10.

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash, and 200 million shares outstanding. You estimate its cost of capital is 8.0%. You forecast that it will generate revenues of $740 million and $760 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 40%, tax rate is 20%, reinvestment rate is 60%, and terminal EV/FCFF exit multiple at the end of year 2 is 8. What is your estimate of its share price? Round to one decimal place.

Tony just won the actuarial lottery. He is allowed to select one of three payout options in order to collect his winnings:(A) $575,000 payable six months from today.(B) $300,000 today plus an additional $300,000 payable two years from today.(C) $20,500 paid at the beginning of each six-month period for 40 years (with the first payment coming six months later).The nominal rate of interest, convertible semiannually, is 8%. Select the option (A, B, or C) that results in the highest present value for Tony. Evaluate all three options and show all work.

10.

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash, and 200 million shares outstanding. You estimate its cost of capital is 8.0%. You forecast that it will generate revenues of $740 million and $760 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 40%, tax rate is 20%, reinvestment rate is 60%, and terminal EV/FCFF exit multiple at the end of year 2 is 8. What is your estimate of its share price? Round to one decimal place.

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash, and 200 million shares outstanding. You estimate its cost of capital is 8.0%. You forecast that it will generate revenues of $740 million and $760 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 40%, tax rate is 20%, reinvestment rate is 60%, and terminal EV/FCFF exit multiple at the end of year 2 is 8. What is your estimate of its share price? Round to one decimal place.

Below is a table containing weekly demand and supply numbers for No-Hyper Chocolate bars for children. As an employee at Sugar Shack Kids Candy Shoppe you want to impress your boss with your economics learning and explain to her at what price the store can maximize sales and profits of the chocolate bar. You will also explain elasticity to show your boss that this is a well thought out pricing strategy. P-$10, $9, $8, $7, $6, $5, $4, $3, $2, $1, $0 Q- 0, 10, 30, 50, 70, 90, 110, 130, 150, 170, 190.  i) Using the midpoint formula (not simple), a) calculate elasticity of demand if the price is changed from $1 to $2. b) and again if changed from $5 to $4. (2+2 marks)

ii) Calculate and list the total revenue per price point in the TR column in the table above. The selling price should be $ _________ (approximately) per bar which will generate a total revenue of $ ____________. (approximately).

iii) In the graph below label and then draw the demand curve and indicate using dashed lines a change in price from $6 to $7 and comment on changes you see. (2+2 marks)

Laptops produced by a company last on an average of 5 years. The life span of each laptop follows an exponential distribution.

            (6). What is the probability that a laptop will last in less than 3 years?

            (7). What is the probability that a laptop will have the life span at least 10 years?

(8). How many laptops from 1000, would be expected to work between 4 and 7 years? (Choose the nearest integer).

     You are a bank regulator working for the Federal Reserve. It is your job to see whether banks are solvent or insolvent, liquid or illiquid. Find the net worth of each bank below and fit them into one of the following four categories. Briefly explain your answers.

I.Liquid and Solvent (best).

II.Illiquid and solvent (probably needs short-term loans from other banks or from the Fed).

III.Liquid but insolvent (should be shut down immediately; could fool people for a while if not for your good efforts).

