2. Consider the following data on salaries and experience. Persons 2,4,6,8,and 9 have MBA degrees. All others only have undergraduate degrees.

1. Calculate the regression of Salary on Experience within a model that controls for whether a person has an MBA or not.

b. Print the data set that allows you to do this regression. Sketch the graph the estimated regression that clearly indicates the impact of a MBA degree on Salary.

c. What is the market value of the MBA degree?

Person           Salary              Experience

1                   $130,468            10 Years

2                       62,250              1

3                       50,000              2.3

4                     140,000              9

5                     110,000              8

6                      80,050              2.8

7                      95,772              7

8                     110,000              6

9                       87,752              4.2

10                     79,290              5

Assume today is March 16, 2016. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science. She is currently employed as a Tier 2 field service representative for a telephony corporation located in Seattle, Washington, and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and has just begun to think about the future.

Natasha has $75,000 that she recently inherited from her aunt. She invested this money in 30-year Treasury Bonds. She is considering whether she should further her education and would use her inheritance to pay for it.*

She has investigated a couple of options and is asking for your help as a financial planning intern to determine the financial consequences associated with each option. Natasha has already been accepted to both of these programs, and could start either one soon.

One alternative that Natasha is considering is attaining a certification in network design. This certification would automatically promote her to a Tier 3 field service representative in her company. The base salary for a Tier 3 representative is $10,000 more than what she currently earns and she anticipates that this salary differential will grow at a rate of 3% a year as long as she keeps working. The certification program requires the completion of 20 Web-based courses and a score of 80% or better on an exam at the end of the course work. She has learned that the average amount of time necessary to finish the program is one year. The total cost of the program is $5000, due when she enrolls in the program. Because she will do all the work for the certification on her own time, Natasha does not expect to lose any income during the certification.

Another option is going back to school for an MBA degree. With an MBA degree, Natasha expects to be promoted to a managerial position in her current firm. The managerial position pays $20,000 a year more than her current position. She expects that this salary differential will also grow at a rate of 3% per year for as long as she keeps working. The evening program, which will take three years to complete, costs $25,000 per year, due at the beginning of each of her three years in school. Because she will attend classes in the evening, Natasha doesn’t expect to lose any income while she is earning her MBA if she chooses to undertake the MBA.

1. Determine the interest rate she is currently earning on her inheritance by going to the U.S. Treasury Department Web site (treasury.gov) and selecting “Data” on the main menu. Then select “Daily Treasury Yiled Curve Rates” under the Interest Rate heading and enter the appropriate year, 2016, and then search down the list for March 16 to obtain the closing yield or interest rate that she is earning. Use this interest rate as the discount rate for the remainder of this problem. --> the identified rate for March 16th on a 30 year bond is 2.73
2. Create a timeline in Excel for her current situation, as well as the certification program and MBA degree options, using the following assumptions:
   • Salaries for the year are paid only once, at the end of the year.
   • The salary increase becomes effective immediately upon graduating from the MBA program or being certified. That is, because the increases become effective immediately but salaries are paid at the end of the year, the first salary increase will be paid exactly one year after graduation or certification.
3. Calculate the present value of the salary differential for completing the certification program. Subtract the cost of the program to get the NPV of undertaking the certification program.
4. Calculate the present value of the salary differential for completing the MBA degree. Calculate the present value of the cost of the MBA program. Based on your calculations, determine the NPV of undertaking the MBA.
5. Based on your answers to Questions 3 and 4, what advice would you give to Natasha? What if the two programs are mutually exclusive? That is, if Natasha undertakes one of the programs there is no further benefit to undertaking the other program. Would your advice be different?

* If Natasha lacked the cash to pay for her tuition upfront, she could borrow the money. More intriguingly, she could sell a fraction of her future earnings, an idea that has received attention from researchers and entrepreneurs; see M. Palacios, Investing in Human Capital: A Capital Markets Approach to Student Funding, Cambridge University Press, 2004.

12.Which of the following statements holds true for the term, skill theft?

