Question One

Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000.

i. How much will the hotel charge members of each group for the vacation package if it could identify the members in each group?

ii. How much will the profit for AG Travel and Tour be?

iii. Since AG Travel and Tour is not able to identify members of each group, what price should it charge for each product?

iv. What will be the profit for AG Travel and Tour in the case of (iii) above?

v. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge?

vi. What profit will AG Travel and Tour make if it charges the package price found in (v) above?

Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000.

i. How much will the hotel charge members of each group for the vacation package if it could identify the members in each group?

ii. How much will the profit for AG Travel and Tour be?

iii. Since AG Travel and Tour is not able to identify members of each group, what price should it charge for each product?

iv. What will be the profit for AG Travel and Tour in the case of (iii) above?

v. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge?

vi. What profit will AG Travel and Tour make if it charges the package price found in (v) above?

Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000. i. How much will the hotel charge members of each group for the vacation package if it could identify the members in each group ii. How much will the profit for AG Travel and Tour be? iii. Since AG Travel and Tour is not able to identify members of each group, what price should it charge for each product iv. What will be the profit for AG Travel and Tour in the case of (iii) above v. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge? vi. What profit will AG Travel and Tour make if it charges the package price found in (v) above

Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000.
i. How much will the hotel charge members of each group for the vacation package if it could identify the members in each group?
ii. How much will the profit for AG Travel and Tour be?
iii. Since AG Travel and Tour is not able to identify members of each group, what price should it charge for each product?
iv. What will be the profit for AG Travel and Tour in the case of (iii) above?

v. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge?
vi. What profit will AG Travel and Tour make if it charges the package price found in (v) above?

part 1)

A farmer is constructing a rectangular pen with two additional fences across it, separating it in three equal parts as shown below. Find the maximum area that can be enclosed in this way with 3200 m of fencing.

the maximum area is  m2?

part 2)

A fence must be built to enclose a rectangular area of 134640 m^2. Fencing costs $2.75 per meter for the two sides facing north and south, and $3.40 per meter for the other two sides. Find the size and cost of the least expensive fence.

The sides facing north and south should be  m long.

The other two sides should be  m long.

The fence will cost $

part 3)

Find the dimensions of the open-topped box with a square base that has volume 4 in^3 and requires the minimum amount of material to build.

(Hint: let x be the length of the base. Express the areas of the base and of four other sides in terms of x. Minimize the sum of these areas.)

The base of the box will have sides of length  in and the height of the box will be  in.

part 4)

An open box will be made by cutting a square from each corner of a 5 ft by 8 ft piece of cardboard and then folding up the sides. What size square should be cut from each corner in order to produce a box of maximum volume?

(Hint: draw a diagram. )

part 5)

A closed box with a square box must be constructed so that its volume is 250 cm3cm3. The material for the top and the bottom of the box costs $8 per square cm. The material for the sides costs $4 per square cm.

a) Find the dimension of the box that will minimize the cost.

Answer: the base of the box will have sides of length  cm and the height of the box will be  cm.

b) Find the minimum total cost.

Answer: $

QWY company is looking to build a manufacturing plant overseas. Project = 5yrs The cost of the land for this project is £6,500,000. The land can be sold for £4,500,000 in five years’ time, irrespective of what is built on it (ignore taxes). The manufacturing plant will cost £15,000,000. The company uses straight line method of depreciation and predicts to sell the plant for £5,000,000 (ignore taxes) at the end of the project. The expectation from the project is to sell 12,000 units per year at a selling price of £9,500 per unit. The variable production costs are £8,500 per unit in each of the five years. The company will incur £1,000,000 in fixed costs in each of the five years. You are given the following market data on the firm’s securities:

Debt – 150,000 bonds outstanding, 7% coupon, paid annually; 15 years to maturity; each bond has £100 par value and currently sells at 92% of par.

Ordinary shares – 300,000 shares outstanding, market price £75 per share; the beta is 1.3

Preference shares – 20,000 shares outstanding with 5% dividend, par value £100, market price £70 per share The market risk premium is 8%, and the risk-free rate is 5%. The management foresees that the new project is riskier than a typical project they undertake. Therefore, an adjustment factor of 1.5% to the cost of capital needs to be done to account for the increased risk. The company’s tax rate is 30%.

You are required to:

i) Calculate the project’s initial cash out flow at time t = 0.

ii) Calculate the market value of debt, ordinary shares and preference shares, as well as for the company as a whole.

iii) Calculate the appropriate cost of capital to use when evaluating the project. (round it up or down to the nearest whole percentage)

iv) What is the project’s annual operating cash flow? v) What is the NPV for the project?

John’s Custom Computer Shop (JCCS) assembles computers for both individual and corporate customers. The company is organized into two divisions: Personal and Business. Once a computer is built, it is shipped to the customer. Billing for all customers is handled by the corporate Accounts Receivable Department. Accounts Receivable performs two major activities: billing and dispute resolution. Billing refers to preparing and sending the bills as well as processing the payments. Dispute resolution occurs when a customer refuses to pay, usually due to an error in billing.

The costs of the Accounts Receivable Department are allocated to the two divisions based on the number of bills prepared. Kyle, the manager of the Business division, has complained that the allocated costs from Accounts Receivable are beginning to make the business division look unprofitable and has asked you to recommend some changes to the allocation system. If he agrees with your recommendation, he will pass them on to the chief financial officer.

Data on costs and activities in the Accounts Receivable Department follow.

The Accounts Receivable Department incurred the following costs during the year.

Required:

a. Under the current allocation system, what is the cost that will be allocated from Accounts Receivable to Personal? To Business?

Allocated Costs: Personal? Business?

b. Suppose the company implements an activity-based cost system for Accounts Receivable with two activities, billing and dispute resolution. What is the cost that will be allocated from Accounts Receivable to Personal? To Business? Use the number of bills prepared as the cost driver for billing costs and the number of disputes for dispute resolution costs.

Billing for Personal? Billing for Business?

Dispute Resolution for Personal? Dispute Resolution for Business?

Environmentalists concerned about the impact of high-frequency radio transmissions on birds found that there was no evidence of a higher mortality rate among hatchlings in nests near cell towers. They based this conclusion on a test using alpha=0.05. Would they have made the same decision at alpha=0.10? How about alpha=0.01? Explain. (Hint: It would help if you write the null and alternative hypotheses).

Please show all work. Typed work only. no handwritten.