The unlevered cost of capital is ____________

Select one:

a.
the cost of capital for a firm with no debt in its capital structure.

b.
the cost of capital for a firm with no equity in its capital structure.

c.
the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.

d.
the interest tax shield times pretax net income.

e.
equal to the profit margin for a firm with some debt in its capital structure.

Dalilah Santana needs to decide between buying or leasing a computer equipment with a cost of $12.5 million. The equipment would be depreciated straight-line to zero over 5 years. The tax rate is 34%. The annual depreciation is $2. 5 million. The after-tax lease payments are $2 million per year for 5 years. The after tax cost of debt is 5.5%. Given this information the incremental cash flow of leasing instead of buying for year 0 is ___ and for years 1 to 5 is ______.

Select one:

a. $12.5 million; -$2.85 million

b. $0 million; -$2 million

c. -$12.5 million; $2.85 million

d. $0 million; -$1.32 million

The beta is a good measure of risk for an individual stock when held in a well-diversified portfolio.

Select one:

True

False

If a cost is a common cost of the segments on a segmented income statement, the cost should:

.

Anderson Corporation has two major business segments-North and South. In July, the North business segment had sales revenues of $220,000, variable expenses of $125,000, and traceable fixed expenses of $29,000. During the same month, the South business segment had sales revenues of $890,000, variable expenses of $472,000, and traceable fixed expenses of $169,000. The common fixed expenses totaled $246,000 and were allocated as follows: $123,000 to the North business segment and $123,000 to the South business segment.

The contribution margin of the South business segment is:

a. The initial cost of the extraction equipment is $2,500,000. In addition to this cost, the equipment will require a large concrete foundation at a cost of $300,000. The vendor has quoted an additional cost of $200,000 to install and test the equipment. These costs are all considered part of the cost of acquiring the equipment.

b.The useful life of the equipment is 10 years with no salvage value at the end of this period. However, for tax purposes, the equipment will be classified as 7year property and use the following MACRS depreciation allowances (half year convention) for computing tax depreciation deductions:

Percentage Of Original Year Cost

1 . . . . . . . . . . 14.3%

2 . . . . . 24.5

3 . . . . . . . . . . 17.5

4 . . . . . . . . . . 12.5

5 . . . . . . . . . . 8.9

6 . . . . . . . . . .8.9

7 . . . . . . . . . . 8.9

8 . . . . . . . . . .4.5

100.0%

c. Using the new equipment, 250 pounds of platinum can be extracted annually for the next 10 years from the previously inaccessible area of the mine.

d.The cost to extract and separate platinum from the ore is $4,000 per pound of platinum. After separation, the platinum must undergo further processing and testing that costs $1900 per pound of platinum. These are all out of pocket, variable costs.

e.Two skilled technicians will be hired to operate the new equipment. The total salary and fringe benefit expense for these two employees will be $200,000 annually over the 10 years.

f.Periodic maintenance on the equipment is expected to cost $175,000 per year.

g.The project requires an investment in additional working capital of $300,000. This working capital would be released for use elsewhere at the conclusion of the project in 10 years.

h.Environmental and safety regulations require that the mine be extensively restored and toxic substances be safely disposed at the conclusion of the project. The cost of environmental remediation work is expected to be $4,500,000

i.The current market price of platinum is 12,800 per pound

j.The tax rate is 21% and it uses an 18% after tax discount rate (minimum required rate of return)

Question:

2.

A couple was at a ski lodge and went to happy hour from 5pm to 9pm. The bar stops serving at 10pm. They leave the ski resort on a snowy night and are driving back to the hotel which is about an hour’s drive from the resort. At 12 am a passerby sees a car off the road in the trees. He finds the male unconscious and injured behind the wheel. The female is deceased. The passerby calls 911 and it takes an hour for them to come. The male arrives at the hospital at 2 am and his blood is drawn at 2:30 am. The male is found to have a BAC of 100mg/dl in plasma.

Male weighs 70 kg

Calculate if he is going to jail or not and why?

How many drinks did he consume?

Minimum # of drinks to achieve BAC?

Clue: the key thing to realize is the happy hour ended at 9 pm and the bar closed at 10 pm. therefore, what assumptions can be made about whether he was absorptive or post-absorptive?

