If the price of ice-cream falls what happens to the demand for ice-cream?

A company has unleveraged beta of 1.7, risk free rate 7% and market risk premium for 5%. The applicable tax rate is 40%.
The company needs to finance its new project having three different scenarios of financing:

Scenario Debt ratio Interest rate (before tax) EPS
1 0% 0% $2.7
2 20% 12% $3.8
3 80% 17% $4.2

$11.75

$22.41

$17.42

None of the above

15.34%

0%

14.86%

None of the above

$11.7

$10.2

$24.7

None of the above

0%

15.34%

14.86%

None of the above

Maximizes its price per share

Minimizes its WACC

All of the above

None of the above

14.86%; 22.65%

14.86%; $24.65

14.86%; $22.65

None of the above.

0% debt; 100% equity.

20% debt; 80% equity.

80% debt; 20% equity.

All of the above

1. Assume that a monopolist has T C(Q) = 22Q and the market demand is P(Q) = 50 − 2Q.

(a) What is the firm’s marginal cost?

(b) What is the profit-maximizing price and quantity (P ∗ , Q∗ )?

(c) What is the total revenue at (P ∗ , Q∗ )?

(d) What is the total cost at (P ∗ , Q∗ )?

(e) What is the profit at (P ∗ , Q∗ )?

(f) What is the consumer surplus at (P ∗ , Q∗ )?

(g) What is the deadweight loss at (P ∗ , Q∗ )?

2. Assume that a monopolists sells a product in the shortrun with a total cost function

STC(Q) =

{125 + 44Q + Q² Q > 0

{108 Q = 0

The market demand curve is given by the equation P(Q) = 80 − 2Q.

(a) Find the marginal cost for the firm.

(b) Find the profit-maximizing output and price (P ∗ , Q∗ ).

(c) What are the monopolists profits?

(d) Does the monopolist want to stay in business?

3. Assume that a monopolist has TC = 13 + 28Q + Q² and the market demand is P(Q) = 100 − 2Q.

(a) What is the profit-maximizing price and quantity (P ∗ , Q∗ )?

(b) What is the marginal cost at Q∗ ?

(c) Calculate the price elasticity of demand at (P ∗ , Q∗ ) (use the equation for elasticity, not IEPR).

(d) Verify that the IEPR holds

Suppose the aggregate demand for honey in a small country is given by Q^D = 100 − P and the aggregate supply is Q^S = P. The international price of honey is P^I = 60, and the world market is willing to buy or sell any amount at that price. Let all quantities be given in gallons and all prices in dollars per gallon. Suppose the country initially starts out with closed borders, and cannot import or export at all.

(a) What is the equilibrium price of honey in the domestic market?

(b) How much consumer surplus, producer surplus, and total welfare is generated by the honey market? Suppose the government recognizes how delicious honey is and decides to subsidize its purchase. They offer consumers a $5 rebate on every gallon of honey purchased.

(c) Find the new equilibrium price and quantity with the rebate.

(d) How would this answer change if the subsidy were given to producers instead of consumers?

(e) Compute the consumer surplus, producer surplus, transfers, and social welfare generated by the subsidy. Depict these graphically. How does each piece of social welfare compare to the competitive equilibrium?

(f) What is the deadweight loss of the subsidy? Propose a set of transfers in the competitive equilibrium such that everyone in the economy would be at least as well off as they are under the subsidy.

25. A relative price is:

A. the rate of inflation. B. a measure of overall prices at a particular point in time. C. the percentage change in a price index such as the CPI. D. the price of a specific good in comparison to the prices of other goods and services.

26.a specific good in comparison with other goods and services are called _______.

A. quality adjustments; substitution bias. B. changes in a relative price; inflation. C. inflation; changes in a relative price. D. price level adjustments; quality adjustments.

27. Suppose the value of the CPI is 1.10 in year 1, 1.16 in year 2, and 1.27 in year 3. Assume also that the price of computers increases by 3% between year 1 and year 2, and by another 3% between year 2 and year 3. The price level is increasing, the inflation rate is _______, and the relative price of computers is _________.

