Item 8

Item 8

Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $560,000 per year; if he works a 50-hour week, the company's EBIT will be $645,000 per year. The company is currently worth $3.30 million. The company needs a cash infusion of $1.40 million, and it can issue equity or issue debt with an interest rate of 8 percent. Assume there are no corporate taxes.

1a. What are the cash flows to Tom under each scenario? (Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

Scenario-1
Debt issue:

Scenario-2
Equity issue:

b. Under which form of financing is Tom likely to work harder?

• Debt issue

• Equity issue

Many small restaurants in Portland, Oregon, and other cities across the United States do not take reservations. Owners say that with smaller capacity, no-shows are costly, and they would rather have their staff focused on customer service rather than maintaining a reservation system.† However, it is important to be able to give reasonable estimates of waiting time when customers arrive and put their name on the waiting list. The file RestaurantLine contains 10 observations of number of people in line ahead of a customer (independent variable x) and actual waiting time (in minutes) (dependent variable y). The estimated regression equation is:

ŷ = 4.35 + 8.81x

and MSE = 94.42.

(a)

Develop a point estimate (in min) for a customer who arrives with four people on the wait-list. (Round your answer to two decimal places.)

ŷ^* =  min

(b)

Develop a 95% confidence interval for the mean waiting time (in min) for a customer who arrives with four customers already in line. (Round your answers to two decimal places.)

min to  min

(c)

Develop a 95% prediction interval for Roger and Sherry Davy's waiting time (in min) if there are four customers in line when they arrive. (Round your answers to two decimal places.)

min to  min

(d)

Discuss the difference between part (b) and part (c).

The prediction interval is much  ---Select--- wider narrower than the confidence interval. This is because it is  ---Select--- more less difficult to predict the waiting time for an individual customer arriving with four people in line than it is to estimate the mean waiting time for a customer arriving with four people in line.

Required information

[The following information applies to the questions displayed below.]

Dowell Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.

Additional Information

1. Sales and production data for these first two years follow.

2. Variable cost per unit and total fixed costs are unchanged during 2018 and 2019. The company's $29 per unit product cost consists of the following.

3. Selling and administrative expenses consist of the following.

1. Prepare income statements for the company for each of its first two years under variable costing. (Loss amounts should be entered with a minus sign.)

2. Prepare a table as in Exhibit 6.12 to convert variable costing income to absorption costing income for both 2018 and 2019. (Loss amounts should be entered with a minus sign.)

public class StackTest
{
    public static void main(String[] args)
    {
        StackX theStack = new StackX(10);  // make new stack
        theStack.push(20);               // push items onto stack
        theStack.push(30);
        theStack.push(40);
        theStack.push(40);
        theStack.push(60);
        theStack.push(80);

        theStack.showStack();

        System.out.println("removeDownTo(40)");
        theStack.removeDownTo(40);

        theStack.showStack();

    }  // end main()
}

public class QueueTest
{
   public static void main(String[] args)
      {
      Queue theQueue = new Queue(20);  // queue holds 5 items

      theQueue.insert(10);            // insert 4 items
      theQueue.insert(20);
      theQueue.insert(30);
      theQueue.insert(40);

      theQueue.showQueue();
      
      System.out.println("Removing 3 items");
      theQueue.remove();              // remove 3 items
      theQueue.remove();              //    (10, 20, 30)
      theQueue.remove();
      
      theQueue.showQueue();

      System.out.println("Inserting 4 more items");
      theQueue.insert(50);            // insert 4 more items
      theQueue.insert(60);            //    (wraps around)
      theQueue.insert(70);
      theQueue.insert(80);
      theQueue.showQueue();

      System.out.println("Calling removeSecond()");
      long second = theQueue.removeSecond();
      theQueue.showQueue();

      }  // end main()
   }  

Attached Files:

• QueueTest.java (942 B)
• StackTest.java (507 B)

You may not use the java.util.Stack class.
You may not use the java.util.Queue class.