1) A 7% Commonwealth government bond has three years to maturity. Given that the bond pays coupons semi-annually (i.e. twice a year) and a coupon payment has just been made, what is the present value (price) of the bond if the market interest rate is 9% and the face value of the bond is $100,000?

2) You have observed the returns for an investment in Telstra shares for the last five years. This shows returns of 23%, -17%, 8%, 22% and 3%. Calculate the average return, variance, and standard deviation of these shares.

3) You own a portfolio that is invested as follows: $11,600 in shares of Rendezvous hotel, $7,800 in shares of Crown Plaza, $14,900 in shares of Carlton & United Breweries, and $3,200 in shares of Domino’s Pizza . What is the portfolio weight of shares of Carlton & United Breweries?

4) One year ago, you bought a share for $36.48. You received a dividend of $1.62 per share last month and sold the share today for $40.18. What is the capital gains yield on this investment?

At a facility’s loading dock, delivery vehicles arrive randomly, starting at 8:00 AM, at a rate of 2.0 per hour. If the dock is occupied by another vehicle, the driver must park in a waiting area until the dock is clear; this occurs with probability 0.20, independent of the time of day or other variables. Identify the family and parameter(s) of each of the following random variables (for instance, “Bernoulli(0.5)”). If it is not one of our “famous” families indicate “other”; if the parameters cannot be determined indicate so.

(a) The time elapsed before the next vehicle arrives.

(b) The number of arrivals between 8:00 AM and 10:00 AM.

(c) The number of vehicles in the loading dock.

(d) Of the next 10 deliveries to arrive, the number than have to wait for the dock to clear.

(e) The number of vehicles in the waiting area.

(f) The number of deliveries made up to and including the first that has to wait for the dock to clear.

(g) The arrival time of the third delivery on a given day

Each statement describes one of the major market models or industry structures (pure competition, pure monopoly, oligopoly, or monopolistic competition) . Provide the market model or industry structure each description best fits

1. Individual firm in this market model faces a perfectly elastic demand curve.

2. Industry model where excess capacity is most likely to be found.

3. Industry structure in which one firm produces a product for which there are no good substitutes.

4. The Vegas hotel casino industry would be found in the industry or market model.

5. A pharmaceutical company would be classified in this group:

6. Market structure in which a local pizza or sandwich shop would be classified.

7. The beer industry would be classified in this industry structure.

8. The airline industry is found in this industry or market structure.

9. Industry structure in which both productive and allocative efficiency is attained in the the long run.

10.  Market structure marked by mutual interdependence among firms.

For each of the following scenarios, develop a testable hypothesis.
a. Scenario 1. Kelly and Jack are playing in the park. Jack rolls a marble
down the small playground slide. Kelly proposes the idea that the marble
would travel at a faster pace if it is rolled down the longer slide.
b. Scenario 2. Andy’s nightly chores include washing the family dishes. His
mother tends to cook everything that she prepares a bit too long. Because
of this, Andy spends a lot of swear, effort, and time washing the dishes.
He sees a commercial on televisions that claims that brand X dishwashing
detergent cuts through grease better than its competitor brand Y.
c. Scenario 3. Ali’s favorite food is microwave popcorn. She lives microwave
popcorn so much that she can’t stand to waste the un-popped kernels in
the bottom of the bag. The next time Ali goes to the grocery store she
buys all the brands of microwave popcorn that the store has.

Suppose a carnival director in a certain city imposes a patron height limit on an amusement park ride called Terror Mountain, due to safety concerns. Patrons must be at least 4 feet tall to ride Terror Mountain. Suppose patrons’ heights in this city follow a Normal distribution with a mean of 4.4 feet and a standard deviation of 0.8 feet (patrons are mostly children). Note: make sure to show all of your work in this question. Show the distribution that your random variable follows; state the probability you are asked to calculate; show any tricks you use; show how you standardize, show your rounded z-score (round to 2 decimal places), and state your found value from Table A4.

a) What is the probability that a randomly selected patron would be tall enough to ride Terror Mountain? [5 marks]

b) A group of 3 friends want to ride Terror Mountain. What is the probability that their mean height is greater than 4.5 feet? [5 marks]