Consider a Cournot duopoly of two identical cigarette producing firms, Warlboro and Cramel. They produce tobacco of same quality and, ceteris paribus, each firm sells to 1 million smokers, making $100 profits per smoker. These 2 million smokers are addicts (as most smokers are). They may change which tobacco they smoke but they do not quit. On the other hand, those who are not smokers will not start even if they are encouraged (because they understand the harm). In other words, the size of the market is fixed (the demand is extremely inelastic). Any of the two firms may try to win the customers away from the rival by advertising. If Warlboro spends $20 million on the ads while Cramel spends nothing, Warlboro wins additional half a million smokers, that is, Warlboro sells to 1.5 million while Cramel sells to 0.5 million. If Cramel spends $20 million on the ads while Warlboro spends nothing, Cramel wins additional half a million smokers, that is, Cramel sells to 1.5 million while Warlboro sells to 0.5 million. If both firms spend $20 million on the ads, their efforts cancel each the other and each firm sells to 1 million smokers. In every scenario, the profits per smoker remains $100 (not accounting for the ad spending).
Think about this game and explain, in your own words, why the tobacco producers may lobby the government to ban (make it illegal) advertising tobacco products.
( Please provide answers with easy words. up to 200 words )
In: Economics
Two firms sell an identical product and engage in simultaneous-move price competition (i.e., Bertrand competition). Market demand is Q = 20 – P. Firm A has marginal cost of $1 per unit and firm B has marginal cost of $2 per unit. In equilibrium, firm A charges PA = $1.99(…) and firm B charges PB = $2.00 A clever UNC alum has patented a cost-saving process that can reduce marginal cost to zero. The UNC alum is willing to license her invention to one (and only one) of the firms. She will invite the firms to bid for the license. The firms submit their bids simultaneously to the inventor. The firm with the higher bid wins the license and pays its bid, and the losing firm keeps its old technology and pays nothing. The firm that wins the auction gets MC = 0. The firm that loses keeps its original marginal cost (MCA = 1 or MCB = 2). After the auction, the firms engage in one additional round of price competition.
a. What is the maximum each firm is willing to pay for the license? In other words, how much value does each firm get from winning the auction instead of losing it? Explain and/or provide sufficient calculations to support your answer.
b. Which firm do you expect will win the auction? At what price (bid)? Assume that each firm is willing to pay (bid) a price that could be as high as its value from the license, i.e. the values you found in part (a), but each firm would prefer a lower price to win if possible.
In: Economics
Question 4
The Government Schools Board is inviting tenders for a contract to provide IT services to schools. A panel of senior managers from the Schools Board will assess the tenders and recommend a preferred tenderer to the Head of the Education Department.
Part a)
Suppose there are two tenders received with the following data:
Tender 1 (Whatis) Tender 2 (Hacker)
Costs Year 1 $250,000 $350,000
Costs year 2 $250,000 $250,000
Costs year 3 $250,000 $150,000
Government departments use a cost of capital of 7%
Required
1) What methods could be used to assess the tenders? Which method would you recommend?
2) Which tender would you accept? Why? (Remember, this is a contract for the total amount the schools board needs to pay to the successful company)
4+6 = 10 marks
Part b)
The Hacker Company submits tender 2 to the Schools Board. In order to gain the special knowledge needed to run this contract, Hacker’s CEO offers a job to one of the managers from the Schools Board. The job will commence if Hacker wins the tender. If Hacker does not win the tender the job offer will not go ahead. The salary to be paid for this job is around double what the manager is currently earning. The manager does not tell the other panel managers from the Schools Board about his job offer.
Required: Discuss the ethical issues for Hacker and for the School’s Board manager who will get a new highly paid job if Hacker wins the tender.
