In this problem, assume that the distribution of differences is approximately normal. Note: For degrees of freedom d.f. not in the Student's t table, use the closest d.f. that is smaller. In some situations, this choice of d.f. may increase the P-value by a small amount and therefore produce a slightly more "conservative" answer.

Are America's top chief executive officers (CEOs) really worth all that money? One way to answer this question is to look at row B, the annual company percentage increase in revenue, versus row A, the CEO's annual percentage salary increase in that same company. Suppose a random sample of companies yielded the following data:

Do these data indicate that the population mean percentage increase in corporate revenue (row B) is different from the population mean percentage increase in CEO salary? Use a 5% level of significance. (Let d = B − A.)

(a) What is the level of significance?


State the null and alternate hypotheses.

H₀: μ_d = 0; H₁: μ_d > 0H₀: μ_d > 0; H₁: μ_d = 0    H₀: μ_d = 0; H₁: μ_d < 0H₀: μ_d = 0; H₁: μ_d ≠ 0H₀: μ_d ≠ 0; H₁: μ_d = 0

(b) What sampling distribution will you use? What assumptions are you making?

The Student's t. We assume that d has an approximately normal distribution.The Student's t. We assume that d has an approximately uniform distribution.    The standard normal. We assume that d has an approximately uniform distribution.The standard normal. We assume that d has an approximately normal distribution.

What is the value of the sample test statistic? (Round your answer to three decimal places.)


(c) Find (or estimate) the P-value.

P-value > 0.5000.250 < P-value < 0.500    0.100 < P-value < 0.2500.050 < P-value < 0.1000.010 < P-value < 0.050P-value < 0.010

Sketch the sampling distribution and show the area corresponding to the P-value.

(d) Based on your answers in parts (a) to (c), will you reject or fail to reject the null hypothesis? Are the data statistically significant at level α?

Since the P-value ≤ α, we fail to reject H₀. The data are statistically significant.Since the P-value > α, we reject H₀. The data are not statistically significant.    Since the P-value > α, we fail to reject H₀. The data are not statistically significant.Since the P-value ≤ α, we reject H₀. The data are statistically significant.

(e) Interpret your conclusion in the context of the application.

Reject H₀. At the 5% level of significance, the evidence is sufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.Reject H₀. At the 5% level of significance, the evidence is insufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.    Fail to reject H₀. At the 5% level of significance, the evidence is insufficient to claim a difference in population mean percentage increases for corporate revenue and CEO salary.Fail to reject H₀. At the 5% level of significance, the e

Suppose that you are part of the Management team at Porsche. Suppose that it is the end of December 2019 and a novel coronavirus that causes a respiratory illness was identified in Wuhan City, Hubei Province, China. The illness was reported to the World Health Organization and there is heightened uncertainty around the Globe.

You (as part of the management team) are reviewing Porsche’s hedging strategy for the cash flows it expects to obtain from vehicle sales in North America during the calendar year 2020. Assume that Porsche’s management entertains three scenarios:

Scenario 1 (Expected): The expected volume of North American sales in 2020 is 35,000 vehicles.

Scenario 2 (Pandemic): The low-sales scenario is 50% lower than the expected sales volume.

Scenario 3 (High Growth): The high-sales scenario is 20% higher than the expected sales volume.

Assume, in each scenario, that the average sales price per vehicle is $85,000 and that all sales are realised at the end of December 2020. All variable costs incurred by producing an additional vehicle to be sold in North America in 2020 are billed in euros (€) and amount to €55,000 per vehicle. Shipping an additional vehicle to be sold in North America in 2020 are billed in € and amount to €3,000 per vehicle.