A. increasing; increasing B. constant; increasing C. constant; decreasing D. increasing; decreasing

28. Inflation _____ the signals sent by price changes to demanders and suppliers of goods and services.

A. amplifies B. obscures C. enhances D. has no impact on

29. The phenomenon known as _____ occurs when inflation causes people to pay an increasing percentage of their income in taxes even when their real incomes have not changed.

A. hyperinflation B. bracket creep C. the Fisher effect D. substitution bias

30. The shoe leather costs of inflation include all of the following EXCEPT:

A. the lost purchasing power of cash. B. the extra costs incurred to avoid holding cash. C. the cost of more frequent trips to the bank. D. the installation of a new cash management system. 31. Ann's Cookie Shop needs $1,000 cash per day for customer transactions. Ann has a choice between going to the bank first thing on Monday morning to withdraw $5,000 - enough cash for the whole week - or going to the bank first thing every morning for $1,000 each time. Ann puts the cost of going to the bank at $1 per trip. Assume that funds left in the bank earn precisely enough interest to keep their purchasing power unaffected by inflation. Ann's Cookie shop is open 5 days a week for 50 weeks each year. If Ann goes to the bank everyday when the inflation rate is 10%, then the annual cost of going to the bank is _____ and Ann's annual losses from holding cash are _____.

A. $50;$5,000 B. $50;$1,000 C. $250; $100 D. $250; $1,000

32. If workers and employers agree to a three-year wage contract expecting 3% inflation and inflation turns out to be 5%, then:

A. workers gain and employers gain. B. workers gain and employers lose. C. workers lose and employers gain. D. workers lose and employers lose.

33. When inflation turns out to be different than expected, wealth is ______.

A. destroyed B. redistributed C. increased D. decreased

34. It is difficult to engage in long-term financial planning when inflation is:

A. high and erratic. B. low and stable. C. accounted for through indexing. D. predictable.

35. The real interest rate is the:

A. market interest rate. B. annual percentage increase in the nominal value of a financial asset. C. annual percentage increase in the purchasing power of a financial asset. D. the interest rate charged on a loan in dollar terms.

36. The annual increase in the dollar value of a financial asset is called the:

A. real rate of return. B. inflation rate. C. real interest rate. D. nominal interest rate.

37. The market interest rate in Alpha is 7% and the market interest rate in Beta is 10%, but the inflation rate in Alpha is 3% and inflation rate in Beta is 8%. Which of the following statements is true?

A. The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta. B. The real interest rate is lower in Alpha, but the nominal interest rate is lower in Beta. C. Both the real and nominal interest rates are higher in Alpha. D. Both the real and nominal interest rates are higher in Beta.

38. On January 1, 2004, Anna invested $5,000 at 5% interest for one year. The CPI on January 1, 2004 stood at 1.60. On January 1, 2005, the CPI was 1.68. The real rate of interest earned by Anna was ____ percent.

A. -5 B. 0 C. 5 D. 8

39. Unexpectedly high inflation ______ borrowers and _____ lenders. A. helps; hurts B. helps; helps C. hurts; hurts D. hurts; helps 40. The Fisher effect is the tendency for ____ interest rates to be ______ when inflation is high.

A. real; high B. real; low C. market; low D. nominal; high

The accompanying table provides the data for 100 room inspections at each of 25 hotels in a major chain. Management would like the proportion of nonconforming rooms to be less than 2​%. Formulate a​ one-sample hypothesis test for a proportion and perform the calculations using the correct formulas and Excel functions. Use a level of significance of 0.05.

Is there sufficient evidence at the 0.05 level of significance that the proportion of nonconforming rooms to be less than 2​%?

Determine the null​ hypothesis, H0​, and the alternative​ hypothesis, H1. Then compute the test statistic and p-value. Finally, state the conclusion.

