Decision

You are considering the purchase of a new vehicle. There are two options for the auto acquisition: a traditional gas-powered auto or a hybrid auto. Based on the information provided below and using net present value (NPV), you will be evaluating the two options and making a recommendation. Note: this scenario is a least cost decision. Since the decision to buy a car will only involve costs, you will be choosing the option with the highest NPV (which in this case, will be the project with the LEAST negative NPV). The assumed WACC is 10%.

Traditional Gas-Powered Auto:

                        Project Life: The autos are going to be kept for 7 years before being sold.

Cost of Auto:   $18,000

Annual Maintenance Cost: Each year, maintenance costs will be a fixed $300.

Gas Cost: The cost of gas is estimated to be an average of $3.30 per gallon over the next 7 years. The auto gets an average of 30 miles to the gallon. The auto is to be driven 16,000 miles per year.

Salvage Value: The car has an estimated salvage value of $4,000 at the end of 7 years.

Hybrid Auto:

                        Project Life: The autos are going to be kept for 7 years before being sold.

Cost of Auto:   $24,000

Annual Maintenance Cost: Each year, maintenance costs will be a fixed $450 (hybrid maintenance costs are higher due to more complex technology).

Gas Cost: The cost of gas is estimated to be an average of $3.30 per gallon over the next 7 years. The auto gets an average of 55 miles to the gallon. The auto is to be driven 16,000 miles per year.

Salvage Value: The car has an estimated salvage value of $7,000 at the end of 7 years.

Tax Credit: The US government encourages the purchase of more fuel-efficient autos, and has offered a $1,000 tax credit in the year of purchase of a qualifying vehicle. Note: The tax credit represents a cash inflow, as it represents cash saved on taxes. Assume the tax credit is taken at the END of the first year of ownership.

Required:

1. Calculate the NPV for both auto purchases.
2. Make a recommendation for which car you would purchase.
3. Assume gas prices rise to an average of $4.50 per gallon. Recalculate the NPVs and make a recommendation.

Q1. Given the following Information

Investment Expected return Standard deviation

1 0.12 0.3

2 0.15 0.5

3 0.21 0.16

4 0.24 0.21

U=E(r) - (A/2)s² , where A=4.0

a) Briefly describe the variable of E(r), s and A and how these variables affect the utility of individual. b) Based on the utility function above, which investment would you select? (shows your calculation. c) Redo part (b) if the investor is risk neutral.

Q.1: Suffixes & Prefixes (15 x 0.3 = 4.5 marks)

Q.2: The body cavities (5.5 marks)

• Body cavities are the spaces within the body that contain internal organs (viscera).

• Combining Forms (ROOT), Suffixes, & Prefixes (2.5 marks)

Q.3: Vocabulary (15 x 0.5 = 7.5 marks)

*Nephron:

*Renin:

*Erythropoietin (EPO):

*Dialysis:

*Amnion:

*Corpus luteum:

*Estrogen:

*Fertilization:

*Follicle-stimulating hormone (FSH):

*Human chorionic gonadotropin (HCG):

*Testosterone:

*Semen:

*(Cowper glands):

*Epididymides:

*The prostate

(a) Find and interpret the expected value of X

(b)Find the variance of X

(c)Find the probability that a person has 1 sibling given that they have less than 3 siblings.

(d)Find the probability that a person has at least 1 sibling OR less than 2 siblings

A sample space has four possible discrete outcomes: S={1,2,3,4} with probabilities 0.1, 0.2, 0.3, 0.4 respectively.
a) Sketch the density function fx(x)
b) Write the equation for the density function
c) Calculate the probability of outcomes between 2 and 3 inclusively
d) Sketch the distribution function Fx(x)
e) Write the equation of the distribution function
f) Use the distribution function to calculate the probability of outcomes between 2 and 3 inclusively (don't forget to use the next lower outcome for the lower limit)

Pratt is ready to graduate and leave College Park. His future employer (Ferndale Corp.) offers the following four compensation packages from which Pratt may choose. Pratt will start working for Ferndale on January 1, year 1.

Assume that the restricted stock is 1,000 shares that trade at $5 per share on the grant date (January 1, year 1) and are expected to be worth $10 per share on the vesting date at the end of year 1 and that no 83(b) election is made. Assume that the NQOs (100 options that each allow the employee to purchase 10 shares at $5 exercise price). The stock trades at $5 per share on the grant date (January 1, year 1) and is expected to be worth $10 per share on the vesting date at the end of year 1 and that the options are exercised and sold at the end of the year. Also assume that Pratt spends on average $3,000 on health-related costs that would be covered by insurance if he has coverage. Assume that Pratt's marginal tax rate is 35 percent. Assume that Pratt spends $3,000 in after-tax dollars for health expenses when he doesn't have health insurance coverage (treat this as an outflow), and that there is no effect when he has health insurance coverage. (Ignore FICA taxes and the time value of money considerations).

Required:

1. What is the after-tax value of each compensation package for year 1?
2. If Pratt’s sole consideration is maximizing after-tax value for year 1, which scheme should he select?

In an amusement park ride called The Roundup, passengers stand inside a 19.0 m -diameter rotating ring. After the ring has acquired sufficient speed, it tilts into a vertical plane

a)Suppose the ring rotates once every 4.50 s . If a rider's mass is 55.0 kg , with how much force does the ring push on her at the top of the ride?

b)Suppose the ring rotates once every 4.50 s . If a rider's mass is 55.0 kg , with how much force does the ring push on her at the bottom of the ride?

c)What is the longest rotation period of the wheel that will prevent the riders from falling off at the top?

Mercer Corporation acquired $400,000 of Park Company’s bonds on June 30, 2018, for $409,991.12. The bonds carry a 12% stated interest rate and pay interest semiannually on June 30 and December 31. The appropriate market interest rate is 11%, and the bonds are due June 30, 2021.

Required:

Tempe Office Services and Supplies (TOSS) provides various products and services in the Tempe Research Park, home to numerous high-tech and bio-tech companies. Making color copies is one of its most popular and profitable services. The controller performed a regression analysis of data from the Color Copy Department with the following results:

The regression output was based on the following data:

Required:

1. What is the variable cost per color copy for TOSS?

2. What is the fixed cost for the Color Copy Department?

3. Based on the regression output obtained by the controller, what cost formula should be used to estimate future total costs for the Color Copy Department? Enter answer as an equation in the form of y = a + bx.

5-a. Use the high-low method to estimate the variable and fixed costs for the Color Copy Department.

5-b. What cost formula should be used based on your analysis? Enter answer as an equation in the form of y = a + bx.

6. If 21,300 copies are made during January, what is the total cost predicted by each method?