13-7: Real Options – Nevada Enterprise is considering buying a vacant lot that sells for $1.2 million. If the property is purchased, the company’s plan is to spend another $5 million today (t = 0). To build a hotel on the property. The cash flows from the hotel will depend critically on whether the state imposes a tourism tax in this year’s legislative session. If the tax is imposed, h the hotel is expected to produce cash flows of $600, 000 at the end of each of the next 15 years. If the tax is not imposed, the hotel is expected to produce cash flows of $1, 200, 000 at the end of each of the next 15 years. The project has a 12% WACC. Assume at the outset that the company does not have the option to delay the project.  

a. What is the project’s expected NPV If the tax is imposed?  

b. What is the project’s expected NPV if the tax is not imposed?  

c. Given that there is a 50% chance that the tax will be imposed, what is the project’s expected NPV if management proceeds  

d. Although the company does not have an option to delay construction, it does have the option to abandon the project 1 year from now if the tax is imposed. If it abandons the project, it will sell the complete property 1 year from now at an expected price of $6 million after taxes. Once the project is abandoned, the company will no longer receive any cash flows. Assuming that all cash flows are discounted at 12%, will the existence of this abandonment option affect the company’s decision to proceed with the project today? Explain.  

e. Finally, assume that there is no option to abandon or delay the project, but that the company has an option to purchase an adjacent property in 1 year at price of $1.5 million (outflow at t =1). If the tourism tax is imposed, the expected net present value of developing this property (as of t =1) will be only $300, 000 (so it doesn’t make sense to purchase the property for $1.5 million. However, if the tax is not imposed, the expected net present value of the future opportunities from developing the property will be $4 million (as of t=1). Thus, under the scenarios, it makes sense to purchase the property for $.5 million (at t=1). Assume that these cash flows are discounted at 12%, and the probability that the tax will be imposed is still 50%. What is the most the company would pay today (t=0) for the $1.5 million purchase options (at t=1) for the adjacent property?  

Nevada Enterprises is considering buying a vacant lot that sells for $1.2 million. If the property is purchased, the company’s plan is to spend another $5 million today (t = 0) to build a hotel on the property. The cash flows from the hotel will depend critically on whether the state imposes a tourism tax in this year’s legislative session. If the tax is imposed, the hotel is expected to produce cash flows of $500,000 at the end of each of the next 15 years. If the tax is not imposed, the hotel is expected to produce cash flows of $1,400,000 at the end of each of the next 15 years. The project has a 12% WACC. Assume at the outset that the company does not have the option to delay the project.

a. What is the project’s expected NPV if the tax is imposed?

b. What is the project’s expected NPV if the tax is not imposed?

c. Given that there is a 55% chance that the tax will be imposed, what is the project’s expected NPV if management proceeds with it today?

d. Although the company does not have an option to delay construction, it does have the option to abandon the project 1 year from now if the tax is imposed. If it abandons the project, it will sell the complete property 1 year from now at an expected price of $6 million after taxes. Once the project is abandoned, the company will no longer receive any cash flows. Assuming that all cash flows are discounted at 12%, will the existence of this abandonment option affect the company’s decision to proceed with the project today? Explain.

e. Finally, assume that there is no option to abandon or delay the project, but that the company has an option to purchase an adjacent property in 1 year at a price of $1.5 million (outflow at t = 1). If the tourism tax is imposed, the expected net present value of developing this property (as of t = 1) will be only $300,000 (so it doesn’t make sense to purchase the property for $1.5 million). However, if the tax is not imposed, the expected net present value of the future opportunities from developing the property will be $4 million (as of t = 1). Thus, under this scenario, it makes sense to purchase the property for $1.5 million (at t = 1). Assume that these cash flows are discounted at 12%, and the probability that the tax will be imposed is still 55%. What is the most the company would pay today (t = 0) for the $1.5 million purchase option (at t = 1) for the adjacent property?

