1. The following XML document describes some employees of a company.

<?xml version="1.0" encoding="UTF-8"?>

<company>

<person age="25" id="p29432" manager="p48293">

<ssn>123456789</ssn>

<name> John Davis</name>

<office>B432</office>

<phone>1234</phone>

</person>

<person age="27" id="p29333" manager="p48222">

<ssn>987654321</ssn>

<name>Jim Handler</name>

<office>B123</office>

</person>

<person age=55 id="p29432" manager="p48221">

<ssn>123456789</ssn>

<name> Christo Dichev</name>

<office>A4210</office>

<phone>2477</phone>

</person>

<person age="57" id="p29333" manager="p4832">

<ssn>987654321</ssn>

<name>Elva Jones</name>

<office>A4211</office>

</person>

</company>

1. Check if the XML document is well-formed. If it is not, change it so that it becomes

wellformed, making as little changes as possible.

2. Write a DTD for this XML document such that the corrected version of the example is

a valid XML document.

Kindly summarize this Literature Review Section 3.2 Efficient Techniques and Performance Measurement Recently, developed techniques compare the efficiency of similar service organizations by explicitly considering their use of multiple inputs to produce multiple outputs. These new efficiency techniques are often divided into two categories. One broad category consists of the linear programming procedures used in this paper (DEA). The second category is a set of regression-based techniques that derive inefficiency estimates from two-part error terms, and has been called the econometric or stochastic frontier approach. Both techniques use sample firms to construct an efficient production frontier. The frontier is efficient in the sense that a firm operating on the frontier could not increase output without increasing its input utilization, or it could not reduce its input utilization without decreasing output. Deviations from the frontier represent inefficiencies, and are termed X-inefficiencies in the finance and economics literature. Efficient frontier techniques avoid the need to develop a standard cost for each service provided and are more comprehensive and reliable that using a set of operating ratios and profit measures. These techniques permit managers and researchers to service organizations and identify units that are relatively inefficient, determine the magnitude of the inefficiency, suggest alternative strategies to reduce the inefficiencies, all in a composite measure. Moreover, these techniques provide an estimate of the overall efficiency level of the market that is under consideration. We know of only two studies that use efficient frontier techniques in the hotel industry. The first is that of Morey and Ditman (1995) who measure the relative performance of hotel general managers using DEA. The authors gathered input-output data for 54 hotels from a geographically dispersed area. They found that managers were operating 89 percent efficiency. In other words, given their output, managers on average could reduce their inputs by 11 percent. The study reported that the least efficient hotel was 64 percent efficient. These results are relatively high compared to those found in other industry studies that utilize DEA. Large efficiency scores are indicators of High performance and competition (Leibenstein 1966). Thus in an economic context, the market for lodging services appears to be operating efficiently. Anderson et al. (1998) argue for the benefits of using a stochastic frontier methodology in addition to DEA in order to accurately assess performance. Using a classical stochastic frontier model, they also find the hotel industry to be performing relatively efficiently, with efficiency measures above 90 percent. While both of these studies are informative, neither provides any information on the source of the inefficiencies. The source of the inefficiencies, whether technical or allocative in nature, is important information that managers need in order to take proactive positions to increase performance. We re-examine hotel efficiency using a method of DEA that provides significantly more detailed results and we further analyze the inefficiency sources. The following section describes our procedure.

SECTION 4 EFFICIENCY DETERMINATION

Section 4.1 The DEA Technique

Within the DEA framework, performance of an individual firm is evaluated with respect to an efficient frontier, which is constructed by taking linear combinations of existing firms. While there are several DEA approaches, wee use an unput-base approach, assuming that inputs are contracted proportionally with exogenous outputs. The procedure relies on sophisticated mathematics; however, the following simplified graphical example deomstates how th eefficiency measures are computed.

Figure 1 displays tha overall (OE) and (TE), and allocativ (AE) efficiency measures. In this example, we assume two inputs (X1 and X2), one output (Y), and constant returns to scale. Additionally, we assume that technology is fixed and that input prices are represented as PP. Firm A is X-efficient since it produces along output isoquant Y by utilizing the least inputs. Suppose thee is a firm operating at point C and producing an output equivalent of that produced along Y. C is uses more inputs than A to produce the output Y and is classified as inefficient with an overall efficiency score of 0D/0C )or equivalenly and inefficiency score of DC/0C).

