What is a fixed cost in a firm’s production schedule?

In a perfectly competitive market, firms are price takers because:

In a perfectly competitive market, at the given price, which of the following is not true?

In a perfectly competitive market, the market supply curve has a positive slope because:

Which of these is not true of perfectly competitive markets?

The estimated sales of any investment were $175,000, the cost was $93,000 and the depreciation cost was $24,800 per year. The tax rate is 23%. Use four approaches to operating cash flows to find operating cash flows and see if they have the same results.
In other words, calculate the operating cash flows separately from the basic approach, the bottom-up approach, the top-down approach, and the tax-saving approach.

Will Pugh, director of cost operations for MicroPak, wishes to develop an accurate cost function to explain and predict support costs in the company’s printed circuit board assembly operation. Mr. Pugh is concerned that the cost function he currently uses – based on direct labor costs – is not accurate enough for proper planning and control of support costs. Mr. Pugh directed one of his financial analysts to obtain a random sample of 25 weeks of support costs and three possible cost drivers in the circuit-board assembly department: direct labor hours, number of boards assembled and average cycle time of boards assembled. (Average cycle time is the average time between start and certified completion – after quality testing – of boards assembled during a week.) Mr. Pugh wants his analyst to use regression analysis to demonstrate which cost driver best explains support costs.

Instructions: The questions that follow pertain to the above data set. Enter your responses in the spaces where indicated. This problem will require the use of MS Excel and/or StatPlus to estimate regression models.

Required:

Use regression analysis to estimate separate cost functions for each of the three potential cost drivers (i.e., estimate the regressions separately for X1, X2 and X3, rather than a single regression that includes all three variables) and then respond to the questions below. Make sure that you properly identify your "Y" and "X" variables in your regression program.

In addition to the discussion questions, you will attach your worksheet that includes your output for each of the three regressions.

A) Based on your regression results, enter the cost functions (using good form) for each of the three cost drivers.



B) Based on your analyses of the regression results, which is the best cost driver for support costs? Why?




C) What is the economic interpretation of the best cost function?

1. Explain the concept of cost of capital and differentiate between it and weighted-average cost of capital.
2. What are the advantages and disadvantages of common versus preferred stock?
3. Describe the potential conflict of interest that exists between credit rating agencies (Moody’s, Standard and Poor, and Fitch) and companies to which they are giving bond ratings

An injection molding system has a first cost of $150,000 and an annual operating cost of $65,000 in years 1 and 2, increasing by $3,000 per year thereafter. The salvage value of the system is 25% of the first cost regardless of when the system is retired within its maximum useful life of 5 years. Using a MARR of 8% per year, determine the ESL and the respective AW value of the system.

The ESL is ____ year(s) and AW value of the system is $ ____

A company's overall cost of capital is a. equal to its cost debt. b. a weighted average of the costs of capital for the collection of individual projects that the company is working on. c. best measured by the cost of capital of the riskiest projects that the company is working on. d. none of the above

A cost estimating relationship (CER) describes the cost as a function of design variables. What are the basic steps in developing a CER?

Generally speaking, the cost of debt is cheaper than the cost of equity. Does it imply that a firm should increase its debt-to-equity ratio to as high as possible such that its corporate cost of capital can be minimized?

A proposed cost-saving device has an installed cost of $820,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $89,000, the marginal tax rate is 22 percent, and the project discount rate is 8 percent. The device has an estimated Year 5 salvage value of $136,000. What level of pretax cost savings do we require for this project to be profitable? MACRS schedule (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

how to solve  pre tax cost savings?

1.(a) If the carrying cost is high and shortage cost is low, what type of current asset policy is more appropriate for a firm in the context of its short-term financial management? Why?
(b) A firm intends to use short term funding (e.g. short-term credit line) to finance its long-term assets. What are the advantages and disadvantages with such a policy?