Choose values of r=4%, i=3%, p=1.5%, a=0.4 and b=0.2 and provide an estimation of the weighted opportunity of capital. When would you choose this discount rate?

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Consider the following time series data.

(a) Construct a time series plot.

(b)Develop the three-week moving average forecasts for this time series. (Round your answers to two decimal places.)

Compute MSE. (Round your answer to two decimal places.)

MSE =

What is the forecast for week 7?

(c) Use α = 0.2 to compute the exponential smoothing forecasts for the time series.

Compute MSE. (Round your answer to two decimal places.)

MSE =

What is the forecast for week 7? (Round your answer to two decimal places.)

(d) Compare the three-week moving average approach with the exponential smoothing approach using α = 0.2.

Which appears to provide more accurate forecasts based on MSE? Explain.

The three-week moving average provides a better forecast since it has a smaller MSE than the smoothing approach.

The three-week moving average provides a better forecast since it has a larger MSE than the smoothing approach.    

The exponential smoothing using α = 0.2 provides a better forecast since it has a smaller MSE than the three-week moving average approach.

The exponential smoothing using α = 0.2 provides a better forecast since it has a larger MSE than the three-week moving average approach.

(e) Use a smoothing constant of α = 0.4 to compute the exponential smoothing forecasts.

The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each costs $6,500 and has an expected life of 3 years. Annual project cash flows begin 1 year after the initial investment and are subject to the following probability distributions:

BPC has decided to evaluate the riskier project at 13% and the less-risky project at 9%.

What is each project's expected annual cash flow? Round your answers to two decimal places.

Project A $

Project B $

Project B's standard deviation (?_B) is $5,822 and its coefficient of variation (CV_B) is 0.78. What are the values of (?_A) and (CV_A)? Round your answer to two decimal places.

?_A = $

CV_A =

Based on the risk-adjusted NPVs, which project should BPC choose?

-Select-Project AProject B

If you knew that Project B's cash flows were negatively correlated with the firm's other cash flows, but Project A's cash flows were positively correlated, how might this affect the decision?

-Select-This would make Project B more appealing.This would make Project B less appealing.

If Project B's cash flows were negatively correlated with gross domestic product (GDP), while A's cash flows were positively correlated, would that influence your risk assessment?

th the firm's other cash flows, but Project A's cash flows were positively correlated, how might this affect the decision?

-Select-This would make Project B more appealing.This would make Project B less appealing.

If Project B's cash flows were negatively correlated with gross domestic product (GDP), while A's cash flows were positively correlated, would that influence your risk assessment?

Choosing Lottery Numbers: In the Super-Mega lottery there are 50 numbers (1 to 50), a player chooses ten different numbers and hopes that these get drawn. If the player's numbers get drawn, he/she wins an obscene amount of money. The table below displays the frequency with which classes of numbers are chosen (not drawn). These numbers came from a sample of 180 chosen numbers.

Chosen Numbers (n = 180)

The Test: Test the claim that all chosen numbers are not evenly distributed across the five classes. Test this claim at the 0.01 significance level.

(a) The table below is used to calculate the test statistic. Complete the missing cells.
Round your answers to the same number of decimal places as other entries for that column.

(b) What is the value for the degrees of freedom?
(c) What is the critical value of

χ²

? Use the answer found in the

χ²

-table or round to 3 decimal places.
t_α =

(d) What is the conclusion regarding the null hypothesis?

reject H₀fail to reject H₀    

(e) Choose the appropriate concluding statement.

We have proven that all chosen numbers are evenly distributed across the five classes.The data supports the claim that all chosen numbers are not evenly distributed across the five classes.     There is not enough data to support the claim that all chosen numbers are not evenly distributed across the five classes.

Choosing Lottery Numbers: In the Super-Mega lottery there are 50 numbers (1 to 50), a player chooses ten different numbers and hopes that these get drawn. If the player's numbers get drawn, he/she wins an obscene amount of money. The table below displays the frequency with which classes of numbers are chosen (not drawn). These numbers came from a sample of 180 chosen numbers.

Chosen Numbers (n = 180)

The Test: Test the claim that all chosen numbers are not evenly distributed across the five classes. Test this claim at the 0.01 significance level.

(a) The table below is used to calculate the test statistic. Complete the missing cells.
Round your answers to the same number of decimal places as other entries for that column.