Overall inefficiency can be decomposed into its techhnical and allocattive components. Without being able to alter input allocations, the bestt that firmC could have done was to operate at point B. The "extra" input usage that was incurred by firm C as a percentage of total input usage is the technical inefficiency measure and can be dpressed as BC/0C The technical efficiency of firm C is ecpresses as 0B/0C. Allocative inefficiency representts managerial failurd to use the optimal input mix. Here, allocative inefficiencies for firm C can be represented by DB/0B, and allocatvie effficiency is expressed as 0D/0B.

Technical efficiency can be further decomposed into technical (PTE) and scale (SE) efficiency measures. Pure technical inefficiency simply refers to deviations from the efficient frontier that result rom failure to utilize the employed resoures efficiently. Hence, this measure assumes that firms are operating at constant return to scale. Scale ineficiencies, on the other hand are losses due tofailure to operate at constant returns to scale. Figure 2 illustrates these two efficiency measures. In this figure, the Y-axis represents output and the X-axis represents input conbinations that contain an equal amount of both input 1 an dinput 2. The graph shows three observations denoted A, B, and C, respectively. Two frontiers are illustrated, a fronier assuming constant returns to scale instead of decreasing or increasing returns toscale.

After completing this analysis, we examine the SE measure to determine if it equals one. If the SE measure equals one, firms are operating at constant returns to scale. If SE does not equal one, we then determine whether the firms are oeprating at increasing or decreasing returns to scale (see Appendix A for a mathematical treatment of DEA).

Questions:

5) What are the advantages and disadvantages to countries that promote frontier tourism?

6) Discuss how nations can create a competitive advantage in attracting tourists.

Roughing It: Tourists Are Boldly Going Into African Trouble Spots

A conservationist in oil-rich Gabon leads the way in promoting tiny nation’s sur ing hippopotamuses and other natural attractions, as part of a regional push for tourism amid instability

By Alexandra Wexler

Oct. 19, 2018 5 30 a.m. ET

WONGA WONGUE, Gabon—For the past decade, an energetic conservationist has been building the foundations for a tourism industry in Gabon, where rare forest elephants stroll down the beach, hippopotamuses surf in the ocean waves and blue-faced mandrills march by the thousands through the jungle.

The challenges for Gabon’s national parks authority and its head, Lee White, include transporting clients to remote camps in a country with little infrastructure, recruiting pygmy trackers from deep within the jungle and training antipoaching units who have to battle armed hunters and illegal gold miners in one of the world’s most pristine stretches of wilderness.

Over the past decade, with the support of government and overseas philanthropists, Mr. White has transformed Gabon’s parks authority from a group with just 100 staff with a budget of $500,000 to a $30 million operation with 800 employees, 175 cars, 35 boats and a number of aircraft, including a helicopter. Tourists have begun to arrive, with visitors up by a third this year through July compared with the average over the same period in 2017 at the country’s most-popular national park for international tourists.

Mr. White’s Gabonese gambit is at the leading edge of a trend attracting a growing list of African economies: frontier-tourism products in places that visitors often more-closely associate with conflict or instability.

In recent years, a small but swelling segment of the tourism market has been drawn to places like Chad, the Democratic Republic of Congo’s Virunga National Park, which was recently closed after two British tourists were kidnapped and their ranger killed, and war-torn Central African Republic. Tour operator Thomas Cook Group PLC recently sent a delegation to Sierra Leone, which has struggled with civil war and more recently an Ebola epidemic, to discuss offering package tours.

“There is a trend recently of interest in ‘unexplored’ places,” said André Rodrigues Aquino, a senior natural-resources management specialist at the World Bank, who advises African

governments on their tourism sector. “It’s very linked to nature, places that have pristine unspoiled nature.”