Illiquid and insolvent (should be shut down immediately

Mary-Lou is a 75-year-old widow, who lost her husband to cancer over a year ago. Her family and friends have noticed that she has been very teary, has low self-esteem and has lost interest in the things she used to love such as going to bingo with her friends and gardening. Her family initially put this down to the loss of her husband and thought it would pass with time. However, they are now getting really concerned as they have noticed that her mood is not improving still. When asked by her daughter if she is sleeping well, she says she has been drinking wine every night to help her go to sleep. It makes her feel happy and relaxed. What started as one glass a night has now increased to two or three glasses a night, and she has also started drinking during the day. Her daughter has noticed that her mum’s face always appears flushed and that she has had quite a few colds lately. Mary-Lou is also losing her balance and experiencing mood swings. Her daughter is worried that she is relying too heavily on alcohol and fears that she is starting to get short-term memory loss from the alcohol consumption. She has been forgetting things such as where she put her keys, whether she turned on the washing machine, why she opened the fridge and forgetting the topic of conversation when talking with her daughter on the phone. Mary-Lou has also been getting disorientated and getting lost when she goes out on her daily walks. A neighbor rang her daughter one day to tell her that she found Mary-Lou wandering around aimlessly, and when questioned what she was doing Mary-Lou snapped and said she was trying to get home. Her daughter decided it was time to take Mary-Lou to the local GP to work out what was going on with her. After listening to the signs and symptoms Mary-Lou was experiencing, the GP diagnosed her with depression and prescribed 50 mg of Fluoxetine/Prozac daily. Based on the results of clinical and radiological assessments, the GP determined that she had early onset Alzheimer’s disease. He prescribed a cholinesterase inhibitor and gave them information on support groups and tips on what to do from here on in. He also prescribed 10 mg of Diazepam daily to help with the withdrawals from alcohol abuse.

a) Identify and explain two pharmacokinetic factors that are characteristic of/specific to Mary- Lou’s antidepressant medication. Discuss how her age impacts the pharmacokinetics of her medication.

b) Explain what specific considerations need to be made in the present scenario, when two drugs are administered simultaneously.

1. Suppose that under the terms of an international agreement, U.S. CO2 emissions are to be reduced by 200 million tons and those of Brazil by 50 million tons.

Here are the policy options that the United States and Brazil have to reduce their emissions:

United States:

Policy Options: Total Emissions Reduction: Cost:

A: Efficient Machinery 60 12

B: Reforestation 40 20

C: Replace coal-fueled power plants 120 30

Brazil:

A: Efficient Machinery 50 20

B: Reforestation 30 3

C: Replace coal-fueled power plants 40 8

A) which policies are most efficient for each country in meeting their reduction targets? How much will be reduced using each option, at which cost, if the two countries must operate independently? Assume that any of the policy options can be partially implemented at a constant marginal cost. For example, the United States could choose to reduce carbon emissions with efficient machinery by 10 million tons at a cost of $2 billion. (Hint: start by calculating the average cost of carbon reduction in dollars per ton for each of the six policies)

B) Suppose a market of transferable permits allow the United States and Brazil to trade permits to emit CO2. Who has an interest in buyng permits? Who has an interest in selling permits? What agreement can be reached between the United States and Brazil so that they can meet the overall emissions reduction target of 250 million tons at the least cost? Can you estimate a range for the price of a permit to emit one ton of carbon? (Hint: use your average cost calculations for the first part of the questions)

Q. 1 (Max. Marks:30) John Smith, a college student, plans to sell CD players over the internet & by mail order during the semester to help pay his expenses. He buys the players for $29 & sells them for $50. If payment by cheque accompanies the mail order (estimated to be 40% of sales), he gives 10% discount. If customers include a credit card number for either internet or mail order (estimated 30% of sales), they receive 5% discount. The remaining collections are estimated as follows: One month following 15% Two months following 8% Three months following 5% Uncollectable 2% Sales forecast are as follows: September 150 units October 250 units November 350 units December 450 units January Business terminated John plans to pay his supplier 60% in the month of purchase, and 40% in the following month. A 5% discount is granted on payments made in the month in the month of purchase. However, John will not be able to take any discounts on the September purchases because of cashflow constraints. All September purchases will be paid for in October. John has 50 players on hand (purchased in August and to be paid in September), and plans to maintain enough end-of-month inventory to meet 60% of the next month's sales. John also wished to maintain a closing cash balance of $1,500 in the bank once the business commences in September. The current interest rate on short term loans is 3.5% pa. 3 Required: Prepare schedules for monthly budgeted cash receipts & cash disbursements & the cash budget . During which month will John need to organise a short- term loan & for how much?