The Mystic Company lists the following stockholders’ equity items on 12/31/17:

6% preferred stock, $100 par, 50,000 shares authorized, 10,000 shares issued $1,000,000

Common stock, $10 par, 500,000 shares authorized, 200,000 shares issued 2,000,000

Paid-in Capital in excess of par - Preferred 500,000

Paid-in Capital in excess of par - Common 800,000

Retained Earnings 700,000

Less: Treasury stock (3,750 shares at cost) (60,000)

Total Stockholders’ Equity $4,940,000

During 2018, Mystic engaged in the following transactions affecting stockholders’ equity:

(1) On 1/1/18, Mystic established a stock option plan giving certain employees the right to purchase 20,000 shares of Mystic common stock at a price of $20. The market price of the common stock on the date of grant was $22, and the fair value of each option is $3. The options may be exercised any time after 1/1/18, and the executives must be in Johnson’s employ at the time of exercise. The service period is considered to be two years.

(2) On 3/10, reacquired 1,250 shares of common stock by purchase at a price of $23 per share.

(3) On 3/15, declared its first quarterly dividend on the preferred stock and a dividend of $.10 per share on its common stock to stockholders of record on 3/31. The dividend was paid on 4/10.

(4) Not wanting to deplete its cash reserves for the expected quarterly dividend, on 6/15, Mystic declared a preferred stock dividend and a property dividend payable on 7/15 to common stockholders of record on 6/30. The dividend consists of 19,475 shares of Baxter Corporation common stock, which has a book value of $2.20 per share. On 6/15, the stock is selling for $2.50 per share.

(5) On 9/15, declared the third quarterly preferred dividend and a 1% stock dividend to common stockholders of record on 9/30, to be distributed 10/15. The market price of Mystic’s common stock on 9/1 is $24.50.

(6) On 10/31, reissued 3,000 shares of treasury stock for $25 per share. Mystic uses the FIFO cost flow assumption for its treasury stock.

(7) On 11/1, sold 1,000 shares of common stock to a supplier for $25.

(8) On 12/15, declared the fourth quarter’s dividend on preferred stock and a $.10 per share dividend on the common stock. Dividends are payable 1/15/19 to shareholders of record on 12/31/18.

(9) Net income for 2018 was $475,000 before any adjustments you may have made above that affect income. The market price of the common stock at 12/31/18 was $25.75 per share, and the market price of the preferred stock was $110. The average price of the common stock during 2018 was $24.00.

Required:

a) Prepare all journal entries required in 2018 as a result of the transactions listed above.

b) Prepare, in good form, the statement of retained earnings for Mystic as of 12/31/18.

c) Prepare, in good form, the stockholders’ equity section for Mystic as of 12/31/18.

I like to ask this question each year. To provide you with some color, consider in answering that right now the federal government purchases one in every five gallons of milk sold in the U.S. and that it is illegal for sellers to sell milk to me and you below a mandated minimum price (note that some other industries have wholesalers and retailers execute these arrangements voluntarily – it happened to us when we were selling Titleist Pro-V1 golf balls when they first hit the market over a decade ago). Furthermore, as if the milk market isn’t curdled enough, we restrict how much foreign dairy comes into the US and we then place tariffs on the stuff that does come in.

The following question has several subsections:

1. Suppose we have a completely free market for milk, with buyers and sellers free to produce and consume milk according to their own interests. Illustrate the total welfare and consumer and producer surpluses in the market for milk. Assume the market clearing price is $2.00.