The numbers are small compared with sub-Saharan Africa’s broader tourism market of $43.7 billion in 2017, according to the World Travel & Tourism Council. But countries with the strongest growth in international arrivals in 2016 compared with a year earlier were Sierra Leone, Nigeria, Eritrea and Togo, according to the African Development Bank.

“A lot of people who have traveled previously, particularly in Africa, are looking for different experiences in different places,” said Peter Fearnhead, chief executive of African Parks, a nongovernmental organization that manages 15 national parks in partnership with governments across Africa. “The fact that [these places are] so edgy, we’re finding that there’s an increasing interest.”

The niche but expanding market for frontier tourism in fractious security environments has governments and companies seeking to balance revenue potential against the investments and know-how needed to ensure safety.

Oil-rich Gabon, a sparsely-populated country the size of Colorado on Africa’s Atlantic seaboard, has one of the highest per-capita incomes in sub-Saharan Africa and is one of the more stable countries in the continent’s central region. But when Mr. White took the reins of the country’s newly created national-parks agency in 2009, the vast nature reserves that cover about 20% of the country existed essentially only on paper.

= “The first priority when I was appointed was to manage the parks and when necessary, defend them,” Mr. White said. He created antipoaching units and armed rapid-response teams to push, with much success, ivory poachers out of the parks.

There are exceptions. Parks officers have had two gunbattles with illegal gold miners in a park called Birougou in the past six months, Mr. White said.

At Zakouma, a national park in the desert nation of Chad, poachers had massacred about 90% of the park’s elephants by the time African Parks took over its management in 2010. Since then, the group has transformed the region into a haven for one of Africa’s largest single herds, now about 560 elephants strong. By establishing flights to link the park with Chad’s capital city— and joining with a group of private guides as part of the marketing strategy—the park’s revenue is expected to be just under a $1 million this year, up from about $50,000 in 2015.

The mobile-tented safari experience that African Parks offers is booked about 18 months in advance, but it takes a maximum of just eight guests at a time and is limited to the dry season.

“It’s not a sustainable solution for the park,” said Stuart Slabbert, head of conservation-led economic development for African Parks.

Experts say national parks across the continent will struggle to expand their tourism revenue without a cooperative and supportive government.

In Gabon, Mr. White’s plans have been aided by his close relationship with current President Ali Bongo Ondimba, established while his father, Omar Bongo Ondimba, was still in power. Though Gabon is

theoretically a democracy, the elder Mr. Bongo ruled for 42 years and the current president, who took over when he died in 2009, won close, tense elections in 2016 marred by accusations of fraud that ignited countrywide rioting.

This year, Mr. White began actively marketing safari-type trips to the parks for the first time. Possible sightings include sea turtles hatching on the country’s beaches, humpback whales breaching in the surf and Western lowland gorillas lazing while their babies climb and swing around trees: a literal jungle gym.

“It’s not savanna tourism. You have to work to see this stuff,“ said Michael Nichols, a photographer who took a picture of Gabon’s surfing hippos that Time magazine calls one of the 100 most influential images of all time. “That doesn’t preclude that it’s frigging unbelievable. It could be like the Amazon.”

Database

You have just started a new position on the database design staff at Gizmonic Consultants, Inc.

Your first project is to translate the database requirements for Continental Hotels into an ER representation. In the next project, you will derive a relational schema from an ER diagram and implement the schema, populate it, and query over it.

Requirements:

Develop an ERD to capture the entities and relationships specified in the requirements documentation below. Use only the conventions covered in class.

1. Show keys [partial keys] for each entity [weak entity].
2. Give cardinality (1:1, 1:m, m:n) and participation constraints (partial, total) for each binary relationship.
3. Your whole ERD should not be more than one page in length, although you can show complete attributes in a separate diagram and just keys/partial keys on the main diagram.
4. You should have at least 4 entities and you may have quite a few relationships between them.
5. Keep a list of assumptions that represent any modeling decisions you have to make.
   • Your assumptions should not contradict any information given in the requirements, and you should strive to make as few additional assumptions as possible.
   • Anything you model that is not explicitly stated in the requirements should be stated in your assumptions.