The current spot exchange rate is (bid-ask) $1.11/€ - $1.12/€ and forward bid-ask is $1.18/€ - $1.185/€. The option premium is 2.5% of US$ strike price, and option strike price is $1.085/€. Your finance team made the following forecasts about the exchange rates at the end of December 2020:

• bid-ask will be $1.45/€ - $1.465/€ if the investors (and speculators) consider the euro (€) a safe haven currency during the pandemic.
• bid-ask will be $0.88/€-$0.90/€ if the investors (and speculators) consider the U.S. dollar ($) a safe haven currency during the pandemic

1. You decided not to hedge Porsche’s currency exposure. If the expected final sales volume is

35,000, what are your total revenues

1. if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€? Let’s call this the baseline scenario.
2. if the investors consider the euro a safe haven currency during the pandemic? How does this compare to the baseline case?
3. if the investors consider the U.S. dollar a safe haven currency during the pandemic? How does this compare to the baseline case?

2. Assume that you and the Porsche’s management team decided to hedge using forward contracts. Assume that the expected final sales volume is 35,000. What are your total benefit/cost and the percentage benefit/cost from hedging (compared to no hedging)

a) if the exchange rate (bid-ask) remains at $1.11/€ - $1.12/€?

b) if the investors consider the U.S. dollar a safe haven currency during the pandemic?

Questions 1 - 6 are based on the following information: B A US multinational corporation has operations in Bolivia through which it plans to sell a new product of 500,000 cans of beans per year for the next 3 years, at a price of BOB 4 per can after incurring a variable cost of BOB 2.50 per can. The company will also incur a fixed cost of $120,000 per year. The company has invested $900,000 today in manufacturing equipment for its Bolivian operations, which will be depreciated to $0 at the end of its 3-year life. The corporation's required rate of return is 20 % and has a tax rate of 25 %. The spot rate was BOB 6.91/$ before it unexpectedly changed to BOB 7.25/$. 1. What is the value of the Bolivian operations prior to the unexpected change in the spot rate assuming the operations have a 3-year life only? (round to the nearest dollar) A). US$237,699 B). US$166,903 C). US$107,453 D). US$159,076 E). None of the above

BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn’t equipped to do. Estimates regarding each machine are provided below.

Click here to view the factor table.

Calculate the net present value and profitability index of each machine. Assume a 9% discount rate.

2. Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as follows.

3. The January 1, 2020, inventory of HD-240 is 2,120 units. Management desires an ending inventory each quarter equal to 40% of the next quarter’s sales. Sales in the first quarter of 2021 are expected to be 25% higher than sales in the same quarter in 2020.

Prepare quarterly production budgets for each quarter and in total for 2020.

Rodriguez, Inc., is preparing its direct labor budget for 2020 from the following production budget based on a calendar year.

Each unit requires 1.80 hours of direct labor.

Prepare a direct labor budget for 2020. Wage rates are expected to be $18 for the first 2 quarters and $20 for quarters 3 and 4. (Round Direct labor time per unit answers to 2 decimal places, e.g. 52.50.)

The stocks included in the S and P 500 are those of large publicity held companies that trade on either the New York Stock exchange or the NASDAQ. In 2008, the Sand P 500 was down 38.5%, but what about financial compensation (salary, bonuses, stock options, etc.) to the 500 CEOs that run the companies? To learn more about the mean CEO compensation, an alphabetical list of the 500 companies was obtained and ordered from 1 (3M) to 500 (Zions Bancorp). Next, the random number table was used to select a random number from 1 to 50. The number was selected was 10. then, the companies numbered 10,60,110,160,210,260,310,360,410 and 460 were investigated and the total CEO compensation recorded. The data stored in are as follows:

Number Company Compensation

10 Alfac 10,783,232

60 Big Lota 9,862, 262

110 Comerica 4,108,245

160 EMC 13,874, 262

210 Harley Davidson 6,048,027

260 Kohl's 11,638,049

310 Molson Coors Brewing 5,558,499

360 Pfizer 6,629,955

410 Sigma Aldrich 3,983,596

460 United Parcel Service 5,168, 664

a). Construct a 95% confidence interval estimate for the mean 2008 compensation for CEOs of s and p 500 companies

b). Construct a 99% confidence interval estimate for the mean 2008 compensation for CEOs of s and p 500 companies'

c). comment on the effect that changing the level of confidence had on your answers in a) and b).

