Raj Danielson graduated from university six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Assiniboine University or the University of Passy. Both schools encourage internships, but to get class credit for the internship, no salary can be accepted. Other than internships, neither school allows its students to work while enrolled in its MBA program.

Raj currently works at the money management firm of Prash and Sid. His annual salary at the firm is $53,000 and his salary is expected to increase at 3% per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26%. Raj has a savings account with enough money to cover the entire cost of his MBA program.

The Sentinel School of Business at Assiniboine University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrolment at the university. The annual tuition is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,000 per year. Raj expects that after graduation from Assiniboine, he will receive a job offer for about $87,000 per year, with a $10,000 signing bonus. The salary at this job will increase at 4% per year. Because of the higher salary, his average income tax rate will increase to 31%.

The Pond School of Business at the University of Passy began its MBA program 16 years ago. The Pond School is smaller and less well known than the Sentinel School. It offers an accelerated one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,200. Raj thinks that he will receive an offer of $78,000 per year upon graduation, with a $8,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29%.

Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Raj also estimates that room and board expenses will decrease $4,000 per year at both schools. The appropriate discount rate is 6.5%.

QUESTIONS:

1.How does Raj’s age affect his decision to get an MBA?
2. What other, perhaps non-quantifiable, factors affect Raj’s decision to get an MBA?
3. Assuming all salaries are paid at the end of each year, what is the best option for Raj from a strictly financial standpoint?
4. Raj believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?
5. What initial salary would Raj need to receive to make him indifferent between attending Assiniboine University and staying in his current position?

6. Suppose, instead of being able to pay cash for his MBA, Raj must borrow the money. The current borrowing rate is 5.4%. How would this affect his decision?

Raj Danielson graduated from university six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Assiniboine University or the University of Passy. Both schools encourage internships, but to get class credit for the internship, no salary can be accepted. Other than internships, neither school allows its students to work while enrolled in its MBA program.

Raj currently works at the money management firm of Prash and Sid. His annual salary at the firm is $53,000 and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 38 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Raj has a savings account with enough money to cover the entire cost of his MBA program.

The Sentinel School of Business at Assiniboine University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrolment at the university. The annual tuition is $58,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $2,000 per year. Raj expects that after graduation from Assiniboine, he will receive a job offer for about $87,000 per year, with a $10,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent.

The Pond School of Business at the University of Passy began its MBA program 16 years ago. The Pond School is smaller and less well known than the Sentinel School. It offers an accelerated one-year program, with a tuition cost of $75,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,200. Raj thinks that he will receive an offer of $78,000 per year upon graduation, with a $8,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent.

Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Raj also estimates that room and board expenses will decrease $4,000 per year at both schools. The appropriate discount rate is 6.5 percent.

QUESTIONS:

1.How does Raj’s age affect his decision to get an MBA?
2. What other, perhaps non-quantifiable, factors affect Raj’s decision to get an MBA?
3. Assuming all salaries are paid at the end of each year, what is the best option for Raj from a strictly financial standpoint?
4. Raj believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?
5. What initial salary would Raj need to receive to make him indifferent between attending Assiniboine University and staying in his current position?

6. Suppose, instead of being able to pay cash for his MBA, Raj must borrow the money. The current borrowing rate is 5.4%. How would this affect his decision?

1) A case of 24 cans contains 1 can that is contaminated. Three cans are to be chosen randomly for testing. How many different sets of 3 cans could be selected?

2) A state’s license plate has 6 positions, each of which has 37 possibilities (letter, integer, or blank). If someone requests a license plate with the first three positions to be BMW how many different license plates would satisfy this request?

3) The U.S. Census Bureau reports that 35% of adults attend a sporting event each year. What are the odds a randomly selected adult in the U.S. attended a sporting event last year?

4) You have to go to 5 different buildings on campus to turn in assignments. How many different orders could you follow when visiting the 5 buildings?

5) A casino in Las Vegas showed that the odds of the Minnesota Twins beating the Detroit Tigers in a baseball game as 4:7. What is the probability the Minnesota Twins will win the game? 6) John and Jane are married. The probability that John watches a certain television show is 0.4. The probability that Jane watches the show is 0.5. The probability that John watches the show, given that Jane does is 0.70. a) Find the probability that both John and Jane watch the show. b) Do John and Jane watch the show independently of each other? Justify your answer. c) Find the probability that either John or Jane watches the show.

7) The U.S. Census Bureau reports that 90.4% of adults aged 25 and over who are employed have graduated from high school and 34.0% of adults aged 25 and over who are employed have graduated from college. Assume that an adult aged 25 and over who has graduated from college also graduated from high school. a) What is the probability an adult aged 25 and over who is employed did not graduate from high school. b) What is the probability an adult aged 25 and over who is employed that graduated from high school also graduated from college? c) What is the probability an adult aged 25 and over who is employed that graduated from high school did not graduate from college? d) Are the events H (Employed adult aged 25 and over who graduated from high school) and C (Employed adult aged 25 and over who graduated from college) independent?

