Problem 3: VSL

a) Describe VSL (i.e., “Value of a Statistical Life”) in terms that a non-economist can understand, taking care to “de-stigmatize” this economic concept (i.e., explain why it should not be considered as controversial as it is often portrayed).

b) Lavetti (2012) studies the wage-risk tradeoff for one of the riskiest professions in the United States: crab fishing in Alaska. The riskiness of crab fishing is driven mainly by the season and weather conditions. Lavetti collects data on the weather conditions of specific fishing trips, and the wages paid to the crew. He then runs a regression of the wage on the expected fatality rate for each trip and finds that an increase in one fatality per 1000 full time workers per year increases the mean hourly wage by $2.10. Calculate the VSL implied by this estimate, assuming that the number of hours a full-time worker works in a year is 2000.

c) Does this number seem high or low to you? Briefly discuss why this might be the case.

You are a nurse preparing to receive a new patient, fresh from surgery, to your unit. The patient is a 71-year-old man who underwent a surgical repair of a fractured femur. As you receive a report from the postanesthesia recovery unit, you learn that his medical history includes hypertension, 40 pack-years of smoking, and COPD. His surgical repair was successful but complicated by excessive bleeding, and he is receiving IV fluids to compensate. He is widowed, and his three children are scattered throughout the United States. He lives alone, receives Meals on Wheels, and pays a cleaning service to keep his home clean.

What general outcomes would you expect to establish from this information?

List potential plan of care revisions available to nurses.

To effect performance improvement in nursing, what steps are necessary in the process?

Health care facilities and organizations implement programs to promote excellence in nursing that are called quality-assurance programs. How do these programs work?

1. Describe in general terms how future appreciation of the euro will likely affect the value (from the parent’s perspective) of a project established in Germany today by a U.S.-based MNC. Will the sensitivity of the project value be affected by the percentage of earnings remitted to the parent each year?

(4 pts) Huskie Industries, a U.S.‑based MNC, considers purchasing a small manufacturing company in France that sells products only within France. Huskie has no other existing business in France and no cash flows in euros. Would the proposed acquisition likely be more feasible if the euro is expected to appreciate or depreciate over the long run? Explain.

2. (4 pts) Flagstaff Corp. is a U.S.‑based firm with a subsidiary in Mexico. It plans to reinvest its earnings in Mexican government securities for the next 10 years since the inter­est rate earned on these securities is so high. Then, after 10 years, it will remit all accumulated earnings to the United States. What is a drawback of using this approach? (Assume the securities have no default or interest rate risk.

Jobs R Us, Inc. is a recruiting firm that specializes in post – college placement in the finance industry. Its clients are currently concentrated in the North-Eastern United States. It is contemplating expanding into the Mid-West and accesses the risk of the new venture to be similar to that of the existing company.

Your RBS summer intern created a summary for Jobs R Us, Inc. potential in the Midwest market over the next 5 years:

Revenue is expected to be $7,500,000 in the first year and grow 8% per year for the next 4 years.

Variable cost is expected to be 45% of revenue.

Fixed cost (including depreciation) is expected to be $1,250,000 of revenue each year.

Depreciation expense is expected to be $75,000 each year.

Maintenance capex is expected to be $150,000 each year.

Change in Net working capital is expected to be $100,000 in year 1, growing at the same percentage as revenue thereafter.

Taxes are 40%.

Initial investment today is estimated to be $2,500,000.

After tax cost of capital is 12%

What is the NPV?

(answer in millions. round to 1 decimal)

Read the Following and Answer Questions

“In my experience consulting, I have seen several examples of organizations that incorporate the printing of paper reports, which replicate information that has been entered and is available with the electronic patient record. These reports are often reviewed, signed, and acted on instead of the electronic information. Despite the knowledge that the information contained in these reports was outdated the moment the report was printed and the very nature of using the report for workflow is an inefficient practice, this method of clinical workflow is prevalent in many hospitals across the United States. There is an underlying fear that drives the decision to mold a paper-based workflow around clinical technology. There is also a lack of the appropriate amount of integration that would otherwise allow this information to be available in an electronic form.

