The following data are for the two products produced by Tadros
Company.
| Product A | Product B | ||||
| Direct materials | $ | 14 per unit | $ | 26 per unit | |
| Direct labor hours | 0.3 DLH per unit | 1.6 DLH per unit | |||
| Machine hours | 0.2 MH per unit | 1.2 MH per unit | |||
| Batches | 115 batches | 230 batches | |||
| Volume | 10,000 units | 2,000 units | |||
| Engineering modifications | 10 modifications | 50 modifications | |||
| Number of customers | 500 customers | 400 customers | |||
| Market price | $ | 35 per unit | $ | 120 per unit | |
The company's direct labor rate is $20 per direct labor hour (DLH).
Additional information follows.
| Costs | Driver | |||
| Indirect manufacturing | ||||
| Engineering support | $ | 25,500 | Engineering modifications | |
| Electricity | 22,000 | Machine hours | ||
| Setup costs | 43,000 | Batches | ||
| Nonmanufacturing | ||||
| Customer service | 73,000 | Number of customers | ||
Required:
(Round your per unit cost answers to 2 decimal places and other
answers to nearest whole number. Loss amounts should be indicated
with minus sign.)
In: Accounting
The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $16 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: $4.6 million with a 0.2 probability, $3.4 million with a 0.5 probability, and $0.5 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 =
Debt/Capital ratio is 50%, interest rate is 11%.
RÔE = %
σ = %
CV =
Debt/Capital ratio is 60%, interest rate is 14%.
RÔE = %
σ = %
CV =
In: Finance
The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $15 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: $5.3 million with a 0.2 probability, $1.7 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 = 0
| RÔE = | % |
| σ = | % |
| CV = |
Debt/Capital Ratio = 10%, Interest Rate = 9%
| RÔE = | % |
| σ = | % |
| CV = |
Debt/Capital Ratio = 50%, Interest Rate = 11%
| RÔE = | % |
| σ = | % |
| CV = |
Debt/Capital Ratio = 60%, Interest Rate = 14%
| RÔE = | % |
| σ = | % |
| CV = |
In: Finance
1. You've estimated the following expected returns for a stock, depending on the strength of the economy:
| State (s) | Probability | Expected return |
| Recession | 0.3 | -0.06 |
| Normal | 0.5 | 0.06 |
| Expansion | 0.2 | 0.12 |
a. What is the expected return for the stock?
b. What is the standard deviation of returns for the stock?
2. You observed the following returns for a stock and Treasury bills:
| Year | Stock A | T-bills |
| 2016 | 18% | 4% |
| 2015 | 8% | 5% |
| 2014 | 19% | 2% |
a. What was the excess return for the stock in 2016?
b. What was the (arithmetic) average return for the stock?
c. What was the (arithmetic) average return for T-bills?
d. What was the average excess return?
2. Below are the returns for different asset classes for a particular year:
| Asset class | Return |
| T-bills | 1.3% |
| Corporate bonds | 4.9% |
| Small company stocks | 17% |
| Large company stocks | 9.5% |
a. What was the excess return for corporate bonds?
b. What was the excess return for small company stocks?
c. What was the excess return for large company stocks?
In: Finance
The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $20 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: $5.2 million with a 0.2 probability, $2.9 million with a 0.5 probability, and $0.4 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 = |
Debt/Capital ratio is 50%, interest rate is 11%.
| RÔE = | % |
| σ = | % |
| CV = |
Debt/Capital ratio is 60%, interest rate is 14%.
| RÔE = | % |
| σ = | % |
| CV = |
In: Finance
The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $20 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: $4.3 million with a 0.2 probability, $3.5 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 0.
| RÔE: | % |
| σ: | % |
| CV: |
Debt/Capital ratio is 10%, interest rate is 9%.
| RÔE: | % |
| σ: | % |
| CV: |
Debt/Capital ratio is 50%, interest rate is 11%.
| RÔE: | % |
| σ: | % |
| CV: |
Debt/Capital ratio is 60%, interest rate is 14%.
| RÔE: | % |
| σ: | % |
| CV: |
In: Finance
INANCIAL 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 $10 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: $4.1 million with a 0.2 probability, $1.7 million with a 0.5 probability, and $0.5 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 = |
Debt/Capital ratio is 50%, interest rate is 11%.
| RÔE = | % |
| σ = | % |
| CV = |
Debt/Capital ratio is 60%, interest rate is 14%.
| RÔE = | % |
| σ = | % |
| CV = |
In: Finance
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 $11 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: $5.1 million with a 0.2 probability, $2.8 million with a 0.5 probability, and $0.5 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 = |
Debt/Capital ratio is 50%, interest rate is 11%.
| RÔE = | % |
| σ = | % |
| CV = |
Debt/Capital ratio is 60%, interest rate is 14%.
| RÔE = | % |
| σ = | % |
| CV = |
In: Finance
Let X be the number of packages being mailed by a randomly selected customer at a certain shipping facility. Suppose the distribution of X is as follows.
| x | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
|
p(x) |
0.1 | 0.4 | 0.2 | 0.3 |
(a)
Consider a random sample of size n = 2 (two customers), and let
X
be the sample mean number of packages shipped. Obtain the probability distribution of
X.
| x | 1 | 1.5 | 2 | 2.5 | 3 | 3.5 | 4 | |
| P(x) |
(b)
Refer to part (a) and calculate
P(X ≤ 2.5).
(c)
Again consider a random sample of size n = 2, but now focus on the statistic R = the sample range (difference between the largest and smallest values in the sample). Obtain the distribution of R. [Hint: Calculate the value of R for each outcome and use the probabilities from part (a).]
| R | 0 | 1 | 2 | 3 |
| P(R) |
(d)
If a random sample of size n = 4 is selected, what is
P(X ≤ 1.5)?
[Hint: You should not have to list all possible outcomes, only those for which
x ≤ 1.5.]
In: Statistics and Probability
Consider randomly selecting a student at a large university. Let A be the event that the selected student has a Visa card, let B be the analogous event for MasterCard, and let C be the event that the selected student has an American Express card. Suppose that P(A) = 0.6,P(B) = 0.4,and P(A ∩ B) = 0.3,suppose that P(C) = 0.2,P(A ∩ C) = 0.12,P(B ∩ C) = 0.1, and P(A ∩ B ∩ C) = 0.08.
a)What is the probability that the selected student has at least one of the three types of cards?
b)What is the probability that the selected student has both a Visa card and a MasterCard but not an American Express card?
c)Calculate P(B | A)and P(A | B).
P(B | A)=
P(A | B)=
d)If we learn that the selected student has an American Express card, what is the probability that she or he also has both a Visa card and a MasterCard?
e)Given that the selected student has an American Express card, what is the probability that she or he has at least one of the other two types of cards?
In: Math