1) Suppose there are 100 workers in the economy in which all workers must choose to work a risky or a safe job. Worker 1’s reservation price for accepting the risky job is $1; worker 2’s reservation price is $2, and so on. Because of technological reasons, there are only 15 risky jobs.

a) What is the equilibrium wage differential between safe and risky jobs?

b) Which workers will be employed at the risky firm? (i.e., worker #X – worker #Y)

c) Suppose now that an advertising campaign, paid for by the employers who offer risky jobs, stresses the excitement associated with “the thrill of injury,” and this campaign changes the attitudes of the work force toward being employed in a risky job. Worker 1 now has a reservation price of -$10 (that is, she is willing to pay $10 for the right to work in the risky job); worker 2’s reservation price is -$9, and so on. There are still only 15 risky jobs. What is the new equilibrium wage differential?

Steve bought ABC stocks on margin, while Larry shorted it. Suppose the share price of ABC at the time of their trading was $100. Initial margin was 50% for margin trading and short selling. One year later, ABC’s per-share price had risen to $115 and they both closed their positions. ABC issued $2-per-share dividends during the year. Interests on margin loans were negligible. Answer the following questions. 1. What was Steve’s rate of return on his investment? (Note: these questions do not require knowledge of their initial investment. You can use one share as the basis of your calculation.) 2. What was Larry’s rate of return on his investment? 3. Suppose right after the margin trade (no dividends announced or paid), there was a big stock price movement and Steve got a margin call. If the maintenance margin was 30%, ABC’s shares must have dropped below price P per share. Find P

1 - On a common-sized income statement, 100% is the

a.net income

b.net cost of goods sold

c.sales

d.gross profit

2- The numerator of the return on total assets is

a.net income plus tax expense

b.net income plus interest expense

c.net income

d.net income minus preferred dividends

3-

The purpose of an audit is to

a.determine whether or not a company is a good investment

b.determine whether or not a company complies with corporate social responsibility

c.determine whether or not a company is a good credit risk

d.render an opinion on the fairness of the statements

4-  

The price-earnings ratio on common stock is calculated as

a.earnings per share of common stock, divided by market price per share of common stock

b.dividends per share of common stock, divided by earnings per share on common stock

c.market price per share of common stock, divided by earnings per share on common stock

d.market price per share of common stock, divided by dividends per share of common stock

5-

The Olsen Mining Company has been very successful in the last five years. Its $1,000 par value convertible bonds have a conversion ratio of 34. The bonds have a quoted interest rate of 9 percent a year. The firm’s common stock is currently selling for $46.10 per share. The current bond price has a conversion premium of $10 over the conversion value. a. What is the current price of the bond? (Do not round intermediate calculations and round your final answer to 2 decimal places.) b. What is the current yield on the bond (annual interest divided by the bond’s market price)? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) c. If the common stock price goes down to $25.90 and the conversion premium goes up to $100, what will be the new current yield on the bond? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

1. Stock Options Worksheet - Pfizer

2. Identify the stock and its ticker symbol that you are using in this assignment. Provide its last traded price.

3. Company Name	Ticker Symbol	Last Traded Price

4. Obtain one of each for Call Option quotes and Put Option quotes. The TWO quotes must meet the following two criteria:
   1. The strike price is approximately equal to the stock’s last traded price you wrote down earlier on your note paper.
   2. The expiry date is in three to six weeks.

5. Call Option

   Expiry (Month/Year)
   Strike	Symbol	Last	Open Interest

   Put Option

   Expiry (Month/Year)
   Strike	Symbol	Last	Open Interest

6. Answer the following questions:
   1. What are the intrinsic values of each option?
7. 2. What are the option time values of each option?
8. 3. Assume each option’s contract size is 100 hundred shares. Given the holdings of this stock in your individual portfolio, describe an option strategy utilizing calls. Discuss the costs incurred and possible benefits of such a strategy.  

Problem 1. ( JUST NEED PROBLEM 2 SOLVED)

Home’s demand curve for wheat is

D = 100-20P. Its supply curve is. S = 20 + 20P.

Suppose that Home is a small country.

a. Graph the demand and supply curves.

2. In the absence of trade, what would the price of wheat be in Home?
3. The price of wheat in the world market is 1.5. What is the free-trade equilibrium price of wheat in Home?
4. Determine the amount of domestic production, domestic consumption, and imports of wheat in Home under free trade.

Problem 2

In the example of problem 1, suppose Home imposes a specific tariff of 0.25 on wheat imports.

1. Determine and graph the effects of the tariff on the price of wheat and the quantity of wheat supplied and demanded in Home.

2. Determine using a graph the effect of the tariff on the welfare of each of the following groups:
   1. Home import-competing producers; (2) Home consumers; (3) the Home government.

3. Calculate, using geometric techniques, the consumption distortion loss, the production distortion loss, and the net welfare effect of the tariff.

Situation: The Ipod Touch has been out for two years now and a lot of data has been collected.