Phase 2

1. Submit one well-formed, consensus ER diagram using Dia with the ER sheet that satisfies the requirements
2. A list of your design decisions (any additional assumptions beyond what is given explicitly in the problem). Organize your assumptions in 3 categories:
   1. related to primary keys,
   2. related to cardinality/participation constraints for relationships, and
   3. miscellaneous (anything else).
3. Translation of the team ERD into RDB tables using the algorithm and conventions

////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////

Continental Hotels Requirements

• General Description

Continental Hotels is a chain of hotels that operates in several cities. There are currently 10 locations, and each hotel has about 100 guest rooms. The rooms are normally 80% occupied, with an average length of stay of three days. The hotels are frequented by both business travelers and vacationers. The chain is expanding to additional locations. The current guestroom reservation system is slow and unreliable and a new system is needed to handle reservations and associated guest billing.

• Basic Operations

Guests normally use the chain’s website to make a room reservation, supplying the dates requested, the number of guests, the number of rooms needed, and the area desired. The site shows the locations that have availability for the dates requested that are in the desired area. The user then chooses a location and a summary of the available rooms for that site is displayed, showing a brief description of the room type and the standard rate for each available room. Locations have unique names like “Columbus Downtown” and “Cincinnati North.”

The user can see a more detailed description of each room by clicking on a button. The user has the option to request a special rate due to membership in a group, military status, or age. The list of available rooms and their cost is updated to reflect the discounted price, if any. The chain also offers a rewards program for frequent guests. The website allows the user to enter or retrieve his or her membership number and password, and the site displays the number of rewards points the user has accumulated.

Whether the user belongs to the rewards program or not, he or she can reserve up to three rooms, and must choose a room type and accept the cost for each one from the list displayed, as well as entering the number of the proposed occupants and any special requests for each room, from a menu of special requests. The customer provides a credit card number to guarantee the reservation, and may choose to use some or all of his or her rewards points, if any, towards the cost of the rooms.

At the conclusion of the process, a confirmation number is assigned for the reservation. If a customer prefers, this same process can be done by telephone or even by mail.

A customer can cancel a reservation up to the day before he or she is due to check in with no penalty. If the customer does not cancel and is a no-show, the room cost(s) for one day will be charged to the credit card account provided in the reservation. A fictitious room number (-1) is used for this purpose. In addition to reservations, the hotel can accommodate walk-in guests, provided there are rooms available. In that case the customer information is taken, and a reservation is made for the same day for the period desired. Guests can also extend their stays past the reserved date, provided there are rooms available. The ending date of the current reservation is updated accordingly.

When a guest checks in with or without a reservation, guest IDs are checked, rooms are assigned, and an imprint of the credit card that will be used for billing is taken. If separate bills are requested for rooms at check-in, additional credit card imprints are taken, and basic information about the credit card holder, who is now considered the customer holding a reservation for that room, is taken. Miscellaneous charges for such items as room service, meals in the hotel restaurants or coffee shop, movie rentals, and telephone calls, as well as the basic room charges, will be billed to the credit card account for each associated room. Guests can access their room account information to see a summary of the charges for each room each day. At the end of the stay, guests are requested to fill out an evaluation form for each room, either on paper or online.

• Information Needs

Some of the reports that the system should be able to produce include the following, for each of the hotels in the chain:

Guest Bill – This should include, for each room:

Invoice number, room number, guest name, guest address, guest telephone, credit card number, number of persons. For each day of the stay, it should show the date, room charge, room tax, and a list of additional charges - room service charges (date, time, amount), hotel restaurant charges (restaurant name, date, time, amount), telephone charges (date, number called, length, cost) and any other items. At the end of the bill, the total charges, any discount for rewards points, and the total paid or charged to the credit card are given. If additional charges are found once the guest has checked out, a revised bill is prepared and sent to the guest.

Weekly Room Utilization Report – This report is normally produced at the end of each week, showing the utilization of rooms during the week. Note that some of the hotel’s guest rooms may not be available for rental because of damages, renovations, or other reasons. For each day, the report shows date, number of rooms available to be rented, number occupied, number unoccupied, number of rooms reserved, number of no-shows, number of walk-ins.