8) A survey of 400 undergraduate college students was conducted to study their views on government and the economy. The Survey worksheet of the HW1 data workbook on Moodle contains each student’s class standing and response to question 7 - which read “The job market will be better when I graduate than when I started college”. a) Construct a contingency table that has one row for each class standing and one column for each response. b) What is the probability a survey respondent is in their sophomore year? What type of probability is this? c) What is the probability a survey respondent Strongly Agrees with Question 7? What type of probability is this? d) What is the probability a sophomore survey respondent Strongly Agrees with Question 7? What type of probability is this? e) What is the probability a survey respondent is a Freshman who Disagrees with question 7? What type of probability is this? f) Are class standing and response to question 7 independent? Why?

16.

A.

A buyer needs $160,000 at retail value in stock. The departmental markup is planned at 52%. The buyer places an order for $54K cost and $106K cost retail. What are the remaining cost and retail orders to be placed, and what are the markup dollars and percent on the balance?

B.

The infantwear buyer designed rompers for her department that she would bring in at a wholesale price of $96 per dozen and a coordinating T-Shirt at $72 per dozen. She brings in 30 dozen rompers and 40 dozen T-Shirts. She plans to mark the rompers at $16 each. At what does she have to mark the T-Shirts to acheive an avergae markup of 52%?

C.

A buyer is offered a group of windbreakers for boys that have all the national basketball team logos. Some of the windbreakers are hooded while some are not. The manufacturer will sell 165 windbreakers at a cost of $25 each and 200 hooded windbreakers at a cost of $28 each. The buyer plans to sell them all at the same retail price. The departmental markup is 43%. What must the retail price be for all the windbreakers to acheive that goal? To what do you suggest the buyer round the price? Explain.

Advanced Analysis) Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 to $2 is unit elastic (E_s = 1.0). In the long run, a price increase from $1 to $2 has an elasticity of supply of 1.50. (Hint: Apply the midpoints approach to the elasticity of supply.)

a. How many popsicles will be sold each day in the short run if the price rises to $2 each?

Instructions: Enter only a whole number for your answer.

per day=


b. How many popsicles will be sold per day in the long run if the price rises to $2 each?

Instructions: Enter only a whole number for your answer.

per day=

Suppose you ask a friend to randomly choose an integer between 1 and 10, inclusive. What is the probability that the number will be more than 5 or odd? (Enter your probability as a fraction.)

Two dice are rolled. Determine the probability of the following. ("Doubles" means both dice show the same number.)

rolling a 4 or doubles

Use the data in the table below, which shows the employment status of individuals in a particular town by age group.

If a person is randomly chosen from the town's population, what is the probability that the person is under 18 or employed part-time?

1. Recall Ken Washington from the beginning of Chapter 35. Now that you have completed the chapter, answer the following questions regarding his case.

1. Is it significant that Ken had a urinary catheter in place for 6 days while he was in the hospital?

2. Dr. Buckwalter plans to send Ken home with a urinary catheter in place. What information can you give him to help him prevent infection?

3. You note on the chart that Dr. Buckwalter wants to see Ken again in 2 days. You ask Ken to schedule an appointment for that time. Ken’s wife states that they are going out of town for a week and will not be able to return until after that time. What should you tell Ken about making an appointment for more than a week?

Frankie's Homemade Cheese Shop ("Frankie's") signed an advertising agreement with Simmons Boards ("Owner") for billboard advertising rights along Route 33 in the town of Hampton. Frankie's has the right to select and display advertising copy on billboard panels numbered 10 and 12 (panel numbers correspond to designated billboard locations) for a 3-year period from Jan. 1, 20X1, to Dec. 31, 20X3. In consideration for these rights, Frankie's agrees to pay $10,000 in year 1, $12,000 in year 2, and $13,000 in year 3. Assume that Frankie's is required to pay the annual fee on Jan. 1 of each contract year. Assuming Frankie's incremental borrowing rate is 5%, what are the entries Frankie should record at inception of the contract, then at the end of years 1, 2, and 3?

The Chocolate Ice Cream Company and the Vanilla Ice Cream Company have agreed to merge and form Fudge Swirl Consolidated. Both companies are exactly alike except that they are located in different towns. The end-of-period value of each firm is determined by the weather, as shown below. There will be no synergy to the merger.

The weather conditions in each town are independent of those in the other. Furthermore, each company has an outstanding debt claim of $620,000. Assume that no premiums are paid in the merger.

How much do stockholders and bondholders each gain or lose if the merger is undertaken? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations.)

Required:

• Ensure you show all formulas and state values of variables, substitute and solve.

• Provide a concluding statement for all parts.

1. Suppose that 31% of families in town own iPads. If sixteen families are surveyed at random,

   1. Determine the probability that exactly 4 families own an IPAD.

2. 2. Determine the probability that less than 3 families own iPads.

3. 3. Determine the probability that least 3 families own iPads.

4. 4. Determine the expected number of families with an iPad.

2. There are ten cats and eleven dogs in a pet shop. Nine pets are chosen at random to visit a children’s hospital.

1. 1. Determine the probability that exactly three of the pets will be dogs.

2. 2. Determine the probability that less than 2 of the pets will be dogs.

3. 3. Determine the probability that at least 2 of the pets will be dogs.

4. 4. Determine the expected number of dogs chosen.