I.What factors influence a company’s WACC?

J. Should the company use the overall, or composite, WACC as the hurdle rate for each of its division’s?

k. What procedures are used to determine the risk-adjusted cost of capital for a particular division? What approaches are used to measure a division’s beta?

m. What are three types of project risk? How is each type of risk used?

n. Explain in words why new common stock that is raised externally has a higher percentage cost than equity that is raised internally as retained earnings.

On February 15, 2018, Leo purchased and placed in service a new car that cost $54,600. The business use percentage for the car is always 100%. He does not take the additional first-year depreciation or any § 179. If required, round your answers to the nearest dollar. Click here to access the depreciation table of the textbook. Click here to access the limits for certain automobiles.

a. What MACRS convention applies to the new car? Half-year

b. Is the automobile considered "listed property"? Yes

c. Leo's cost recovery deduction in 2018 is $ and for 2019 is $.

CoolTech Inc. is considering a new refrigerated warehouse which will cost $7,000,000 and is expected to have revenues of $900,000 at the end of each of the next 5 years and expenses of $200,000 for years 1-3 and $250,000 for years 4-5. The warehouse is depreciated for 40 years on a straight line basis and expects to have a salvage value of $1,000,000. At the end of 5 years, they expect to sell the warehouse for $6,000,000. Working capital requirements will be $125,000 up front. CoolTech’s tax rate is 40% and their cost of capital is 12%.

CoolTech’s IRR is __________%. Answer in percentage, rounded to two decimal places.

1. A random sample of 100 construction workers found that the average monthly salary was $21,310 USD with a standard deviation of $2405. A random sample of 81 Office workers found that the average salary was $27,041 with a standard deviation of $4651.

a.) Calculate a 95% confidence interval for the true mean difference between office workers’ salaries and construction workers’ salaries.

b.) Verify your conditions for inference

c.) Interpret your confidence interval with a sentence in context.

d.) According to your confidence interval, is there significant evidence of a difference between construction workers and office workers salaries?

2. A random sample of 100 patients with virus found that it was fatal in 18 people and 182 people eventually made a full recovery. In a random sample of 300 SARS patients, 34 died.  

a.) Verify your conditions for inference

b.) Calculate a 90% confidence interval for the true mean difference in the proportion of virus cases that were fatal and the proportion of SARS cases that were fatal.

c.) If you were to create a 95% confidence interval, would it be wider or narrower?

On January 1, Year 1, Company ABC hired a general contractor to begin construction of a new office building. ABC negotiated a $900,000, five-year, 10% loan on January 1, Year 1, to finance construction. Payments made to the general contractor for the building during Year 1 amount to $1,000,000. Payments were made evenly throughout the year. Construction is completed at the end of Year 1, and ABC moves in and begins using the building on January 1, Year 2. The building is estimated to have a 40-year life and no residual value. On December 31, Year 3, ABC determines that the market value for building is $970,000. On December 31, Year 5, ABC estimates the market value for the building to be $950,000.

Required: Use the two alternative methods allowed by IAS 16 with respect to the measurement of property, plant, and equipment subsequent to initial recognition to determine:

1. THe carrying amount of the building that would be reported on the balance sheet at the end of Year 1-5

2. The amounts to be reported in net income related to this building for Years 1-5

It essential that the population of rebars to be used in a lightweight concrete application should have a yield strength of 17 psi. From the rebars delivered to the construction site by the supplier, the engineer ordered that a sample of 10 rebars to be randomly selected and tested for yield strength. The sample of 10 rebars yielded a value of 15.9 psi. Suppose it is known that yield strength is normally distributed and the variance of rebar strength is 5.0 psi.

a) Which specific statistical inference method(s) can be used to assess whether the rebars delivered to the construction site can be used in a lightweight concrete application? State how you chose this method. Provide a concise justification of your rationale.

b)Assess whether the rebars delivered to the construction site can be used in a lightweight concrete application using the seven-step method using the �-value method and a significance level of 0.05.

c)Develop and interpret the confidence interval linked to your analysis in 2(b).

d)If the true yield strength of rebars is 18 psi, what is the probability that the test will fail to capture this shift in the mean?

1. In California, medical care costs for back injuries are 43 percent higher when part of a workers’ compensation claim than when part of a group medical insurance plan. Critics of workers’ compensation claim that this difference can be attributed to abuse of the system by both injured employees and their physicians. Proponents of workers’ compensation argue that the higher costs indicate exactly the opposite: that is, under workers’ compensation, injured employees are receiving more and better (hence more costly) medical care. They claim that group medical plans are shortchanging employees by allowing insurance companies to make medical decisions. What is your opinion?

2. Following an order from his supervisor, a carpenter working for Jones Construction Company removed all the guardrails from stairwell openings, floor openings, and open-sided stairs. Uncomfortable with this action, the carpenter telephoned his union representative, who, in turn, called OSHA. Jones Construction Company was fined $15,000 for willful violations. Jones Construction Company, in turn, fired the carpenter. Was the firing lawful (under OSHA standards)? Was the action of the carpenter appropriate (under OSHA standards)?

Suppose that the price elasticity for hip replacement surgeries is 0.2. Further suppose that hip replacement surgeries are originally not covered by health insurance and that at a price of $50,000 each, 10,000 such surgeries are demanded each year.

Instructions: Enter your answers as whole numbers.

a. Suppose that health insurance begins to cover hip replacement surgeries and that everyone interested in getting a hip replacement has health insurance. If insurance covers 70 percent of the cost of the surgery, by what percentage would you expect the quantity demanded of hip replacements to increase? (Hint: Do not bother to calculate the percentage changes using the midpoint formula. If insurance covers 70 percent of the bill, just assume that the price paid by consumers falls 70 percent.)

What if insurance covered 95 percent of the price?

Instructions: Round your answer to 1 decimal place.

b. Suppose that with insurance companies covering 95 percent of the price, the increase in demand leads to a jump in the price per hip surgery from $50,000 to $100,000. How much will each insured patient now pay for a hip replacement surgery?

Compared to the original situation, where hip replacements cost $50,000 each but people had no insurance to help subsidize the cost, will the quantity demanded increase or decrease?

(Click to select)  Increase  Decrease

By how much?

• Is the demand curve for your product relatively elastic, inelastic, or unitary elastic? Demonstrate for your company's product, by how much the quantity demanded will change if you pass on a 10% increase in cost. In other words, show your calculation of the percentage change in the quantity demanded given a 10% change in your price. You must provide calculations showing the percentage change in quantity demanded. • Given your company's and the price elasticity of demand and the industry supply/competitive environment you face prepare a statement for your board as to the potential impact on profits. Who will pay the larger share of the cost increases, your firm or your customers?

My Business:

All America Grocery Inc - We serve communities in the middle of the income market providing low prices for all basic grocery needs. Our modest income consumers expect goods deals on good quality foods.  The Covid-19 pandemic has put upward pressure on the price of everything we sell. We have also experience rising cost in every aspect of our operation as we have to put extra resources in to protecting both our employees and the public. We are both fortunate and unfortunate that the price elasticity of demand for food is .20.