a. Ahmed runs a small business. In the first year he charged $45 and sold 1200 units and in the second year he charged $30 and sold 1800 units. Calculate the price elasticity of demand (Use the midpoint method). If Ahmed plans to raise the price by 10%, indicate what would be a reasonable estimate of what will happen to the quantity demanded and to the total revenue?

b. The table below shows the change of the demand for good A when the price of good B increases from $450 to $540. Quantify the cross-price elasticity of the good A (use the mid-point method) and explain what does it show. Indicate if goods A and B complements or substitutes.

1. Which of the following is true of the weighted average method of process costing?

   	A.	If there is no ending work in process, it results in the same amount of cost for completed units as the FIFO method does.
   	B.	In computing equivalent units of production, it considers all work done during the previous periods.
   	C.	In computing the cost per equivalent unit of production, it considers only costs incurred in the current period.
   	D.	It better matches ending inventory costs with current costs than the FIFO method.
   	E.	It results in higher net income than the FIFO method.

2 points   

QUESTION 53

1. For a given process/department, if there is no beginning work-in-process, both the weighted average and first-in first out (FIFO) methods of process costing result in the same amount for which of the following?

   I. Equivalent units of production for materials

   II. Cost per equivalent unit for conversion

   III. Cost of completed units

   IV. Cost of ending work-in-process

   	A.	I, II, III, and IV
   	B.	I and II
   	C.	I, III, IV
   	D.	II and IV
   	E.	I and III

2 points   

QUESTION 54

1. The Sanding Department had 10,000 units in its beginning work-in-process inventory that were 60% complete with respect to conversion. 80,000 units were started during the period. The department finished and transferred out 70,000 units. And there were 20,000 units in the ending work-in-process that were 10% complete with respect to conversion.

   Assume that the first-in first-out method is used. What were the equivalent units (EU) of production for conversion?

   	A.	78,000
   	B.	72,000
   	C.	68,000
   	D.	66,000

2 points   

QUESTION 55

1. True Company uses the First-In First-Out method of process costing. The following information is given for the company's Milling Department:   

   	units	% complete for Materials	% complete for Conversion		Costs incurred
   Beginning Work in process	200	30%	40%			Materials	Conversion
   Units started	500				Beginning Work in process	$1,500	$1,600
   Units completed	600
   Ending Work in process	100	20	50		During Current Period	$13,440	$17,100

     The following additional information is given:

   Cost per equivalent unit for Material: $24

   Cost per equivalent unit for Conversion: $30

   Cost of ending work in process: $1,980

       The cost of 600 complete units is:

   	A.	$25,330
   	B.	$21,600
   	C.	$33,800
   	D.	$31,660
   	E.	$28,560

2 points   

QUESTION 56

1. Which of the following would not cause the break-even point to increase?

   	A.	Fixed cost increases.
   	B.	Variable costs per unit increases.
   	C.	contribution margin per unit decreases.
   	D.	Sales price increases.
   	E.	Contribution margin ratio decreases.

2 points   

QUESTION 57

1. If the sales units go up by 40%,

   	A.	Contribution margin goes up by 40%.
   	B.	Variable expenses go up by 60%.
   	C.	Net operating income goes up by 40%.
   	D.	Operating leverage goes up by 60%.
   	E.	Total expenses go up by 40%.

2 points   

QUESTION 58

1. At a break-even point of 1,000 units sold, White Corporation's Sales are $16,000; variable expenses are $12,000; contribution margin is $4,000; and fixed expenses are $4,000. Unit sales price is $16. Unit variable expense is $12, and unit contribution margin is $4.  What will the Corporation's net operating income be at a volume of 1,001 units?  

   	A.	$8,000
   	B.	$12
   	C.	$604
   	D.	$16
   	E.	$4

2 points   

QUESTION 59

1. XYZ Company sells a single product for $100 each. The variable expense per unit is $70.  It is now selling 10,000 units. Currently, its operating leverage is 3 and its contribution margin ratio is 0.3 (30%).

   The company’s fixed costs are a step cost, and they are:   

   Sales and production units up to 12,000 12,001 to 20,000

   Fixed Expenses $100,000 $140,000

   If the company sales increase by 50% or by 5,000 units (i.e., sell $500,000 more), the company’s income will:

   	A.	increase by $110,000.
   	B.	increase by $150,000.
   	C.	decrease by $40,000.
   	D.	increase by 50%.
   	E.	increase by 150%.

2 points   

QUESTION 60

1. The following data are given for a cost of Green Company.

   Production units Cost in total

   100 $500

   200 $700

   What kind of cost is the above cost?

   	A.	Fixed
   	B.	Variable
   	C.	Mixed
   	D.	Direct
   	E.	Discretionary

2 points   

QUESTION 61

1. The cost of a precious metal is: $30 per gram for first 100 grams, after which $40 per gram.

   Which of the following graphs best depicts the cost of the metal. The horizontal axis represents activity level and the vertical axis represents cost in total.