In: Accounting
According to an article, 37% of adults have experienced a breakup at least once during the last 10 years. Of 9 randomly selected adults, find the probability that the number, X, who have experienced a breakup at least once during the last 10 years is a. exactly five; at most five; at least five. b. at least one; at most one. c. between two and four, inclusive. d. Determine the probability distribution of the random variable X. a. The probability that exactly five adults have experienced a breakup at least once during the last 10 years is nothing. (Round to four decimal places as needed.) The probability that at most five adults have experienced a breakup at least once during the last 10 years is nothing. (Round to four decimal places as needed.) The probability that at least five adults have experienced a breakup at least once during the last 10 years is nothing. (Round to four decimal places as needed.) b. The probability that at least one adult has experienced a breakup at least once during the last 10 years is nothing. (Round to four decimal places as needed.) The probability that at most one adult has experienced a breakup at least once during the last 10 years is nothing. (Round to four decimal places as needed.) c. The probability that between two and four adults, inclusive, have experienced a breakup at least once during the last 10 years is nothing. (Round to four decimal places as needed.) d. Complete the table below to determine the probability distribution of X. x Upper P left parenthesis Upper X equals x right parenthesis x Upper P left parenthesis Upper X equals x right parenthesis 0 nothing 5 nothing 1 nothing 6 nothing 2 nothing 7 nothing 3 nothing 8 nothing 4 nothing 9 nothing (Round to four decimal places as needed.) Enter your answer in each of the answer boxes.
In: Statistics and Probability
On February 24th, 2020, MU University Board of Visitors announced that Dr.Washington was selected as the university’s eighth president. In a Washington Post article, Dr. Washington mentioned that he was a first-generation college student. It is known that 39% of MU students are the first in their families to attend college. A random sample of ten STAT 250 students were asked the question, “Are you a first-generation college student?”
1. Check if this situation fits the binomial setting. Write four complete sentences addressing each requirement in one sentence each.
a. Assuming this situation is a binomial experiment, build the probability distribution in table form. use the binomial calculator and calculate the probability of each of the values of the random variable from X = 0 to X = 10. present this table horizontally or vertically and leave the probabilities unrounded.
b. Calculate the probability that exactly four of the students in this sample are first-generation college students using the binomial calculator. Then, write one sentence to interpret the probability in context of the question.
c. Calculate the probability that at least two students in this sample are first-generation college students using the probability distribution table you created in (a). Show your work “by hand.” Then, verify your answer using the binomial calculator.
d. Calculate the probability that between four and seven (inclusive) of the students in this sample are first-generation college students the binomial calculator graph and include this image with values.
e. What is the average number of students you expect to respond “yes” to being a first-generation student? To answer this question, calculate the mean and standard deviation of this probability distribution. Show your work using the binomial mean and binomial standard deviation formulas and provide your answers. Round to two decimal place when necessary.
f. Imagine you repeated this sample of ten students 10,000 times. Produce a properly titled and labeled relative frequency bar plot.
g. Compare the height of the bar above four with your answer to part (b) and identify which type of probability each value is.
In: Statistics and Probability
There are several scenarios described below. For each of them, do the following (note: R.V. means random variable) (1) Define the R.V.--- that means something like, “Let X be the number of people who…..” (2) Define the distribution and parameter(s) of the R.V. (3) Give the support of the R.V. (4) Write the probability statement related to the information being sought. Do not calculate the probability.
a) Joe is debugging a coding project. From prior experience, he expects to find a bug in every 25 lines of code and each bug occurs independently of other bugs. What is the probability that it takes more than 30 lines of code until Joe finds his first bug?
b) Joe has examined 500 lines of code and has identified several bugs. What is the probability that the next line that Joe examines contains another bug?
c) Joe will keep working until he has identified 15 bugs. What is the probability that Joe examines exactly 400 lines of code before Joe takes a break?
d) The current project Joe is debugging contains 1200 lines of code. Determine the probability that he finds more than 52 bugs in the project.
e) A previous project is currently running live and will continue to run until it runs into a serious error. A serious error occurs on average once every 90 days. Determine the probability of observing at least 3 serious errors in an eight-month period (assume 30 days in a month and that the project restarts immediately).
f) After a long day of debugging Joe decides to have a few beers at his local brewery. The brewery has 15 different beers on tap, 13 of which have alcohol content less than 7%. If Joe decides to randomly have four different beers find the probability that 3 of the beers have alcohol content less than 7%.