Question 12

The following facts pertain to a non-cancelable lease agreement between Shamrock Leasing Company and Pharoah Company, a lessee.

1. Compute the amount of the lease receivable at commencement of the lease. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round answer to 2 decimal places, e.g. 5,275.15.)

2. Suppose the collectibility of the lease payments was not probable for Shamrock. Prepare all necessary journal entries for the company in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.15.)

SS Moving Company reported $400,000 in credit sales in December 2020. The company has historically seen losses (bad debt) of approximately 1% of all credit sales. On December 31, 2020, the Accounts Receivable balance is $201,000. SS’s accountants prepared the following Aging of Accounts Receivable as of December 31, 2020:

--------------------------Number of days past due-----------------------------

Total Balance 0-30 31-60 61-90 Over 90 Accts.

Receivable $201,000 $60,000 $90,000 $50,000 $1,000

Estimated % uncollectible 1% 5% 15% 50%

Assuming that SS Moving Company uses the income statement approach (percentage of credit sales method) to record the bad debt expense each period, record the journal entry for December 2020 in each of the following scenarios (you need two journal entries and they can both be in the space provided).

A) The current balance in the Allowance for Doubtful Accounts is $3,000.

B) The current balance in the Allowance for Doubtful Accounts is $10,000. You should show your journal entries AND your calculations in this space...

Here are comparative balance sheets for Velo Company.

Additional information:

Prepare a statement of cash flows for 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000, or in parenthesis e.g. (15,000).)

Gruman Company purchased a machine for $198,000 on January 2, 2019. It made the following estimates:

In 2019, Gruman uses the machine for 2,000 hours and produces 50,000 units. In 2020, Gruman uses the machine for 1,200 hours and produces 32,000 units. If required, round your final answers to the nearest dollar.

Required:

1. Compute the depreciation for 2019 and 2020 under each of the following methods:

1. Straight-line method

   2019	$
   2020	$

2. Sum-of-the-years'-digits method

   2019	$
   2020	$

3. Double-declining-balance method

   2019	$
   2020	$

4. Activity method based on hours worked

   2019	$
   2020	$

5. Activity method based on units of output

   2019	$
   2020	$

2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020?

1. Straight-line method

   2019	$
   2020	$

2. Sum-of-the-years'-digits method

   2019	$
   2020	$

3. Double-declining-balance method

   2019	$
   2020	$

4. Activity method based on hours worked

   2019	$
   2020	$

5. Activity method based on units of output

   2019	$
   2020	$

3. If Gruman used a service life of 8 years or 15,000 hours and a residual value of $9,000 , what would be the effect on the following under the straight-line, sum-of-the-years'-digits, and double-declining-balance depreciation methods?

Depreciation expense

1. Straight-line method

   2019	$
   2020	$

2. Sum-of-the-years'-digits method

   2019	$
   2020	$

3. Double-declining-balance method

   2019	$
   2020	$

Book value

1. Straight-line method

   2019	$
   2020	$

2. Sum-of-the-years'-digits method

   2019	$
   2020	$

3. Double-declining-balance method

   2019	$
   2020	$

Company A, today expects to earn $8.50 per share for each of the future operating periods (beginning at Time 1), today if the firm makes no new investments and returns the earnings as dividends to the shareholders. However, the CEO has discovered an opportunity to retain and invest 20 percent of the earnings beginning three years from today. This opportunity to invest will continue for each period indefinitely. He expects to earn 10 percent on this new equity investment, the return beginning one year after each investment is made. The firm’s equity discount rate is 12 percent.

a. What is the price per share of Company A's stock without making the new investment?

b. If the new investment is expected to be made, per the preceding information, what would the price of the stock be now?

c. Suppose the company could increase the investment in the project by whatever amount it chose. What would the retention ratio need to be to make this project attractive?