Chapter 8 hand-in Homework
Pat I
A random sample of 15 customers’ waiting time in a bank was selected, giving the following results in minutes:

0.38
2.34
3.02
3.2
3.54
3.79
4.21
4.5
4.77
5.1
5.13
5.55
6.1
6.19
6.46

1) Based on the sample above, what is the point estimate of the true percentage (same as True Population) of customers’ waiting time in a bank?  
2) To estimate the true percentage of customers’ waiting time in a bank, how large a sample must be taken to insure the estimate is off by no more than + 2% with 99% certainty?  

3) What would happen to the sample size above if the error was increased to 4%?  

4) What would happen to the sample size in question 2 above if the error was decreased to 1%?  
Part II
A bottle of water distributor wants to estimate the amount of water contained in 1-gallon bottles purchased from a nationally known water bottling company. The water bottling company’s specifications state that the standard deviation of the amount of water is equal to 0.02 gallon. A random sample of 50 bottle is selected, and the sample mean amount of water per 1-gallon bottle is 0.995 gallon.

Construct a 99% confidence interval estimate for the population mean amount of water included in a 1-gallon bottle.

b) On the basis of these results, do you think that the distributor has a right to complaint to the water bottling company? Why?

c) Must you assume that the population amount of water per bottle is normally distributed? Explain.

Part III
In a survey of 529 travelers, 386 said that location was very important and 323 said that room quality was very important in choosing a hotel.
a) Construct a 95% confidence interval estimate for the population proportion of travelers who said that location was very important for choosing a hotel.
b) The percentage of travelers that said that location was very important for choosing a hotel is a statistic or a parameter? Explain
c) If we need to conduct a follow up study, what sample size is need to estimate the population proportion of travelers who said that location was very important for choosing a hotel with 95% confidence within ± 5%?

1.        Angelo uses the equity method to account for its investment in Fischer on January 1. On the date of acquisition, Fischer’s land and buildings were undervalued on its balance sheet. During the year following the acquisition, how do these excesses of fair values over book values affect Angelo's Equity Income from Fischer?

a. Building, Decrease; Land, No Effect

b. Building, Decrease; Land, Decrease

c. Building, Increase;   Land, Increase

d. Building, Increase;   Land, No Effect

2.         On January 2, 2020, Campbell, Inc. purchased a 20% interest in Renner Corp. for $2,000,000 cash. During 2020, Renner's net income was $2,500,000 and it paid dividends of $750,000.

Equity Investment balance should Campbell report at December 31, 2020?

a. $2,500,000

b. $   500,000

c. $2,350,000

d. $2,150,000

3.        On December 31, 2020, Park Inc. paid $500,000 for all of the common stock of Smith Corp. On that date, Smith had assets and liabilities with book values of $400,000 and $100,000; and fair values of $450,000 and $125,000, respectively.

What amount of goodwill will be reported on the December 31, 2020 balance sheet?

a. $ 50,000

b. $100,000

c. $200,000

d. $175,000

4.         Francis, Inc. acquired 40% of Park's voting stock on January 1, 2020 for $420,000. During 2020, Park earned $120,000 and paid dividends of $60,000. During 2021, Park earned $160,000 and paid dividends of $50,000 on April 1 and $40,000 on December 1. On July 1, 2021, Francis sold half of its stock in Park for $275,000 cash.

The Equity Investment balance at December 31, 2020 is:

a. $420,000

b. $444,000

c. $408,000

d.   $492,000

5.         On January 1, 2020, Cracker Co. purchased 40% of Dallas Corp.'s common stock at book value of net assets. The balance in Cracker's Equity Investment account was $820,000 at December 31, 2020. Dallas reported net income of $500,000 for the year ended December 31, 2020, and paid dividends totaling $150,000 during 2020.

How much did Cracker pay for its 40% interest in Dallas?

a. $680,000

b. $500,000

c. $560,000

d. $760,000

● The Faculty & Staff parking permit allows a car to park in YELLOW and GREEN slots. User

can purchase multiple Faculty & Staffparking permit.