In: Statistics and Probability
1.Which of the following is not a characteristic of a binomial random variable?
a. n identical trials
b. probability of failure is the same for each trial
c. non-correlated outcomes for each trial
d. non of the above
2. Which of the following are not binomial random variables(multiple answers)
a. one hundred randomly selected individuals are asked about their opinion on health insurance
b. one hundred people at a bar are asked about whether they are for or against restricting the sale of alcohol
c. one hundred randomly selected people are asked if they are in favor of a single payer health care system
d. one hundred randomly selected individuals are asked abut their marital status
3. Supposed that the probability of a randomly selected individual developing side effects from a new diet is 20%. If ten subjects are testing the diet, what is the probability that exactly 3 individuals develop side effects? (enter your answer as follows: 10.1%)
4. Suppose that the probability of a randomly selected individual developing side effects from a new diet is 20%. If ten subjects are testing the diet, what is the probability that at most 3 individuals develop side effects? (enter your answer as follows: 10.1%)
5. Suppose that the probability of a randomly selected individual developing side effects from a new diet is 20%. What is the expected number of subjects that would develop side effects if 500 individuals tested the diet?
6. Suppose that the probability of a randomly selected individual developing side effects from a new diet is 20%. Would it be unusual if only 35 out of 400 individuals trying the diet developed side effects?
a. yes, since the probability of 35 cases out of 400 is less than 1%
b. yes, since the 35 cases are more than two standard deviation from the mean
c. all of the above
d. none of the above
In: Math
A(n) 9.0 %, 25-year bond has a par value of $1,000 and a call price of $1,125. (The bond's first call date is in 5 years.) Coupon payments are made semiannually (so use semiannual compounding where appropriate).
a. Find the current yield, YTM, and YTC on this issue, given that it is currently being priced in the market at $$1,250. Which of these 3 yields is the highest? Which is the lowest? Which yield would you use to value this bond? Explain.
b. Repeat the 3 calculations above, given that the bond is being priced at $900 Now which yield is the highest? Which is the lowest? Which yield would you use to value this bond? Explain.
a. If the bond is priced at $1,250 , the current yield is %. (Round to two decimal places.)
The annual yield-to-maturity with semiannual compounding is %. (Round to two decimal places.)
The annual yield-to-call with semiannual compounding is %. (Round to two decimal places.)
Which of these 3 yields is the highest? Which is the lowest? (Select from the drop-down menus.)
▼
Yield-to-maturity
Current yield
Yield-to-call
is the highest, while ▼
yield-to-call
current yield
yield-to-maturity
is the lowest.
Which yield would you use to value this bond? (Select the best answer below.)
A. It doesn't matter which yield you use.
B.The yield-to-maturity is always used.
C.The yield-to-maturity because the bonds may not be called.
D.The yield-to-call because convention is to use the lower more conservative measure of yield.
b. If the bond is priced at $900 , the current yield is %. (Round to two decimal places.)
The annual yield-to-maturity with semiannual compounding is %. (Round to two decimal places.)
The annual yield-to-call with semiannual compounding is %. (Round to two decimal places.)
Which of these 3 yields is the highest? Which is the lowest? (Select from the drop-down menus.)
▼
Current yield
Yield-to-call
Yield-to-maturity
is the highest, while ▼
yield-to-maturity
current yield
yield-to-call
is the lowest.
Which yield would you use to value this bond? (Select the best answer below.)
A. The yield-to-maturity is always used.
B.The yield-to-maturity because convention is to use the lower of yield-to-maturity or yield-to-call for bonds selling at a discount.
