4.

If you buy a call option of Amazon Inc. with an exercise price of $2000 for a premium of $210.

Draw payoff and profit of call option buyer and call option writer at expiration date graphically.

(use a ruler and draw it by hand if it is hard for you to do it on your computer)

Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company

Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows:

a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.

b. Prepare a cost of quality report. Assume that sales are $3,550,000. If required, round percentages to one decimal place.

c. Prepare a value-added/non-value-added analysis.

d. What percentage of total costs of quality are considered to be value-added?
72.0%

Question 1

At the beginning of 1976 a relative migrated to Australia with $10,000 ‘spare cash’. The money could have been used to buy a block of land or invested in an ‘at-call’ savings account that paid interest at 8% p.a. compounded half-yearly. At the end of 2018, the land was valued by a local real estate agent who was keen to list the property on behalf of his agency, at a price of approximately $400,000.

Required:

1. Which of the alternative investments had the higher value at the end of 2018? Justify your response with appropriate calculations.

(Students should write no more than 50 words for this part of the question).

2. i)Assuming the half-yearly compounding of interest, what was the rate of growth in the land value over the total period expressed as a nominal annual interest rate?

2. What was the rate of growth in the land value over the total period expressed as an effective interest rate?

3. What was the rate of growth in the ‘at-call’ savings account over the total period expressed as an effective interest rate?

3. What investment in the savings account would have been necessary at the beginning

of 1976, to have the same value as the land was worth at the end of 2018? Briefly explain your response.

(Students should write no more than 50 words for this part of the question).

4. Recognising both your finance skills and ‘common sense’, one of your friends has asked whether your calculations above allow you to determine which of the investments would have been ‘better’ to make at the beginning of 1976, given the outcomes discussed above at the end of 2018. Provide a well-reasoned, complete response to this question taking into consideration various financial and non-financial issues.

(Students should write no more than 100 words for this part of the question).

e. i)You have now been provided further information that the investment in the land required the owner to make continuous annual payments of council rates over the total period held. These amounts are determined in accordance with Table 1 below. Assuming the land was sold at the end of 2018 (but ignoring the expected sale value), what is the adjusted present value at the beginning of 1976 of all the cash outflows relating to the acquisition and continued ownership of the land?

Note:     For the purposes of this question assume the following:

1. Rates are payable on the anniversary of each year of land ownership.

2. The annual amount of the rates are determined in accordance with the following formula;

Initial Purchase Cost ($) x Factor (times) x Relevant Percentage (%)

3. Rates are still payable for the 2018 year (for the full year).

Table 1

2. Taking into consideration the calculations from part e) i) of this question, what is the rate of growth in the land value over the total period expressed as an effective interest rate?

(Students should write no more than 50 words for this part of the question).

When you order a Lyft, the probability that you get a Subaru is 0.4. Further, the probability that you get a white car is 0.3, and that you will get a white Subaru is 0.2. Find the probability that,

1. You will get a non-white, non-Subaru car
2. You will get a white, non-Subaru car

On January 1, 2018, the Allegheny Corporation purchased machinery for $146,000. The estimated service life of the machinery is 10 years and the estimated residual value is $3,000. The machine is expected to produce 220,000 units during its life.

Required:
Calculate depreciation for 2018 and 2019 using each of the following methods.

1. Straight line.
2. Sum-of-the-years'-digits.
3. Double-declining balance.
4. One hundred fifty percent declining balance.
5. Units of production (units produced in 2018, 38,000; units produced in 2019, 33,000).

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3
• Required 4
• Required 5

Calculate depreciation for 2018 and 2019 using straight line method.

Calculate depreciation for 2018 and 2019 using sum-of-the-years' digits.

Calculate depreciation for 2018 and 2019 using double-declining balance.

Calculate depreciation for 2018 and 2019 using one hundred fifty percent declining balance.

Calculate depreciation for 2018 and 2019 using units of production (units produced in 2018, 38,000; units produced in 2019, 33,000). (Round "Depreciation per unit rate" answers to 2 decimal places.)

Financial information for Powell Panther Corporation is shown below:

Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)

Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars)

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest dollar, if necessary. Negative values, if any, should be indicated by a minus sign.

1. What was net operating working capital for 2017 and 2018? Assume the firm has no excess cash.

   2017:  $  

   2018:  $  

2. What was the 2018 free cash flow?

   $  

3. How would you explain the large increase in 2018 dividends?
   
   1. The large increase in net income from 2017 to 2018 explains the large increase in 2018 dividends.
   2. The large increase in EBIT from 2017 to 2018 explains the large increase in 2018 dividends.
   3. The large increase in sales from 2017 to 2018 explains the large increase in 2018 dividends.
   4. The large increase in free cash flow from 2017 to 2018 explains the large increase in 2018 dividends.
   5. The large increase in retained earnings from 2017 to 2018 explains the large increase in 2018 dividends.

Externality: A restaurant owner is considering a ban on smoking in his restaurant. The table below lists the daily-expected benefits received by the owner from smokers and non-smokers. There are three choices, ban, allow or set up a separate smoking area. Assume all parties can negotiate at zero cost.

1. Suppose the restaurant owner has the property rights to allow, ban or provide a smoking area in the restaurant. What will happen? Explain.

2. Suppose the non-smokers have property rights to allow, ban or provide a smoking area in the restaurant. What will happen? Explain.

3. Suppose the non-smoking benefit for banning smoking increases from $220 to $250 per day. If smokers own the rights to smoke what will happen? Explain.

100 students were asked to ll out a form with three survey questions, as follows: H: Honor Roll
C: Club membership (Robotics Club or Gaming Club)
D: Double-major

Survey results were as follows:

28 checked H (possibly non-exclusively), 26 checked C (possibly non-exclusively), 14 checked D (possibly non-exclusively)

8 checked H and C (possibly. non-exclusively), 4 checked H and D (possibly. non- exclusively), 3 checked C and D (possibly. non-exclusively)

And 2 checked all three statements.
1. How many students didn't check any of the boxes?

2. How many students checked exactly two boxes?
3. How many students checked at LEAST two boxes?

4. How many students checked the Clubs box only? [d]

In the context of public goods, what is meant by non-rivalry versus rivalry in consumption? What is meant by non-excludability versus excludability in consumption? Give an example of a commodity that is both non-rival and non-excludable? Could a commodity have one of these properties without the other? What is an open access resource? How does it differ from a private good? How does it differ from a public good? Could private provision of a public good occur? Give an example of how that might come about. If there were private provision of a public good, would the level of that provision be socially optimal? Explain your reasoning. 2 What is the marginal cost of supplying an extra person with a good that is non-rival? If there were private provision of a good that is non-rival, would the amount supplied be socially optimal? Explain your reasoning. (Please type all the answer,do not handwriting, thanks！）