● The Student parking permit allows a car to park in GREEN slots. User can purchase multiple

student parking permit.

● The Resident parking permit allows a car to park in ORANGE and GREEN slots. User can add

a premium package to this kind of permit that allows one of user’s friend to share this permit, but

each user can only purchase one Resident parking permit.

● The Visitor parking permit allows a car to park in ORANGE, YELLOW and GREEN slots.

The permit is only valid for one day and user can only purchase one Visitor parking permit.

User can purchase more than one type of ticket at a time, as many Faculty & Staff and student as

they choose.

Your goal is to write a program that sells the permits and using the existing functions in

hw4a.cpp.

//---------------------------------------------------------------------------
//      This is the main program that you need to write
//---------------------------------------------------------------------------
int main ()
{
   // Variable Declarations
   char Choice = '\0';   // what the user enters
   int NumPermits = 0;   // how many permits they want to buy
   int TotalPermits = 0; // total number of permit sold so far
   float Price = 0.0;    // the price of one set of permit
   float TotalPrice = 0.0;    // the total price of all permits
   char ExitChoice = 'N'; //whether or not the user wants to exit


   // Print your name and ID
   cout << "Name: \n"
        <<"ID: \n\n";
                
   // Loop until the user is done
   
      // Print the main menu describing the tickets offered

           
      // Ask the user type what permit they want to purchase next
  
           
      // If the user selects Faculty&Staff parking permit calculate the price of tickets
     
           
      // If the user selects Student parking permit be sure to note the reference parameters
   

      // If the user selects Resident parking permit, ask if they want the premium package
     
           
      // If the user selected visitor parking permit, make sure they decided to order them

           
      // Add the permit price to a running total 
          
          
          //Add the number of permits to a running total  
  
  
          // Ask if they want to continue (Y or N)

          
      // When the loop is done
      // Print out the total number of permits sold, and the amount of all the permits, with a $.

   
   return 0;
}

The following information is available for Park Valley Spa for July Year 1:

The following is a list of checks and deposits recorded on the books of the Park Valley Spa for July Year 1:

Other Information

1. Check no. 2350 was outstanding from June.
2. The credit memo was for collection of notes receivable.
3. All checks were paid at the correct amount.
4. The debit memo was for printed checks.
5. The June 30 bank reconciliation showed a deposit in transit of $1,104.
6. The unadjusted Cash account balance at July 31 was $14,603.

Required
a. Prepare the bank reconciliation for Park Valley Spa at the end of July.
b. Record in general journal form any necessary entries to the Cash account to adjust it to the true cash balance.
  

A. record the collection of notes recievable

B. record cash paid for office supplies expenses

US History

Freedom House was an organization that:

a demanded American intervention in the European war.

b Jewish refugees could flee to from Europe.

c believed the European war was not an American concern.

d raised funds for Japanese-Americans to use for legal fees to bring court cases against the United States for unlawful imprisonment.

e was located in Chicago and acted as a networking resource for blacks moving there from the South.

Which of the following best describes Nixon's foreign policy of "détente"?

a It meant a continuation of the status quo.

b The United States was not yet willing to sign arms-control treaties with the Soviet Union.

c As demonstrated by diplomatic visits to both China and the Soviet Union, Nixon sought a peaceful coexistence with communist nations.

d It meant a rejection of Henry Kissinger's "realist" approach to the Cold War.

e It meant Nixon had gone "soft" on communism.

"Americanization" was:

a the Viet Cong's policy of immediate execution of defectors recaptured from the South Vietnamese army.

b Nixon's term for the transformation of young people into "real" Americans when they refrained from protesting against the war.

c Nixon's Vietnam strategy to have American troops gradually withdraw and South Vietnamese troops assume more of the fighting.

d the State Department program offering fast-tracked political asylum for South Vietnamese military officials and their families.

e the spread of American culture in South Vietnam to display the benefits of capitalism.