At the bottom of the report, the totals of each of these numbers for the week is shown.

Housekeeping Daily Room Requests Report – A report is created daily showing any special requests for guests who are checking in that day or who are already registered that must be filled by the housekeeping staff, such as extra pillows, rollaway beds, and so forth.

Daily Checkout Report - The report lists the rooms that will be vacated that day so that the housekeeping staff can prepare them for new guests after current guests depart.

• Query Checklist

□ List all the hotels (names) in the Cincinnati area.

□ List all the areas that do not have a hotel with a room with the type “queen size, handicapped accessible.”

□   List names of guests who watched the movie “Buckaroo Banzai” at any hotel.

□   List names of guests who were charged for a no-show reservation and who have a rewards membership.

□   List the sum of all miscellaneous charges by guest name and room number at the “Downtown Columbus” hotel in June 2019.

For each of these five separate cases, identify the principle(s) of internal control that is violated. Recommend what the business should do to ensure adherence to principles of internal control.

1.Latisha Tally is the company’s computer specialist and oversees its computerized payroll system. Her boss recently asked her to put password protection on all office computers. Latisha has put a password in place that allows only the boss access to the file where pay rates are changed and personnel are added or deleted from the payroll.

2.Marker Theater has a computerized order-taking system for its tickets. The system is active all week and backed up every Friday night.

3.Sutton Company has two employees handling acquisitions of inventory. One employee places purchase orders and pays vendors. The second employee receives the merchandise.

4.The owner of Super Pharmacy uses a check software/printer to prepare checks, making it difficult for ­anyone to alter the amount of a check. The check software/printer, which is not password protected, is on the owner’s desk in an office that contains company checks and is normally unlocked.

5.Lavina Company is a small business that has separated the duties of cash receipts and cash disbursements. The employee responsible for cash disbursements reconciles the bank account monthly.

1. Tie one end of the string [~1.5 m] to

one of the small plastic bags into

which you have put 6 US pennies.

We will call the bag/pennies

combination the rotating object, RO.

[A suggested method for making the

RO is given at the end of these inst

ructions.] Pass the other end of the

string through one end of the plastic t

ube. The end of the tube into which

you fed this string is now referred to

as the top end of the tube. Lay the

RO-string-tube combination on a handy fl

at surface. Mo

ve the tube until

its top end is 1.0-m from the center of

the bag of pennies t

hat forms the RO.

[That white-looking stick lying on the

table is a meterstick.] Next, you need to

mark the string at the point where it exits

the bottom of the tube. One way is to

place a paperclip at that point.

Another is to put a drop of paint, nail

polish or liquid paper

[if the string is

dark in color] at that point. Any way you can mark that point so you can

see it as you rotate the Rotating

Object around your head will be fine.

Record the distance from the Rotating Ob

ject to the top of

the tube in the

Radius column for Trial 1. Try to keep

this at 1.0 m for all trials. If for

some reason that is impossible, be sure to record the correct value in the

Radius column.

2. Place the required num

ber of pennies in the second plastic bag and tie the

bag to the string using a slip knot so you can remove the bag easily for the

second trial to add more pennies.

3. Start with 16 pennies as your first ma

ss. The mass, m, is the mass of all

the pennies you have in the plastic bag plus the mass of the paperclip.

Record this mass in kilograms in the

Mass of Pennies column for Trial 1.

[1g=0.001kg] It is the we

ight of these pennies t

hat is transmitted as

tension in the string to keep the rotati

ng object from flying off as you rotate

it. This weight [W=mg] we call the balancing force FB

. Calculate the

weight of the pennies you are using and

record it in the Balancing Force

column.

4. Begin to swing the Rotating Object

around your head. As you swing it

faster the tension in the

string will increase. You must rotate the Rotating

Object at the proper speed so that t

he tension produced by the weight of

the pennies is enough to keep the Rotati

ng Object rotating in a circle of

1.0-m radius. That takes practice!