How does workflow analysis help practicing nurses?

Can we mold paper-based workflows into clinical information systems? Explain your answer.

Imagine that you are the INS charged with implementing the use of electronic records. What strategies could you use to promote a seamless transition?

in the last few decades, the auto industry has shifted from one in which a few, large companies primarily manufactured in their domestic markets and sold in their domestic markets, to one in which a few large companies serve the world market, manufacturing around the globe to capture competitive advantages wherever they can.

3-a) Why do companies like Toyota and Nissan have large operations in the U.S. market? Why don’t American companies have a large presence in Japan?

3-b) Why BMW and Mercedes have established manufacturing operations in the U.S. market, while American companies are shifting their production to places like Mexico. Similarly, reflect on the new agreement between Toyota and Mazda whereby Mazda will produce cars at its plant in Mexico for Toyota to sell in the United States.

3-c) Explain the current changes in the car industry, and in the future. Volkswagen, for example, has just committed to opening a new factory in Tennessee where wage rates are relatively low.

Covered and uncovered interest rate parity, Purchasing Power Parity (25)

Explain the difference between the covered and the uncovered interest rate parity. What is the underlying idea behind these concepts? How does it relate to the Purchasing Power Parity and what are the differences? (10)

Suppose the one-year interest rate in the US is 5.5% and in Germany is 6.0%. The dollar per Euro exchange rate is 1.20. What is the current forward exchange rate on a 1-year contract? (5)

Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The six-month interest rate is 8 percent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is $1.20 per Euro and the six-month forward exchange rate is $1.18 per Euro. The treasurer of IBM does not wish to bear any exchange risk. Where should he/she invest to maximize the return? (10)

How did you use your cell phone? A Pew Internet poll asked cell phone owners about how they used their cell phones. One question asked whether or not during the past 30 days they had used their phone while in a store to call a friend or family member for advice about a purchase they were considering. The poll surveyed 1003 adults living in the United States by telephone. Of these, 462 responded that they had used thier cell phone while in a store within the last 30 days to call a friend or family member for advice about a purchase they were considering.

a) Report the sample proportion, the standard error of the sample proportion, and the margin of error for 95% confidence.

b) Are the guidelines for when to use the large-sample confidence interval for a population proportion satisfied in this setting? Explain your answer.

c) Find the 95% large-sample confidence interval for the population proportion.

d) Write a short statement explaining the meaning of your confidence interval.

1. Which of the following is the effect on the transaction metrics of a company when it records depreciation?

a.Its profitability and liquidity remain unaffected.

b.Its liquidity increases.

c.Its profitability increases.

d.Its profitability decreases.

2. Aquablue Roadways Corporation operates throughout the United States. The following data (in millions) were adapted from recent financial statements of Aquablue.

From the above data, what would be the asset turnover for Year 2? (Round the answer to two decimal places.)

a.1.22

b.2.01

c.2.18

d.1.15

3. Which of the following is the effect on a company's liquidity and profitability metrics when it purchases a piece of equipment?

a.Its free cash flow decreases.

b.Its asset turnover remains unaffected.

c.Its free cash flow increases.

d.Its asset turnover increases.

MULTIPLE CHOICES - ADVANCED AUDITING

1. Which one of the following does not impact on inherent risk?

                 A. The auditor has reduced the sample sizes for testing of purchases for the company

B. During the year, the company converted its computer system to a new improved online system.

C. The company has purchased its raw materials from the United States at discounted prices.

D. Management has introduced a new bonus scheme for sales employees who meet their monthly target.

2. Which of the following increase control risk?

Select which two options are correct.

1. Optimistic forecasts presented to analysts
2. Lack of segregation of duties
3. Reduction in the size of the internal audit group
4. Reduction in sample size for substantive tests

3. Which one of the following fundamental principles of professional conduct is under threat when an accountant prepares an advertisement comparing the quality of their work with that of other accountants?

Select one:

1. Professional competence and due care
2. Objectivity
3. Professional behaviour
4. Professional scepticism

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