2. Now suppose the government steps in and wishes to support struggling milk farmers by imposing a minimum milk price rule. Whereas milk sold for $2 per gallon in part (a), the new rule stipulates that no milk can be sold below a price of $3. Illustrate the new equilibrium in this market. Show the new consumer and producer surpluses and total welfare. Compare your answer to that in part (a). Is this program a good idea from an economic standpoint? Briefly explain where the losses come from. (for the sake of this problem, assume that all farmers rent all of their land 100% outright, but that land prices remain unchanged)

3. Suppose now that the government understands the extra costs implied by the solution in (b). As a result, they assume a program of purchasing all of the milk that consumers demand (the government buys at the mandated price) and then requires that consumers purchase a milk-ticket from the government which consumers must purchase (from the government) along with their milk directly from the government (the government will only issue as many milk tickets as are required to not force the government to purchase and dispose of any excess milk). Describe the equilibrium under this program. Illustrate the price(s) of milk, how much the milk-tickets will sell for, the consumer surplus, the producer surplus and the welfare from the program. Compare this welfare with your answer in part b. What is different?

4. Instead of the program in part c, assume the government imposes the price floor and then does nothing. However, all farmers rent their land from other landowners and now real estate prices adjust instantaneously. In other words, if something decreases the value of land, prices fall immediately, and if something increases the value of land, prices rise immediately. Show the new consumer and producer surpluses and total welfare. Compare your answer to that in part (a) and part (b) and part (c).

5. Think back to question (d). Describe what happens if the farmers are also the landowners. Can you think about when farmers would prefer this outcome to the one described in part a?

The Ageless Child, Inc. (“TAC” or “the Company”) is a public company that sells children’s fashions and educational toys and games. As an incentive to its employees, TAC established a compensation incentive plan in which a total of 100,000 options were granted on January 1, 2019. TAC’s stock price was $15.00 per share on that date. 718-20-55-10 The significant terms of the incentive plan are as follows: • The options have a $15.00 “strike” or exercise price. • For the options to vest, the following must occur: o The employee must continue to provide service to the Company throughout the entire explicit service period of five years (i.e., a five-year “cliff-vesting” award). o TAC must achieve annual sales of at least $20 million during the fifth year (2023) of the explicit service period. o TAC’s share price must increase by at least 25% over the five-year explicit service period. • In addition, if the Company achieves sales of at least $25 million during the fifth year (2023) of the explicit vesting period, the strike price of the options will decrease from $15 to $10. • The options expire after 10 years following the grant date. • The options are classified as equity awards. Additional Facts: • Assume it is probable at all times that 100% of the employees receiving the awards will continue providing service to the Company as employees for the entire five-year explicit service period and that the five-year explicit service period is determined to be the requisite service period. • On the grant date, TAC’s management determine that it is probable that the Company’s sales in 2023 will be $30 million, and therefore it is probable on the grant date that sales are greater than or equal to at least $25 million in the fifth year. • The grant-date fair value of the options assuming a strike price of $15 is $8 per option. The grant-date fair value assuming a strike price of $10 per option is $12 per option. The CFO, Jayne Wilson, has come to you, the controller, and asked you to gather some information for her. First, she wants the types of conditions (i.e., service, performance, market, or other) present in the plan for the vesting of the units. Second, she wants to know how the service, performance, and market conditions affect vesting of the units. That is, of the various conditions present in the award, which conditions affect the vesting of the award and which affect factors other than vesting of the award (and what is their accounting treatment). Third, she would like to know the accounting impact if TAC’s share price remains steady at $15 through the end of the fifth year. Bonus (5 points) As described above, on January 1, 2019 (the grant date), $30 million of sales were probable for the fifth year (2023). During 2019, 2020, and 2021 $30 million of sales for 2023 remained probable. At the beginning of 2022 (the fourth year), management determines that it is probable that only $22 million of sales will occur for 2023. What are the journal entries for each year? Cite references from the FASB Accounting Standards Codification.

Has Greg provided accurate information concerning Mrs. Angstrom’s options for advance directives? If not, what’s wrong with what he said? What options would be more appropriate to suggest to her?

Mention at least 4 facts and 4 myth about aging, and explain one of then.

Has Greg provided accurate information concerning Mrs. Angstrom’s options for advance directives? If not, what’s wrong with what he said? What options would be more appropriate to suggest to her?

Mention at least 4 facts and 4 myth about aging, and explain one of then.