1. The following equation describes a firm’s total cost.

TC = 500 + 10Q + Q²

a. If the firm is a price taker and other firms in the industry sell output at a price of $100, what price should the manager of this firm put on the product?

b. What level of output should be produced to maximize profits (or minimize losses)?

c. Should the firm keep producing or shut down? Hint: Is P ≥ AVC?

d. Calculate profit (or losses)?

e. The firm sells orange juice, which is a perfect substitute, at a farmers market. What type of market is this firm operating in?

2. The following equations describe a firm’s demand and total cost.

P = 1,000 – 10Q

TC = 500 + 10Q + Q²

a. What level of output should be produced to maximize profits (or minimize losses)?

b. What is the market price?

c. Should the firm keep producing or shut down? Hint: Is P ≥ AVC?

d. Calculate profit (or losses)?

e. The firm sells cereal and competes with other firms selling slightly differentiated cereal products. What type of market is this firm operating in?

James has a $100 monthly exercise budget, which he spends at Tarheel Gym on yoga classes (Y) and spin classes (S). The price of yoga class is $10, and the price of a spin class is $5. Draw his budget constraint for each of the following scenarios. Use a separate graph for each part and label all axes, intercepts and the coordinates of any kink points. Treat each case separately and graph yoga classes on the x-axis and spin classes on the y-axis.

a. The price of a yoga class drops to $8 after 5 classes, and again to $5 after 10 classes.

b. After every 4 yoga classes you buy, you get the next one for half off.

c. After purchasing 5 yoga classes, you must become a “Tarheel Yogi.” Becoming a Tarheel Yogi costs $20, but it also reduces the price of each subsequent yoga class to $5.

d. For every 5 yoga classes you buy, you get $5 in gym credit that can be used on any class at Tarheel Gym.

Boran Stockbrokers, Inc., selects four stocks for the purpose of developing its own index of stock market behavior. Prices per share for a year 1 base period, January year 3, and March year 3 follow. Base-year quantities are set on the basis of historical volumes for the four stocks.

Compute the price relatives for the four stocks making up the Boran index. (Round your answers to one decimal place.)

Use the weighted average of price relatives to compute the January year 3 and March year 3 Boran indexes. (Round your answers to one decimal place.)

I_Jan=

I_Mar=

The following transactions took place for fiscal year 2020 related to common stock:

January 1, beginning balance ..............................................  30,000 shares

April 1, issuance ..................................................................  10,000 shares

June 1, 15% stock dividend

July 1, treasury stock acquisition .............................. 7,500 shares

September 1, 2:1 stock split .......................................

November 1, issuance ............................................. 15,000 shares

6% $100 par value convertible, cumulative preferred stock 2,000 shares

Issued at $105.
Convertible into 2,000 shares of common stock.

Stock options ................................... 6,000 shares
Option/ Exercise price .................................... $20

Average market price ................................. $25

December 31st market price ................................. $40

January 1st market price ................................. $42

Requirements:
Net income for 2020 was $230,000. The company's tax rate is 30 percent. No conversions or options were exercised during 2020.

Compute Weighted-Average Common Stock Outstanding

Compute basic earnings per share.

Compute diluted earnings per share. State whether or not this calculation results in dilutive or antidilutive EPS.

Boran Stockbrokers, Inc., selects four stocks for the purpose of developing its own index of stock market behavior. Prices per share for a year 1 base period, January year 3, and March year 3 follow. Base-year quantities are set on the basis of historical volumes for the four stocks.

Part 1:

Compute the price relatives for the four stocks making up the Boran index. (Round your answers to one decimal place.)

Part 2:

Use the weighted average of price relatives to compute the January year 3 and March year 3 Boran indexes. (Round your answers to one decimal place.)

I_Jan=

I_Mar=

In 2017, the Hicklien Corporation was formed. The corporate charter authorizes the issuance of 10,000,000 shares of $1 par value common stock, and 4,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock.      The following selected transactions took place in 2017:

>1,200,000 shares of common stock were issued for cash.   The market price of the stock was $10 per shares.

>25,000 shares of common stock were issued for land.   The asking price of the land was $270,000.   The fair value of the land was $239,500.

>200,000 shares of preferred stock were issued for cash. The market price of the stock was $95.

>10,000 shares of common stock were issued to attorneys in payment of their bill for $35,000 of services performed during the company’s organization.

>5,000 shares of preferred stock were issued for cash.   The market price of the stock was $100

>15,000 shares of preferred stock were issued for machinery and equipment.   The fair value of the machinery and equipment was $1,650,000.   The stock was selling in the market at $102 per share.

INSTRUCTIONS:

JOURNALIZE the 2017 transactions above in general journal form.

Boran Stockbrokers, Inc., selects four stocks for the purpose of developing its own index of stock market behavior. Prices per share for a year 1 base period, January year 3, and March year 3 follow. Base-year quantities are set on the basis of historical volumes for the four stocks.

Compute the price relatives for the four stocks making up the Boran index. (Round your answers to one decimal place.)

Use the weighted average of price relatives to compute the January year 3 and March year 3 Boran indexes. (Round your answers to one decimal place.)

I_Jan=

I_Mar=

You = gold producer, worried about the gold prices in the future. In May , you buy six September gold futures contracts (short position) of 100 ounces each, with an exercise price of $860.00 per ounce. Ignore transaction costs.

i)profit/loss be for your entire position, if gold prices turn out to be $900 per ounce at expiration?

ii) profit or loss be for your entire position if gold prices turn out to be $820 per ounce at expiration?

iii) Based on your answer to question (i) and (ii) were you right or wrong to get the future contract? What is the main benefit you get from hedging your selling price?

iv) What would the profit or loss be for your entire position if you had a put option, instead of a futures contract, with a strike price of $860 per ounce, and the price turns out to be $900 per ounce at expiration?

v) State one advantage and one disadvantage of an option contract when compared to a futures contract?

Consider the following stock price and shares outstanding information. DECEMBER 31, Year 1 DECEMBER 31, Year 2 Price Shares Outstanding Price Shares Outstanding Stock K $22 100,000,000 $30 100,000,000 Stock M 84 2,400,000 46 4,800,000a Stock R 39 24,000,000 42 24,000,000 aStock split two-for-one during the year. Compute the beginning and ending values for a price-weighted index and a market-value-weighted index. Assume a base value of 100 and Year 1 as the base period. Do not round intermediate calculations. Round your answers to two decimal places.

PWIYear 1: PWIYear 2: VWIYear 1: VWIYear 2:

Compute the percentage change in the value of each index during the year. Do not round intermediate calculations. Round your answers to two decimal places. Percentage change in PWI: % Percentage change in VWI: %

Compute the percentage change for an unweighted index assuming $1,000 is invested in each stock. Do not round intermediate calculations. Round your answer to two decimal places. %

Consider the following stock price and shares outstanding information.

1. Compute the beginning and ending values for a price-weighted index and a market-value-weighted index. Assume a base value of 100 and Year 1 as the base period. Do not round intermediate calculations. Round your answers to two decimal places.

             PWI_{Year 1}:

             PWI_{Year 2}:

             VWI_{Year 1}:

             VWI_{Year 2}:

2. Compute the percentage change in the value of each index during the year. Do not round intermediate calculations. Round your answers to two decimal places.

   Percentage change in PWI:   %

   Percentage change in VWI:   %

3. Compute the percentage change for an unweighted index assuming $1,000 is invested in each stock. Do not round intermediate calculations. Round your answer to two decimal places.

     %