What was the Contract with America?

a A press term for the Clinton reelection strategy.

b Clinton's 256-page proposal to overhaul the nation's welfare system.

c A 1994 Republican plan to steeply cut federal education, medical, and environmental programs.

d A speech delivered by Clinton that promised to continue to work on health care reform.

e what Democrats called Bill Clinton's victory in 1992.

Globalization:

a had little to do with the collapse of communism.

b was symbolized by corporations such as Microsoft and organizations like the WTO.

c is closely associated with the 1990s, although it was not a new phenomenon.

d promoted the free flow of goods and services across borders, but only with a strict regulatory apparatus in place.

e B and C

In the 1990s, the prison population:

a declined because there was little new prison construction.

b experienced shorter sentences and more rehabilitation programs than before.

c increased because crime rates increased in the 1990s.

d increased as state governments increased penalties for crimes and decreased parole.

e declined because states refused to fund the "prison-industrial complex."

SSHA score

Survey Study Habits and Attitude (SSHA) is a psychological test designed to measure motivation, habits and attitudes towards learning among college students in the United States. The scores on the SSHA range from 0 to 200. In a study at an American college, the results were included in the data file SSHA.SAV.

1- Give a descriptive description of the SSHA score, with mean, median, standard deviation and any other descriptive targets that can describe this data.

2- Are the SSHA slots normalized?

The study also indicates whether you are female (sex = 0) or male (sex = 1).

3- Provide a 95% confidence interval for the average for women and men individually.

4- Show that confidentiality ranges for women and men are overlapping.

A researcher of you claims that the impossible can be statistically significant difference between the SSHA scores as long as the confidence intervals are (partially) overlapping. What do you mean about this claim?

5- Test the hypothesis that the SSHA scores are equal for men and women. What is the conclusion? Be sure to check the assumptions that lie behind the test

6- Summarize the conclusion in point 5 to what you got in point 4, and what can you tell your alleged researcher?

SPSS FILE 1.

Score

154
109
137
115
152
140
154
168
101
103
126
126
137
165
165
128
180
148
108
140
114
91
175
115
126
92
169
146
109
132
75
88
113
151
70
115
169
104

SPSS FILE 2.

SEX

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

SSHA score

Survey Study Habits and Attitude (SSHA) is a psychological test designed to measure motivation, habits and attitudes towards learning among college students in the United States. The scores on the SSHA range from 0 to 200. In a study at an American college, The SSHA, SPSS file is attached below with the number SPSS FILE 1 AND 2..

1- Give a descriptive description of the SSHA score, with mean, median, standard deviation and any other descriptive targets that can describe this data.

2- Are the SSHA slots normalized?

The study also indicates whether you are female (sex = 0) or male (sex = 1).

3- Provide a 95% confidence interval for the average for women and men individually.

4- Show that confidentiality ranges for women and men are overlapping.

A researcher of you claims that the impossible can be statistically significant difference between the SSHA scores as long as the confidence intervals are (partially) overlapping. What do you mean about this claim?

5- Test the hypothesis that the SSHA scores are equal for men and women. What is the conclusion? Be sure to check the assumptions that lie behind the test

6- Summarize the conclusion in point 5 to what you got in point 4, and what can you tell your alleged researcher?

SPSS FILE 1.

Score

154
109
137
115
152
140
154
168
101
103
126
126
137
165
165
128
180
148
108
140
114
91
175
115
126
92
169
146
109
132
75
88
113
151
70
115
169
104

SPSS FILE 2.

SEX

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

USA's different cultural and institutional profiles compared to the United Kingdom.

One North American employee is coming to work in your organisation in United Kingdom, you are the manager of your organisation in the United Kingdom.

A. Put together a report advising about cultural differences that the North American may have coming to work in the United Kingdom, and the differences in the institutional business environment.

B. What challenges may arise for the manager in the United Kingdom, dealing with a North American?