Exercise 5

Mr. Ahmed, MD of XYZ company wants to select one of the following candidates on the basis of their performance (marks) in the last 5 quarters of their MBA program.                                                           

            Quarter:           I           II         III        IV        V

            Mr. Abdulla    95        90        85        80        75

            Mr. Khalid      75        80        85        90        95

            (i). Which candidate is more consistent, show the quantitative working?

            (ii). Which candidate you will recommend, show the quantitative working?

Exercise 6

In a sample study about coffee-drinking habits in two towns, the following information was received.

Town-A: Females were 40 percent. Total coffee drinkers are 45 percent and male non-coffee drinkers were 20 percent.

Town-B: Males were 55 percent. Male non-coffee drinkers were 30 percent and Female coffee drinkers were 15 percent.

Present the above data in a tabular form.

Exercise 7

The data on fund flow (in million AED) of an international airport authority during the financial year 2015, 2016 and 2017 are given below.

Present the data by a suitable chart.

Exercise 8

The following data relate to area in millions of kilometers oceans of the world.

Represent the above data by a suitable method.

Exercise 9

The following data represent the income and dividends for the last six years.

(a). Present the data graphically.

(b). Analyze the data and interpret.

Use the following comparative Balance Sheets, Income Statement, and additional information to prepare the 2018 Statement of Cash Flows for United Brands Corporation.

Required:

Prepare an entire Statement of Cash Flows (all three sections) using the indirect method for the Operating Activities section.

Prepare the Operating Activities section using the direct method.

United Brands Corporation

Balance Sheets

December 31, 2018 and 2017

($ in millions)

2018 2017 Incr (Decr)

ASSETS

Current Assets:

Cash $41 $20 $21

Accounts receivable 32 30 2

Inventory 46 50 (4)

Prepaid insurance 3 6 (3)

Property, Plant, & Equipment:

Land 80 60 20

Equipment 81 75 6

Less: Accumulated depreciation (16) (20) (4)

Total Assets $267 $221

LIABILITIES

Current Liabilities:

Accounts payable $26 $20 $6

Salaries payable 3 1 2

Income tax payable 6 8 (2)

Notes payable, current 34 47 (13)

Long-term Liabilities:

Notes payable, long-term 20 0 20

EQUITY

Common stock, $10 par, 50 million

shares authorized, 13 million issued in 2018,

10 million issued in 2017 $130 $100 $30

Paid-in capital in excess of par-common stock 29 20 9

Retained Earnings 19 25 (6)

Total Liabilities and Equity $267 $221

United Brands Corporation

Income Statement

for the year ended December 31, 2018

($ in millions)

Sales revenue $100

Cost of goods sold (60)

Gross profit $40

Operating expenses:

Salaries expense (13)

Depreciation expense (3)

Insurance expense (7)

Income from operations $17

Other income and expenses:

Interest expense (2)

Gain on sale of land 8

Loss on sale of equipment (2)

Income before income tax $21

Income tax expense (9)

Net income $12

Additional information for 2018 transactions:

All inventory is purchased on account, and the Accounts Payable account is used exclusively for inventory purchases.

A portion of the company land was sold for $18 million in cash. This land was originally purchased in a previous year for $10 million.

Land was purchased for $30 million cash for use as a parking lot.

Equipment was sold in 2018 that had an Accumulated Depreciation balance of $7 million on the date of sale. The equipment originally cost $14 million and was sold at a loss for cash. (HINT: You must determine the amount of cash received.)

In 2018, new equipment was acquired by issuing a 12%, five-year, $20 million note payable to the seller.

During 2018, $55 million of short-term (current) notes payable were paid in cash and $42 million of cash was borrowed in the form of short-term debt (current notes payable).

The increase in the common stock account is attributed to two transactions:

Issuance of a 10% stock dividend (1 million shares) when the market price was $13 per share.

Issuance of 2 million shares for cash when the market price was $13 per share.

Cash dividends were declared and paid to shareholders. (HINT: You must determine the amount of cash dividends paid.)