Select one:

a. It refers to taking specific, job-related abilities acquired at one organization to another, especially a competitor.

b. It refers to a situation where an employee moves to a new organization and helps it appropriate the former organization’s market segment.

c. It refers to the use of company working hours for activities unrelated to work, including looking for a job elsewhere.

d. It refers to a situation where an employee moves to a new organization and helps it appropriate the former organization’s client base.

e. It refers to the use of an organization’s equipment for activities unrelated to work, including looking for a job elsewhere.

13.In the morning rush hour, John, a bicycle courier boy, skids off his cycle and is unable to get up. A number of people pass him, but do not stop to help him because if they did so, they would get late for school or work. Martha, who is also getting late for an appointment, sees John in pain and stops her car, helps him get up and drives him to a nearby clinic. Martha’s act of helping John is an example of:

Select one:

a. product sincerity.

b. cultural imperialism.

c. laissez faire.

d. objectification.

e. Samaritanism.

14._____ refers to a situation in business in which decisions are made on the basis of personal relationships and loyalties more than unbiased judgments and purely professional considerations.

Select one:

a. Regulatory capture

b. Kleptocracy

c. Patrimonialism

d. Crony capitalism

e. Supercapitalism

Question 2 Gamma Ltd. acquired a tract of land with a building for $600,000. The closing statement indicated that the land’s assessed tax value was $400,000 and the building’s value was $200,000. The land was acquired as a site for Gamma's new office building and immediately after acquisition the building was demolished at a cost of $60,000. Gamma Ltd. constructed a new building, for $900,000 plus the following costs: Building design $ 20,000 Construction foreman salary 40,000 Imputed interest on retained earnings used during construction 30,000 Since Gamma has no debt, and a surplus of cash, all amounts were paid with cash.

a) Calculate the cost of the land. b) Calculate the cost of the building. c) Assume your answer to b) above was $1,000,000. Gamma Ltd. has a December 31 yearend. The building was completed and occupied on September 30, 2020. The estimated useful life of the building is 20 years, the residual value is estimated to be $100,000, and double-declining-balance depreciation is used. Calculate depreciation expense for 2020 and 2021. d) Assume your answer to b) above was $1,000,000. The building was completed and occupied on January 1, 2020. The estimated useful life of the building is 20 years and the residual value is estimated to be $100,000. On January 1, 2020, Gamma received a government grant of $400,000 to assist in the cost of the building. Prepare the journal entries required during 2020 related to the government grant and depreciation of the building. Assume straight-line amortization.

On 5/17/2020, a random sample of 1007 U.S. households finds that Trump has a 49% approval rating.

a) Use the 2SD method to find a 95% confidence interval estimate of the proportion of all U.S. households that approve of Trump on 5/17/2020. Show all work/steps to get the 2SD estimate. Round the margin of error to three decimal places. Work and Answer:

b) Use your answer from part (a) to fill in the red spaces below in order to write the results of the poll in these two notations:

According to the poll, on 5/17/2020, Trump has an approval rating of 49% ± _________%

According to the poll, on 5/17/2020, Trump’s approval rating was between ______% and ______%

c) If we were to use this same sample information to find a 90% confidence interval estimate instead of a 95% confidence interval estimate, then would our new 90% confidence interval be wider, or would it be narrower than the 95% estimate? Work and Answer:

When WorldCom Inc.’s former chief executive Bernard Ebbers was found guilty of participating

In one of the largest U.S. accounting frauds ever, the ruling sent a message to corporate

Executives: Professing ignorance won’t necessarily save you.

Mr. Ebbers, who died Feb. 2 at age 78, was a former gym teacher who rose to head a

Telecommunications Company with a peak market value of about $180 billion. In the late 1990s

And early 2000s, WorldCom improperly boosted profit by booking operating expenses as capital

Spending, which can be deducted from earnings in small chunks over time.