C.The yield-to-maturity because the bonds may not be called.
D.It doesn't matter which yield you use.
Click to select your answer(s).
In: Finance
A(n) 10.0%, 25-year bond has a par value of $1,000 and a call price of $1,125. (The bond's first call date is in 5 years.) Coupon payments are made semiannually (so use semiannual compounding where appropriate).
The annual yield-to-maturity with semiannual compounding is ___%. (Round to two decimal places.)
The annual yield-to-call with semiannual compounding is ___%. (Round to two decimal places.)
Which of these 3 yields is the highest? Which is the lowest? (Select from the drop-down menus.)
Yield-to-call Or Yield-to-maturity Or Current yield is the highest, while
Yield-to-maturity or yield-to-call or current yield is the lowest.
Which yield would you use to value this bond? (Select the best answer below.)
A. The yield-to-maturity because the bonds may not be called.
B. It doesn't matter which yield you use.
C. The yield-to-call because convention is to use the lower more conservative measure of yield.
D. The yield-to-maturity is always used.
b. If the bond is priced at $900 the current yield is ____%. (Round to two decimal places.)
The annual yield-to-maturity with semiannual compounding is ___%. (Round to two decimal places.)
The annual yield-to-call with semiannual compounding is ___%. (Round to two decimal places.)
Which of these 3 yields is the highest? Which is the lowest? (Select from the drop-down menus.)
▼
Yield-to-maturity or Yield-to-call or Current yield is the highest, while
Yield-to-call or current yield or yield-to-maturity is the lowest.
Which yield would you use to value this bond?(Select the best answer below.)
A The yield-to-maturity because convention is to use the lower of yield-to-maturity or yield-to-call for bonds selling at a discount.
B. The yield-to-maturity is always used.
C. It doesn't matter which yield you use.
D. The yield-to-maturity because the bonds may not be called.
In: Finance
1.Which of the following is not an advantage of MIRR compared to IRR?
A. Assumes reinvestment of cash flows at WACC
B. Assumes reinvestment of cash flows at IRR
C. Avoids multiple IRR issue
D. None of the above
2.What’s the crossover rate of the following two cash flow series? Year 0 1 2 3 Project X -$1,150 $1000 $300 $400 Project Y -$1,150 $500 $300 $1000
A. 12%
B. 11%
C. 10.3%
D. 9.5%
E. None of the above
3. Which of the following is the criterion to evaluate mutually exclusive projects using NPV decision rule?
A. If NPV>0, accept the project
B. If NPV<0, accept the project A. Select the project with the highest positive NPV B. Select the project with the highest negative NPV C. None of the above ><0.Accept the project
A. Select the project with the highest positive NPV
B. Select the project with the highest negative NPV
C. None of the above
4. Which of the following is the criterion to evaluate independent project using IRR decision rule?
A. If IRR>WACC, accept the project
B. If IRR<WACC.
C. Select the project with the highest IRR
D. Select the project with the highest WACC
E. None of the above
5. You are using a net present value profile to compare Projects A and B, which are mutually exclusive. Which one of the following statements correctly applies to the crossover point between these two?
A. The internal rate of return for Project A equals that of Project B, but generally does not equal zero.
B. The internal rate of return of each project is equal to zero.
C. The net present value of each project is equal to zero.
D. The net present value of Project A equals that of Project B, but generally does not equal zero. E. The net present value of each project is equal to the respective project's initial cost.
6. USA Manufacturing issued 30-year, 7.5 percent semiannual bonds 6 years ago. The bonds currently sell at 101 percent of face value. What is the firm's aftertax cost of debt if the tax rate is 35 percent?
A. 4.82 percent
B. 5.62 percent
C. 3.76 percent
D. 3.59 percent
E. 4.40 percent
7. Financing expense is a relevant cash flow
. A. True B. False
In: Finance