The more pennies you use the easier it

gets to produce this balanced conditi

on. You’ll use more pennies in

subsequent trials. Make sure that the paperclip you may have used to

mark the bottom end of the tube does not

actually touch the tube. This is

why it is easier to use a spot of whit

e-out or fingernail polish if the string is

light colored. Once you can do this

you’re ready to determine the period

of rotation.

5. Once you have established a balanced co

ndition with the Rotating Object

moving at a constant rate, have your

assistant measure the time recorded

for 20 revolutions of the Rotating Object. Determine the period of a single

rotation by dividing the measured time by the number of revolutions:

20

TimeT=

. Write this in the Period column for trial 1.

6. Now, compute the value

of the centripetal force FC

. In the following

equation the M is the mass

of the Rotating Object

(RO), previously known

as Rotating Object in kilograms.

This mass M will remain constant

throughout the experiment.

7. Calculate the percent error between FC and FB

using the following

equation.()%100 CBB FFerrorF?=×

. If this error is fairly small say 10 % or

less proceed to the next

step. If it is large, 20% or higher you may be

doing something wrong.

8. For Trial 2 add 6 pennies and repeat st

eps 3 through 7. Continue to add 6

pennies for each subsequent trial until

you have completed the 5 trials.

9. Answer the questions and upload

your report to

the Drop Box.

A Discussion of Centripetal Force

According to Newton’s First Law of Mo

tion an object in straight-line motion

at constant speed will continue moving in a

straight-line at constant speed unless

acted on by an external, unbalanced force.

If an external unbalanced force acts

the object will either speed

up, slow down, change direction or any combination

of the first two and third options. If

the force exerted on the object is so

constructed that it can keep a constant

magnitude and stay at right angles to the

direction of the object’s velocity, the

object will move at constant speed in a

circle: uniform circular motion.

Such a force is called a centripetal force because it always points toward

the center of the circle in which

the object is moving. That force FC

is an unbalanced or net force so it satisfies Newton’s Second Law of Motion: F

net =ma.

In this particular case the acceleration

is called the centripetal acceleration.

Centripetal acceleration can be computed from the equation

2cVar=.

Where V is the linear speed of the object and r

is the radius of the circular path.

The amount of time for an object to make

one complete revolution in its circular

path is called the period, T.

The distance around a circle is its circumference

which is given by C= 2?r. The speed is just distance/time so2 circumference

rVtimeT?==

. Substituting this into the equation for centripetal

acceleration gives us22222()4crVrTarrT??== =. Finally multiplying the

acceleration by the mass of the rotating

object [stopper], which we here label as

M, we get224crMFT?=.

Centripetal Force Report

The balancing force is computed using F_B=mg, where m is in kilograms and g is the gravitational acceleration of 9.8 m/s/s.    

The centripetal force is computed using F_C=4p²rM/T²

{Note the different ‘m’ and ‘M’ used here are the two different masses listed in the table. m=mass of pennies in a bag on the lower, vertical end of the string [these produce the balancing force] and M=mass of rotating object used to compute the centripetal force.[should be 6 pennies in a bag]}

Hints: Try to keep the radius the same from trial to trial and about 1 meter. Recall that 1 gram = 0.001 kg. The mass of a post 1983 penny is 2.5 g.

Questions:

1.         In each trial you computed a balancing force and a centripetal force. Were those values, for a particular trial, nearly equal? Should they be? Why or why not?

2.         What experimental factors caused the errors encountered? Be specific and tell which, in your opinion, was the largest source of error. Tell why you chose this source as the largest.

3.         Did the percent errors tend to grow or get smaller as more mass was added to the string? If you see a trend here explain why it should exist.

             4.        Summarize what you’ve learned from this experiment.

11.       Which of the following statements is CORRECT?

            a.         If you add enough randomly selected stocks to a portfolio, you can completely eliminate all of the market risk from the portfolio.

            b.         If you were restricted to investing in publicly traded common stocks, yet you wanted to minimize the riskiness of your portfolio as measured by its beta, then according to the CAPM theory you should invest an equal amount of money in each stock in the market. That is, if there were 10,000 traded stocks in the world, the least risky possible portfolio would include some shares of each one.

            c.         If you formed a portfolio that consisted of all stocks with betas less than 1.0, which is about half of all stocks, the portfolio would itself have a beta coefficient that is equal to the weighted average beta of the stocks in the portfolio, and that portfolio would have less risk than a portfolio that consisted of all stocks in the market.

            d.         Market risk can be eliminated by forming a large portfolio, and if some Treasury bonds are held in the portfolio, the portfolio can be made to be completely riskless.

            e.         A portfolio that consists of all stocks in the market would have a required return that is equal to the riskless rate.