During a trial in 2005, he pleaded not guilty to accounting fraud and said he didn’t know about

The misdeeds. The jury didn’t buy it. His 25-year prison sentence “put an exclamation point behind the old phrase ‘the buck stops here,’ ” said Patrick McGurn, special counsel at proxy advisor Institutional Shareholder Services. The dot-com bust and accounting scandals at WorldCom and Enron Corp. helped spur Congress to enact the Sarbanes-Oxley Act of 2002, whose provisions include requiring a public company’s chief executive and chief financial officer to certify that financial statements are accurate. The scandals also hastened a trend toward more independent corporate directors willing to challenge CEOs. Charles Elson, who heads a corporate-governance center at the University of Delaware, has this epitaph for the WorldCom fiasco: “As bad as it was, some good came out of it.” The regulatory changes didn’t mean corporate scandals would automatically land CEOs in prison. The aftermath of the 2008 financial crisis was notable for a lack of CEO scalps. Corporate leaders, wary of prison, may have become more cautious and less likely to leave paper or email trails, said Peter Henning, a law professor at Wayne State University, in Detroit. Mr. Ebbers, who built WorldCom through dozens of takeovers, was released from prison 13 years into his sentence in December because of deteriorating health. He followed an unconventional route to the CEO suite. The second of five children, Bernard John Ebbers was born Aug. 27, 1941, in Edmonton, Alberta, in Canada. His father worked as a traveling salesman and mechanic. The family moved to California in the late 1940s. Mr. Ebbers attended a boarding school on a Navajo reservation in New Mexico. As a young man he held odd jobs as a milk delivery man and a nightclub bouncer. Twice he gave up on college because of poor grades. He graduated from Mississippi College, where he played basketball, with a degree in education in 1967. Early in his career, Mr. Ebbers taught physical education and worked in a garment factory. He later began buying motels, starting with one in Columbia, Miss., where he lived in a two bedroom trailer in the parking lot. When AT&T’s “Ma Bell” system was broken up in the early 1980s, small rivals began reselling long-distance service. Mr. Ebbers and a handful of investors backed a company called Long Distance Discount Service, later renamed WorldCom. Dubbed the “Telecom Cowboy,” he earned a reputation as a hard-driving boss. He began to borrow money from the company in the late 1990s and used some of it to buy company stock. As the company expanded, Mr. Ebbers said he relied heavily on experts. “I’m not an engineer by training; I’m not an accountant by training,” he told the New York Times in 1998. “I’m the coach. I’m not the point guard who shoots the ball.” WorldCom began to show signs of stress in 2000 as its share price sank amid the dot-com meltdown. Mr. Ebbers was fired as CEO in April 2002. Soon afterward, an internal auditor spotted accounting irregularities. After his ouster, Mr. Ebbers appeared at his Mississippi church. At the end of the service, he walked to the front of the church and spoke to the congregation: “I just want you to know you aren’t going to church with a crook.” WorldCom’s former chief financial officer, Scott Sullivan, who engineered the fraud and worked closely with Mr. Ebbers, was sentenced to five years in prison after cooperating with prosecutors. He testified that Mr. Ebbers knew of the accounting methods used. Mr. Ebbers insisted he was blind-sided by the fraud. “I know what I don’t know,” he testified in a federal court. “I don’t, to this day, know technology. I don’t know finance and accounting.” As a judge delivered the sentence in 2005, Mr. Ebbers hung his head and cried while hugging his wife, Kristie Ebbers, who filed for divorce in 2008. He drove himself to prison in a Mercedes the following year and spent part of his sentence as inmate No. 56022-054 in a low-security prison in Louisiana. He was later transferred to FMC Fort Worth, a federal prison hospital in Texas. Paul Watson, a Mississippi resident and former WorldCom investor, lost $135,000 when the company collapsed, and supports a relative who lost $2.2 million. Still, he said, he feels little anger toward Mr. Ebbers and thinks “others have done far worse and been punished less.”

1. Why do you think, Charles Elson, from University of Delaware, said: “As bad as it was, some good came out of it.”?
2. Do you believe Mr. Ebbers was at fault of what happened with Worldcom despite he claimed in court that”…. I don’t know finance and accounting.” Why?
3. Why was Bernie Ebbers called the Telecom Cowboy?
4. Did the agency problem take a role in the Worldcom fiasco? Explain why yes or no? (note: there is not a clear answer here, so whatever you answer will be ok as long as you can explain it)

AMP Corporation (calendar-year-end) has 2020 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2020, AMP acquired the following assets: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

a. What is the maximum amount of §179 expense AMP may deduct for 2020?

b. What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2020 on the assets it placed in service in 2020, assuming no bonus depreciation? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)