen to the price in this market? What do you expect to happen to the number of firms in this market

Bathrooms R Us Limited (BRUL) is a manufacturer of bathroom appliances. BRUL has decided to increase the capacity of its Wellington factory to accommodate increased customer demand in the lower North Island and South Island. As part of this expansion, BRUL is considering proposals from four equipment suppliers that will assist in the production of a new style of bath. The equipment from each of the suppliers is different however all of them meet BRUL's specifications for the production of the new bath.

The selling price of the new bath is expected to be $1,150.

Details of each of the four proposals are contained in the following table:

Notes:

1. The salvage value is at the end of year 5.

2. The equipment will be depreciated using the diminishing value (also known as reducing balance) depreciation method at the Inland Revenue Department (IRD) approved maximum rates in the table (note: the equipment from Supplier A is depreciated at a higher rate due to its specialised technology).

3. The company expects that net working capital will be a percentage of the sales in the following year. For example. if BRUL selects Suppliers A's equipment it will need an initial investment, before Year 1 begins, in working capital of 0.15 x 2,400 x $1,150 = $414,000

The following table presents sales forecasts for the new bath. It is expected that the popularity of this bath will decline during years 4 and 5 and that BRUL will stop producing and selling this product at the end of year 5.

Other information includes:

- The company has a policy of accepting projects where there are a Discounted Payback Period of three (3) years or less.

- The company's discount rate for projects of this nature is 15% based on current funding.

- The company's tax rate is 28%.

Required:

a) Prepare a summary table that includes the following for each of the four suppliers:

i) The Discounted Payback Period (DPP)

ii) The Net Present Value (NPV)

iii) The Internal Rate of Return (IRR)

iv) Profitability Index (PI)

b) Based on your summary table in part a) above rand each of the suppliers' equipment from 'most preferred' to 'least preferred' using four criteria

c) Evaluate the calculations in part a) above and your ranking in part b) above and provide a recommendation on which of the supplier's equipment should be accepted.

A businessman has an opportunity to invest in one of three mutually exclusive alternatives. The first alternative has a first cost of $7000, a uniform annual benefit of $2000, and a salvage value of $500. The second has a first cost of $3500, a benefit of $900 the first year, and increasing by $100 per year thereafter. Its salvage value is $400. The third alternative has a first cost of $8000, a benefit of $2000 the first year, and increasing by 2% each year thereafter. Its salvage value is $500. Assume all alternatives have a 10 year life, and the company’s MARR is 10%.

A) Use incremental rate of return analysis to determine which alternative is best. State the rates as percentages, formatted to two decimal places (i.e., xx.xx%).You can do this manually or using Excel… in either case, be sure to show all your work!

B) Plot the results on a graph for values of i from 0 – 50%, and construct a choice table. Assuming a MARR of 10%, which alternative would you choose?

C) Are the results from part “a” and “b” consistent? Briefly discuss… (in 1-2 sentences).

(if using excel please post code)

Eastland College is concerned about the rising price of textbooks that students must purchase. To better identify the increase in the price of textbooks, the dean asks you, the Economics Department’s star student, to create an index of textbook prices. The average student purchases three English, two math, and four economics textbooks per year. The prices of these books are given in the accompanying table. 2012 2013 2014 English textbook $100 $110 $114 Math textbook 140 144 148 Economics textbook 160 180 200 Using 2013 as a base year, create a market basket and than a price index for 2012. 2013. 2014 What is the inflation rate from 2012 to 2014?

Sarabeth Tucek is monopoly singer from New York City and has identified two types of customers that attend her concerts: adults (A); and non-adults (N). Adult demand is pA = 100 – qA and non-adult demand is pN= 50 – (1/2)qN, where p is the price per concert ticket, and q is the quantity of tickets demanded. Her marginal cost (MC = AC) of playing music to an additional patron is 10. Assume that Sarabeth practices third-degree price discrimination.

. Given the information above, now assume that Sarabeth must practice uniform pricing. 1.What is the profit-maximizing price and quantity? 2. What is the producer surplus in this market?

US government issued a railroad perpetual bond that pays $100 every year forever. However the interest rate fluctuates a lot, and you want to know the impact of interest rate on price of the bond. Consider interest rates range between 1% and 20% with 1% incremental step. Plot the relationship between interest rate and price of the perpetual bond in Excel, and clearly state the relationship.

Note: plot interest rate in X axis, and price in Y axis. Note that in Excel, you put interest rates in one column, and prices in another column, then select these two, and click insert graph. You might have to right click the graph to choose what is displayed on X axis.

a) Initially, the market price was p=20, and the competitive firm’s minimum average variable cost was 18, while its minimum average cost was 21. Should it shut down? Why? Now this firm’s average variable cost increases by 3 at every quantity, while other firms in the market are unaffected. What happens to its average cost? Should this firm shut down? Why?

b) Suppose that the demand curve for wheat is Q=100−10p and the supply curve is Q=10p. The government imposes a price ceiling of p=3

i) Describe how the equilibrium changes. ii) What effect does this price ceiling have on consumer surplus, producer surplus, and deadweight loss?

The following multiple regression model shows the expected PRICE of a VW Passat at auction (in $) as a function of the number of MILES on the Passat, the AGE of the Passat (AGE = 2020 – Year Assembled), and whether the Passat is SILVER (Yes = 1; No = 0):

Expected Price = 16,700 – 0.06MILES – 1,233AGE + 296SILVER

a. If the level of significance equals 0.05 and 100 Passats are in the sample, determine the critical value of the associated test statistic to assess whether the coefficient for AGE is significantly negative

b. You are deciding between two Passats: Passat A has 34,600 miles, was assembled in 2016, and is silver; Passat B has 46,200 miles, was assembled in 2017, and is red. Which Passat has the higher expected PRICE and by how much?