12.       Inflation, recession, and high interest rates are economic events that are best characterized as being

            a.         systematic risk factors that can be diversified away.

            b.         company-specific risk factors that can be diversified away.

            c.         among the factors that are responsible for market risk.

            d.         risks that are beyond the control of investors and thus should not be considered by security analysts or portfolio managers.

            e.         irrelevant except to governmental authorities like the Federal Reserve.

13. Which of the following statements is CORRECT?

            a.         Beta is measured by the slope of the security market line.

            b.         If the risk-free rate rises, then the market risk premium must also rise.

            c.         If a company's beta is halved, then its required return will also be halved.

            d.         If a company's beta doubles, then its required return will also double.

            e.         The slope of the security market line is equal to the market risk premium, (rM – rRF).

14. Stock A has a beta of 1.2 and a standard deviation of 20%. Stock B has a beta of 0.8 and a standard deviation of 25%. Portfolio P has $200,000 consisting of $100,000 invested in Stock A and $100,000 in Stock B. Which of the following statements is CORRECT? (Assume that the stocks are in equilibrium.)

            a.         Stock A's returns are less highly correlated with the returns on most other stocks than are B's returns.

            b.         Stock B has a higher required rate of return than Stock A.

            c.         Portfolio P has a standard deviation of 22.5%.

            d.         More information is needed to determine the portfolio's beta.

            e.         Portfolio P has a beta of 1.0.

15. Nile Food's stock has a beta of 1.4, while Elba Eateries' stock has a beta of 0.7. Assume that the risk-free rate, rRF, is 5.5% and the market risk premium, (rM – rRF), equals 4%. Which of the following statements is CORRECT?

            a.         If the risk-free rate increases but the market risk premium remains unchanged, the required return will increase for both stocks but the increase will be larger for Nile since it has a higher beta.

            b.         If the market risk premium increases but the risk-free rate remains unchanged, Nile's required return will increase because it has a beta greater than 1.0 but Elba's required return will decline because it has a beta less than 1.0.

            c.         Since Nile's beta is twice that of Elba's, its required rate of return will also be twice that of Elba's.

            d.         If the risk-free rate increases while the market risk premium remains constant, then the required return on an average stock will increase.

            e.         If the market risk premium decreases but the risk-free rate remains unchanged, Nile's required return will decrease because it has a beta greater than 1.0 and Elba's will also decrease, but by more than Nile's because it has a beta less than 1.0.

16. Stock X has a beta of 0.6, while Stock Y has a beta of 1.4. Which of the following statements is CORRECT?

            a.         A portfolio consisting of $50,000 invested in Stock X and $50,000 invested in Stock Y will have a required return that exceeds that of the overall market.

            b.         Stock Y must have a higher expected return and a higher standard deviation than Stock X.

            c.         If expected inflation increases but the market risk premium is unchanged, then the required return on both stocks will fall by the same amount.

            d.         If the market risk premium declines but expected inflation is unchanged, the required return on both stocks will decrease, but the decrease will be greater for Stock Y.

            e.         If expected inflation declines but the market risk premium is unchanged, then the required return on both stocks will decrease but the decrease will be greater for Stock Y.

17. Stock A has a beta of 0.8 and Stock B has a beta of 1.2. 50% of Portfolio P is invested in Stock A and 50% is invested in Stock B. If the market risk premium (rM – rRF) were to increase but the risk-free rate (rRF) remained constant, which of the following would occur?

            a.         The required return would increase for both stocks but the increase would be greater for Stock B than for Stock A.

            b.         The required return would decrease by the same amount for both Stock A and Stock B.

            c.         The required return would increase for Stock A but decrease for Stock B.

            d.         The required return on Portfolio P would remain unchanged.

            e.         The required return would increase for Stock B but decrease for Stock A.