   	A.	Graph (A)
   	B.	Graph (B)
   	C.	Graph (C)
   	D.	Graph (D)
   	E.	Graph (E)

2 points   

QUESTION 62

1. Frank Company operates a cafeteria for its employees. The number of meals served each week over the last six weeks and the total costs of operating the cafeteria are given below:

   Week	Meals served (X)	Cafeteria costs (Y)
   1	1,500	$4,800
   2	1,600	$5,080
   3	1,750	$5,280
   4	1,200	$4,000
   5	1,650	$5,100
   6	1,900	$5,400
   7	1,850	$5,500

   Based on the high-low method of analysis, the variable cost per meal served (“b” in Y = a+ bX) and fixed cost in total (“a” in Y = a + b X) would be estimated at:

   	A.	$2.00 and $1,000, respectively
   	B.	$2.00 and $1,600, respectively
   	C.	$2.50 and $1,000, respectively
   	D.	$2.14 and $1,308, respectively
   	E.	$2.14 and $1,729, respectively

Suppose a textbook monopoly can produce any level of output it wishes at a constant marginal (and average) cost of $5 per book. Assume that the monopoly sells its books in two different markets that are separated by some distance. The demand curve in the first market is given by Q_1=55- P_1 and the curve in the second market is given by Q_2=70-2P_2 Remember sometimes is easier to work with inverse demand functions. First assume that the monopolist can charge only one price. Obtain the P and the Q and economic profit for a monopolist. If the monopolist can maintain the separation between the two markets, what level of output should be produced in each market and what price will prevail in each market? What are total profits in this situation?

Stubborn Motors, Inc. is asking a price of $91 million to be purchased by Rubber Tire Motor Corp. Stubborn Motors currently has total cash flows of $3 million that are expected to grow indefinitely by 1 percent annually. Managers estimate that, because of synergies, the merged firm’s cash flows will increase by $5 million in the first year after the merger and that these cash flows will grow by an additional 5 percent in years 2 through 4 following the merger. After the first four years, these incremental cash flows will grow at a rate of 1 percent annually. The WACC for the merged firms is 11 percent.

Calculate the NPV of the merger.

Should Rubber Tire Motor Corporation agree to acquire Stubborn Motors for the asking price of $91 million?

1.
A)You own a share in Red Hat. Every period it has a 15 percent chance of going bankrupt. The interest rate is 0. If it survives to the end of the first period, it will pay $2 in dividends, $3 in dividends at the end of the second period, $3 in dividends at the end of the third period, and $4 in dividends at the end of the fourth period. It will pay no dividends after the end of the fourth period What is its efficient market price at the beginning of the first period?

B) Hula Hoops has an eight percent chance of going bankrupt each period. In period seven it will pay $30, if it survives. The interest rate is 0. Prior to that point, and afterwards, it will pay nothing. What is the efficient market price for Hula Hoops at the beginning of period 1?

C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price of the machine will be $400,000 and its economic life five years. The machine will be fully depreciated by the straight line method. The machine will produce 10,000 units of keyboards each year. The price of each keyboard will be $40 in the first year, and it will increase at 5% per year. The production cost per unit of the keyboard will be $20 in the first year, and it will increase at 10% per year. The corporate tax rate for the company is 34%. If the appropriate discount rate is 15%, what is the NPV of the investment?

**Could you show the work on how the answer was calculated. If solved by using excel could u also provide the formulas used in the calculations? Thank you.

You are an analyst in charge of valuing common stocks. You have been asked to value two stocks. The first stock AB Inc. just paid a dividend of $12.00. The dividend is expected to increase by 40%, 35%, 25%, 20% and 10% per year respectively in the next five years. Thereafter the dividend will increase by 5% per year in perpetuity.

The second stock is CD Inc. CD will pay its first dividend of $15.00 per share in 5 years. The dividend will increase by 30% per year for the following 3 years after its first dividend payment. Thereafter the dividend will increase by 3% per year in perpetuity.

1. Calculate AB’s expected dividend for t = 1, 2, 3, 4, 5 and 6.
2. Calculate CD’s expected dividend for t = 1, 2, 3, 4, 5, 6, 7, 8 and 9.

If the required rate of return for both stocks is 12%,

3. What is AB’s stock price?
4. What is CD’s stock price?

Now assume that both stocks have a required rate of return of 50% per year for the first 2 years, 30% per year for the following 2 years, 20% per year for the subsequent 2 years and thereafter the required rate of return will be 12%. The required rates of return start with year 1.

5. What is AB’s stock price?
6. What is CD’s stock price?

(Hint: you may need to forecast more dividends than you did in parts a, and b.)

Note you cannot use the NPV function to immediately value the stocks at time 0, as the required rate of return changes during the forecast period.

Note: All calculations should be rounded to the nearest penny. That is 2 decimal places.

Suppose a 15-year bond with $100 face value, 8.00% coupon rate and semiannual coupons is currently trading at par. All else constant, if the yield to maturity of the bond suddenly changes to 7.00% APR, what will happen to this bond’s price?

Group of answer choices

it will decrease by $9.108

it will decrease by $8.745

it will increase by $9.196

it will stay the same

Suppose a monopolist is can price discriminate between two groups of consumers. Group 1 has demand function given by P_1 = 100-2Q_1 and group 2 has demand function given by P_1 = 200-4Q_2. Suppose this monopolist has constant marginal cost of $20 and zero fixed cost.

Calculate consumer surplus in this market.