(b) What is the value for the degrees of freedom? 6
(c) What is the critical value of

χ²

? Use the answer found in the

χ²

-table or round to 3 decimal places.
t_α = 7

(d) What is the conclusion regarding the null hypothesis?

reject H₀ fail to reject H₀    

(e) Choose the appropriate concluding statement.

We have proven that all chosen numbers are evenly distributed across the five classes. The data supports the claim that all chosen numbers are not evenly distributed across the five classes.      There is not enough data to support the claim that all chosen numbers are not evenly distributed across the five classes.

Make-or-Buy Decision for a Service Company

The Theater Arts Guild of Dallas (TAG-D) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, magazines, and other publications for the TAG-D productions. The pages are delivered to an outside company for printing. The company is considering an outside publication service for the layout work. The outside service is quoting a price of $13 per layout page. The budget for the Publication Department for the current year is as follows:

The department expects to lay out 24,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department's function were purchased from the outside.

a. Prepare a differential analysis dated February 22 to determine whether TAG-D should lay out pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0".

b. The benefit from using an outside service is shown to be _____ than performing the layout work internally. The fixed costs (depreciation expenses) in the budget are _____ to the decision. Thus, the work should ______ purchased from the outside on a strictly financial basis.

c. Before electing to _____ the five employees, the TAG-D should consider the ____ of the decision.

Make-or-Buy Decision for a Service Company

The Theater Arts Guild of Dallas (TAG-D) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, magazines, and other publications for the TAG-D productions. The pages are delivered to an outside company for printing. The company is considering an outside publication service for the layout work. The outside service quoting a price of $15 per layout page. The budget for the Publication Department for the current year is as follows:

Salaries $247,500
Benefits 56,300
Supplies 30,000
Office expenses 37,500
Office depreciation 33,800
Computer depreciation 22,500
Total $427,600

The department expects to lay out 25,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department’s function were purchased from the outside.

a. Prepare a differential analysis dated February 22 to determine whether TAG-D should lay out pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Lay out Pages Internally (Alt. 1) or Purchase Lay out Services (Alt. 2)
February 22
Lay out Pages Internally (Alternative 1) Purchase Lay out Services (Alternative 2) Differential Effect on Income (Alternative 2)
Selling Price $0 $0 $0
Costs:
Purchase price of lay out work $ $ $
Salaries
Benefits
Supplies
Office expenses
Office depreciation
Computer depreciation
Income (loss) $ $ $

Feedback

b. The benefit from using an outside service is shown to be less  than performing the lay out work internally. The fixed costs (depreciation expenses) in the budget are irrelevant  to the decision. Thus, the work should not be  purchased from the outside on a strictly financial basis.

c. Before electing to lay off  the five employees, the guild should consider the long-run impact  of the decision.

Make-or-Buy Decision for a Service Company

The Theater Arts Guild of Dallas (TAG-D) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, magazines, and other publications for the TAG-D productions. The pages are delivered to an outside company for printing. The company is considering an outside publication service for the layout work. The outside service is quoting a price of $13 per layout page. The budget for the Publication Department for the current year is as follows:

The department expects to lay out 18,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department's function were purchased from the outside.

a. Prepare a differential analysis dated February 22 to determine whether TAG-D should layout pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

b. The benefit from using an outside service is shown to be   than performing the layout work internally. The fixed costs (depreciation expenses) in the budget are   to the decision. Thus, the work should   purchased from the outside on a strictly financial basis.

c. Before electing to   the five employees, the Guild should consider the   of the decision.

Make-or-Buy Decision for a Service Company

The Theater Arts Guild of Dallas (TAG-D) employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, magazines, and other publications for the TAG-D productions. The pages are delivered to an outside company for printing. The company is considering an outside publication service for the layout work. The outside service is quoting a price of $14 per layout page. The budget for the Publication Department for the current year is as follows:

The department expects to lay out 26,000 pages for the current year. The Publication Department office space and equipment would be used for future administrative needs, if the department's function were purchased from the outside.

a. Prepare a differential analysis dated February 22 to determine whether TAG-D should layout pages internally (Alternative 1) or purchase layout services from the outside (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

b. The benefit from using an outside service is shown to be than performing the layout work internally. The fixed costs (depreciation expenses) in the budget are to the decision. Thus, the work should purchased from the outside on a strictly financial basis.

c. Before electing to the five employees, the Guild should consider the of the decision.