18. Stock A has a beta of 0.7, whereas Stock B has a beta of 1.3. Portfolio P has 50% invested in both A and B. Which of the following would occur if the market risk premium increased by 1% but the risk-free rate remained constant?

            a.         The required return on Portfolio P would increase by 1%.

            b.         The required return on both stocks would increase by 1%.

            c.         The required return on Portfolio P would remain unchanged.

            d.         The required return on Stock A would increase by more than 1%, while the return on Stock B would increase by less than 1%.

            e.         The required return for Stock A would fall, but the required return for Stock B would increase.

19. Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur?

            a.         The required return on a stock with beta = 1.0 will not change.

            b.         The required return on a stock with beta > 1.0 will increase.

            c.         The return on "the market" will remain constant.

            d.         The return on "the market" will increase.

            e.         The required return on a stock with a positive beta < 1.0 will decline.

20.       A 10-year corporate bond has an annual coupon of 9%. The bond is currently selling at par ($1,000). Which of the following statements is CORRECT?

            a.         The bond’s expected capital gains yield is zero.

            b.         The bond’s yield to maturity is above 9%.

            c.         The bond’s current yield is above 9%.

            d.         If the bond’s yield to maturity declines, the bond will sell at a discount.

            e.         The bond’s current yield is less than its expected capital gains yield.

1.

High-Low Method for a Service Company

Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed “gross-ton miles,” which is the total number of tons multiplied by the miles moved.

Determine the variable cost per gross-ton mile and the fixed cost.

2.

Contribution Margin and Contribution Margin Ratio

For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):

Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)
$ million

b. What is Wicker Company's contribution margin ratio? Round to one decimal place.
%

c. How much would income from operations increase if same-store sales increased by $1,600 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
$ million

3.

Sales Mix and Break-Even Sales

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $522,000, and the sales mix is 30% bats and 70% gloves. The unit selling price and the unit variable cost for each product are as follows:

a. Compute the break-even sales (units) for both products combined.
units

b. How many units of each product, baseball bats and baseball gloves, would be sold at break-even point?

1.On January 1 of the current year (Year 1), our company acquired a truck for $75,000. The estimated useful life of the truck is 5 years or 100,000 miles. The residual value at the end of 5 years is estimated to be $5,000. The actual mileage for the truck was 22,000 miles in Year 1 and 27,000 miles in Year 2. What is the depreciation expense for the second year of use (Year 2) if we use the units of production method?

$14,000

$15,400

$16,800

$18,900

2.On January 1, our company purchased a truck for $85,000. The estimated useful life of the truck is 4 years. The residual value at the end of 4 years is estimated to be $5,000.

What is the depreciation expense for the second year of use if we use the double-declining balance method?

What is the balance in accumulated depreciation at the end of the second year of use if we use the double-declining balance method?

What is the book value at the end of the second year of use if we use the double-declining balance method.

3.On January 1, our company purchased a truck for $80,000. The estimated useful life of the truck is 4 years. The residual value at the end of 4 years is estimated to be $10,000. What is the depreciation expense for the third year of use if we use the straight-line method?

$17,500

$20,000

$35,000

$52,500

4.Our company uses the percentage of receivables method to estimate bad debt expense for the year. We had the following account balances on our unadjusted trial balance at the end of the year (December 31): accounts receivable, debit balance of $150,000; allowance for bad debts, debit balance of $1,000. We estimate that 3.5% of accounts receivable at the end of the year are uncollectible. What amount will be debited to bad debt expense when we record the adjusting entry?

$4,000

$4,250

$5,250

$6,250

5.Our company uses the percentage of sales method to estimate bad debt expense for the year. Our allowance for bad debts account has a credit balance of $1,000 prior to the adjusting entry for bad debt expense. We have estimated that 2% of net credit sales will be uncollectible for the current year. Net credit sales for the year totaled $200,000. What amount will be debited to bad debt expense when we record the adjusting entry?

3,000

$4,000

$5,000

$6,000