Question: You are starting a new project. This project would last 4 years. The following is the input information that you have collected:

1. What is the NPV of this project? (In your calculations use zero decimal spaces/round to the whole numbers).
2. Explain briefly if you think that the project is viable.
3. Discuss the potential sources of long-term finance available to a large company.

It is 2018. You decided to purchase a US treasury bond now. It matures in 8 years (in 2026), has a face value of $100,000, a coupon rate of 6 percent (as usually, you get the first coupon in a year, i.e. 2019) and a yield of 7 percent.

a) Even before proceeding to calculations, you refresh what you learnt in the M&B class and immediately realize that you would have to pay … rather than the face value of this bond. (choose: more or less)

b) Based on this information, you quickly calculate that you would have to pay $____ for this bond.

c) You purchased the bond back in 2017. It is 2018 now, and you’ve received the first coupon payment. Shortly after this, FED’s actions led to an unexpected change in yield of all bonds. The yield for your bond now is 9 percent. What is the price of your bond now?

d) but, if you actually feel completely indifferent to any changes in the bond price (even if it drops a lot) and yield, it must be the case that you planned originally to... (write a sentence or two explaining the reason when you feel not affected by this at all).

1. Discuss why having a monopoly may hurt social welfare. Discuss about what Anti-Trustdoes to regulate the monopoly.

2. Suppose there are two groups of consumers, students or adults. The demand function forstudents isQs= 6?p, the demand for the adults isQa= 12?p. Suppose the marginal costis 2.

(a) What is the monopolistic prices for both markets? What is the total producer’s surplus?

(b) If the monopoly can only charge a single price, what would be the optimal price? Whatis the producer’s surplus?

(c) Explain without calculation, which producer surplus is larger, (a) or (b)?

3. (Cournot Competition.) Suppose there are two firms facing a common market withdemand functionp= 12?Q. Suppose both firms’ marginal cost aremc= 2. Let’s assumethat these two firms are playing the cournot competition game.

(a) Write down the profit function of both firms.

(b) Solve the best response function of the two firms.

(c) Compute the Nash Equilibrium.

(d) Now assume that the first firm has the first mover advantage. Calculate the new equi-librium (the Stackleburg equilibrium.)

Variable Costing and Over/Under Producing

Cathy's Mats produces and sells artistic placemats for dining room tables. These placemats are manufactured out of recycled plastics. For last year and this year each mat has a variable manufacturing cost of $3, and fixed manufacturing overhead is $150,000 per year (both Last Year and This Year). Cathy's Mats incurs no other costs. The following table summarizes the selling price and the number of mats produced and sold Last Year and This Year:

Cathy's Mats uses FIFO (First-in First Out) to value its ending inventory. Last Year Cathy's Mats had no beginning inventory.

Required:

a. Prepare income statements for Last Year and This Year using absorption costing.
b. Prepare income statements for Last Year and This Year using variable costing.

c. What is the value of the ending inventory using the FIFO method?

d. What is the value of the ending inventory using the LIFO method?

Glass CC is a supplier of glass containers and has the following sales budget for the coming year: Month Sales Value (Rands) January 300 000 February 315 000 March 345 000 April 367 500 The sales price per unit is R15; the cost of sales is 60% of sales. Glass CC keeps inventory equal to the coming month's budgeted sales requirements. It pays for purchases 55% in the month of purchase and 45% in the month after purchase. Inventory at the beginning of January is R172,800. Accounts Payable on 1 January is R83,000. Required a. Prepare a purchases budget, in units and in rands, for the first three months of the year (8) b. Prepare a schedule of cash disbursements on account for the first three months of the year. (6) c. Determine the accounts payable balance as of 31 March. (2) Glass CC is a supplier of glass containers and has the following sales budget for the coming year:Month Sales Value (Rands) January 300 000 February 315 000 March 345 000 April 367 500 The sales price per unit is R15; the cost of sales is 60% of sales.

A firm’s production function is given by: F(L,K) = L^1/4K^3/4. You also know that the wage rate is $2, the price of capital is $6, and the price of the product is $216

a) In the short-run, capital is fixed at 1 unit. How many units of Labor (L) should this firm hire?

b) How much profit is the firm making in the short-run?

c) Assuming that in the long-run both capital (K) and labor (L) are variable inputs, what is the optimal combination (profit-maximizing/cost-minimizing L* and K* ) to produce the same amount of output as in the short-run?

d) What are the profits in the long-run?

e) Assume that the firm has a fixed cost of $200. Find the variable cost function, the total cost function, the marginal cost function, the average total cost function, the average fixed cost function, and the average variable cost function (hint: to answer this question, first, redo all calculations in part (c) in terms of a general level of output Q. In other words, first find L* and K* as a function of Q using the tangency condition, then find cost functions).

Inner Secret T Shirt Company produces and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $ 29 Direct labor $ 14 Variable manufacturing overhead $ 4 Variable selling and administrative $ 1 Fixed costs per year:

Fixed manufacturing overhead $ 570,000

Fixed selling and administrative expenses $ 170,000

During its first year of operations, O’Brien produced 92,000 units and sold 75,000 units.

During its second year of operations, it produced 84,000 units and sold 96,000 units.

In its third year, O’Brien produced 89,000 units and sold 84,000 units.

The selling price of the company’s product is $79 per unit.

4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):

a. Compute the unit product cost for Year 1, Year 2, and Year 3.

b. Prepare an income statement for Year 1, Year 2, and Year 3.

O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $ 29 Direct labor $ 15 Variable manufacturing overhead $ 6 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 520,000 Fixed selling and administrative expenses $ 190,000 During its first year of operations, O’Brien produced 97,000 units and sold 72,000 units. During its second year of operations, it produced 81,000 units and sold 101,000 units. In its third year, O’Brien produced 84,000 units and sold 79,000 units. The selling price of the company’s product is $74 per unit. 2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first): a. Compute the unit product cost for Year 1, Year 2, and Year 3. b. Prepare an income statement for Year 1, Year 2, and Year 3.

Inner Secret T Shirt Company produces and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $ 28 Direct labor $ 17 Variable manufacturing overhead $ 3 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 500,000 Fixed selling and administrative expenses $ 130,000 During its first year of operations, O’Brien produced 93,000 units and sold 73,000 units. During its second year of operations, it produced 80,000 units and sold 95,000 units. In its third year, O’Brien produced 89,000 units and sold 84,000 units. The selling price of the company’s product is $73 per unit. 2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first): a. Compute the unit product cost for Year 1, Year 2, and Year 3. b. Prepare an income statement for Year 1, Year 2, and Year 3