Pick 5 of the concepts below and explain in 50 words maximum each selected concept:

GATT and Trade rounds

National Treatment and non-discrimination (Most favored nation status)

Adam Smith’s “The invisible hand” and Mercantilism

Lender of last resort and IMF conditionality

Comparative advantage vs. absolute advantage

Shallow integration v. deep integration

Foreign direct investment (FDI) and name two types of FDI’s

Bretton Woods conference

An individual faces the following to investment options:
Investment A: buy a stock fund that every year either earns 50% with a probability of 60% or loses -25% with a probability of 40%.
Investment B: buy a bond that returns 5% with a probability of 50% or 0% with a probability of 50%.
Assume that the returns of the two funds are independent and that returns from year to year are also independent. Also, assume an initial investment of £1.
The value function of the individual is specified as:
V(z)=z for z>0
V(z)= 3.5z for z<0
4.1) Which investment option would the investor choose if he looks at the investment once per year?

4.2) Which investment option would the investor choose if he looks at the investment once every two years?

4.3) Discuss the term “Myopic loss aversion”

4.4) Explain the equity premium puzzle. Why is it deemed to be a puzzle?

4.5) How can myopic loss aversion explain the equity premium puzzle?

1)

Aday’s Restaurant has the following income statement:

Calculate administrative expenses as a % of sales

Select one:

a. 3.00%

b.

10.00%

c.
1.23%

d.
4.29%

2)

Smitty’s Place recorded the following information from its lunch period on May 1:

Using the information in the table above:

What is the average check?

Select one:

a. $18

b. $8

c. $6.92

d. $4.43

3)

Smitty’s Place recorded the following information from its lunch period on May 1:

Using the information in the table above:

What is the average dollar sales per table?

Select one:

a. $18

b. $8

c. $4.43

d. $37.23

1) A door-to-door salesman expects to make a sale 26% of the time when starting the day. But making a sale increases his enthusiasm so much that the probability of a sale to the next customer is 0.36. If he makes no sale, the probability for a sale to the next customer stays at 0.26. What is the probability that he will make at least two sales with his first three visits?

2)Two machines turn out all the products in a factory, with the first machine producing 50% of the product and the second 50%. The first machine produces defective products 2% of the time and the second machine 7% of the time.

(a) What is the probability that a defective part is produced at this factory given that it was made on the first machine?


(b) What is the probability that a defective part is produced at this factory?

3)Dystopia county has three bridges. In the next year, the Elder bridge has a 11% chance of collapse, the Younger bridge has a 2% chance of collapse, and the Ancient bridge has a 22% chance of collapse. What is the probability that exactly one of these bridges will collapse in the next year? (Round your final answer to four decimal places. Do not round intermediate calculations.)

Compute the value of an option using the Black-Scholes formula. Underlying equity price = 50, one month to expiration, risk-free rate 0 4%, strike price = 50, volatility = 40%, dividends = 0.

The operations manager of a musical instrument distributor feels that demand for a particular type of guitar may be related to the number of YouTube views for a popular music video by the popular rock group Marble Pumpkins during the preceding month. The manager has collected the data shown in the following table: (can be done in excel)

1. Graph the data to see whether a linear equation might describe the relationship between the views on YouTube and guitar sales.
2. Using the equations presented in this chapter, compute the SST, SSE, and SSR. Find the least squares regression line for the data.
3. Using the regression equation, predict guitar sales if there were 40,000 views last month.

1) Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 300,000 dollars and that is expected to last for 6 years. MACRS depreciation would be used where the depreciation rates in years 1, 2, 3, and 4 are 40 percent, 34 percent, 18 percent, and 8 percent, respectively. For each year of the project, Fairfax Pizza expects relevant, incremental annual revenue associated with the project to be 567,000 dollars and relevant, incremental annual costs associated with the project to be 498,000 dollars. The tax rate is 50 percent. What is (X plus Y) if X is the relevant operating cash flow (OCF) associated with the project expected in year 1 of the project and Y is the relevant OCF associated with the project expected in year 4 of the project?

#2. The operations manager of a musical instrument distributor feels that demand for a particular type of guitar may be related to the number of YouTube views for a popular music video by the popular rock group Marble Pumpkins during the preceding month. The manager has collected the data shown in the following table: YouTube Views (1000s) Guitar Sales 30 8 40 11 70 12 60 10 80 15 50 13

a. Graph the data to see whether a linear equation might describe the relationship between the views on YouTube and guitar sales.

b. Using the equations presented in this chapter, compute the SST, SSE, and SSR. Find the least squares regression line for the data.

c. Using the regression equation, predict guitar sales if there were 40,000 views last month.