Relevant Relationship:
There is a functional relationship between Price of an IPod Touch,pp and Weekly Demand,ss.
Below is a table of data that have been collected

A.. Find the linear model that best fits this data using regression and enter the model below
(for entry round the linear parameter value to nearest 0.01 and constant parameter to nearest 1)
s=T(p)=s=T(p)=   

Now answer these two questions using the UNROUNDED model parameters


B. What does the model predict will be the weekly demand if the price of an ipod touch is $249 ?  (nearest 100)

C. According to the model at what should the price be set in order to have a weekly demand of 189,600 ipod Touches? $ (nearest $1)

Cleveland Enterprises is considering the addition of a new product line.  The firm would not need additional factory space, but it would require the purchase of $2.45 million of equipment installed.  The equipment would be depreciated using a 7-year accelerated depreciation schedule.  Additional inventory of 13% of the projected increase in next year’s sales would be necessary prior to each year of operation, but the entire value will be recovered at the end of the project.  The firm expects to sell 340,000 units during the first year of the project, increasing to 355,000 units during the next three years before decreasing to 100,000 during the fifth and final year of the project.  The product is expected to be obsolete at that point.  The expected sales price is $13 per unit with a variable cost of $6 per unit during the first year of operations.  Variable costs will increase by 5% per year, but the sales price remains fixed.  Fixed costs are estimated at $610,000 during the first year, but will increase by 6% per year.  The firm’s tax rate is 21%.  The equipment has an estimated salvage value of $500,000.

What is the estimated net present value of the project assuming a required return of 18%?

Management of the firm is predicting the possibility of an economic boom during the upcoming years.  If so, the projected sales would be 380,000 units per year with a price of $14.  However, it would also increase labor costs giving the firm a variable cost per unit of $8 in the first year, with subsequent increases as discussed above.  

What is the estimated net present value of the project assuming an economic boom?

Based on your calculations, what recommendations would you make to the management of Cleveland Enterprises?

**NOTE FROM STUDENT: Can you please show all the formulas entered in the spreadsheet so I may enter them in as well and understand how to do them?***

Cleveland Enterprises is considering the addition of a new product line.  The firm would not need additional factory space, but it would require the purchase of $2.45 million of equipment installed.  The equipment would be depreciated using a 7-year accelerated depreciation schedule.  Additional inventory of 13% of the projected increase in next year’s sales would be necessary prior to each year of operation, but the entire value will be recovered at the end of the project.  The firm expects to sell 340,000 units during the first year of the project, increasing to 355,000 units during the next three years before decreasing to 100,000 during the fifth and final year of the project.  The product is expected to be obsolete at that point.  The expected sales price is $13 per unit with a variable cost of $6 per unit during the first year of operations.  Variable costs will increase by 5% per year, but the sales price remains fixed.  Fixed costs are estimated at $610,000 during the first year, but will increase by 6% per year.  The firm’s tax rate is 21%.  The equipment has an estimated salvage value of $500,000.

What is the estimated net present value of the project assuming a required return of 18%?

Management of the firm is predicting the possibility of an economic boom during the upcoming years.  If so, the projected sales would be 380,000 units per year with a price of $14.  However, it would also increase labor costs giving the firm a variable cost per unit of $8 in the first year, with subsequent increases as discussed above.  

What is the estimated net present value of the project assuming an economic boom?

Based on your calculations, what recommendations would you make to the management of Cleveland Enterprises?

***Can you please write in the formulas on how you were about to determine this on a spreadsheet, I need to understand and input the formulas***

Cleveland Enterprises is considering the addition of a new product line.  The firm would not need additional factory space, but it would require the purchase of $2.45 million of equipment installed.  The equipment would be depreciated using a 7-year accelerated depreciation schedule.  Additional inventory of 13% of the projected increase in next year’s sales would be necessary prior to each year of operation, but the entire value will be recovered at the end of the project.  The firm expects to sell 340,000 units during the first year of the project, increasing to 355,000 units during the next three years before decreasing to 100,000 during the fifth and final year of the project.  The product is expected to be obsolete at that point.  The expected sales price is $13 per unit with a variable cost of $6 per unit during the first year of operations.  Variable costs will increase by 5% per year, but the sales price remains fixed.  Fixed costs are estimated at $610,000 during the first year, but will increase by 6% per year.  The firm’s tax rate is 21%.  The equipment has an estimated salvage value of $500,000.

What is the estimated net present value of the project assuming a required return of 18%?

Management of the firm is predicting the possibility of an economic boom during the upcoming years.  If so, the projected sales would be 380,000 units per year with a price of $14.  However, it would also increase labor costs giving the firm a variable cost per unit of $8 in the first year, with subsequent increases as discussed above.  

What is the estimated net present value of the project assuming an economic boom?

Based on your calculations, what recommendations would you make to the management of Cleveland Enterprises?

**NOTE FROM STUDENT: Can you please show all the formulas entered in the spreadsheet so I may enter them in as well and understand how to do them?***