Ex1: Write a program that converts decimal to binary using a stack.

StackX class:
Ex2: Write method showStack(): It displays the contents of the stack starting with the first inserted element to the last. The stack would contain the same elements after showStack(). . If for example if to an empty stackx we push(20) then push(30) showStack() would print 20 30

Ex3: Write a method public static void removeDownTo (long n): It pops all values off the stack down to but not including the first element it sees that is equal to the second parameter. If none are equal, leave the stack empty.

Attach your StackX.java. I will use StackTest.java to test the above methods.

Queue class:
Ex4: Write method showQueue() to display the contents of the queue from first to last. The queue would contain the same elements after showQueue().

Ex5: Write a method public static Object removeSecond (): It removes and returns the element just behind the front element. Precondition: The queue has at least two elements.

Attach your Queue.java. I will use QueueTest.java to test the above methods.

Problem 19-18 EPS; stock options; nonconvertible preferred; convertible bonds; shares sold [LO19-4, 19-5, 19-6, 19-7, 19-8, 19-9]

At January 1, 2018, Canaday Corporation had outstanding the following securities:

720 million common shares
45 million 8% cumulative preferred shares, $50 par
4% convertible bonds, $4,500 million face amount, convertible into 90 million common shares

The following additional information is available:

On September 1, 2018, Canaday sold 81 million additional shares of common stock.

Incentive stock options to purchase 40 million shares of common stock after July 1, 2017, at $14 per share were outstanding at the beginning and end of 2018. The average market price of Canaday’s common stock was $20 per share during 2018.

Canaday's net income for the year ended December 31, 2018, was $1,524 million. The effective income tax rate was 40%.

Required:
1. & 2. Calculate basic and the diluted earnings per common share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of r_d = 10% as long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividend (D₀) was $1.90, its expected constant growth rate is 4%, and its common stock sells for $30. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 10%, and Project B's return is 8%. These two projects are equally risky and about as risky as the firm's existing assets.

1. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

   %

2. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places.

   %

3. Which projects should Empire accept?

   -Select-Project AProject B

Find the sample proportions and test statistic for equal proportions.

(a-1) Dissatisfied workers in two companies: x₁ = 44, n₁ = 100, x₂ = 34, n₂ = 100, α = .05, two-tailed test. (Round your answers to 4 decimal places. Use Excel to calculate the p-value.)

(a-2) Choose the appropriate hypotheses.

1. H₀:π₁ – π₂= 0 vs. H₁:π₁ – π₂ ≠ 0. Reject H₀ if z_calc < –1.96 or z_calc > 1.96
2. H₀:π₁ – π₂= 0 vs. H₁:π₁ – π₂ ≠ 0. Reject H₀ if z_calc > –1.96 or z_calc < 1.96

• a

• b

(a-3) Based on the data reject H₀.
  

• False

• True

(b-1) Rooms rented at least a week in advance at two hotels: x₁ = 28, n₁ = 200, x₂ = 16, n₂ = 50, α = .01, left-tailed test. (Round your answers to 4 decimal places. Negative values should be indicated by a minus sign. Use Excel to calculate the p-value.)

  
(b-2) Choose the appropriate hypotheses.

1. H₀:π₁ – π₂ ≥ 0 vs. H₀:π₁ – π₂ < 0. Reject H₀ if z_calc > 2.3263
2. H₀:π₁ – π₂ ≥ 0 vs. H₀:π₁ – π₂ < 0. Reject H₀ if z_calc < –2.3263

• a

• b

(b-2) Based on the data reject H₀.

• True

• False

(c-1) Home equity loan default rates in two banks: x₁ = 40, n₁ = 480, x₂ = 30, n₂ = 520, α = .05, right-tailed test. (Round your answers to 4 decimal places. Use Excel to calculate the p-value.)

(c-2) Choose the appropriate hypotheses.

1. H₀:π₁ – π₂ ≤ 0 vs. H₁:π₁ – π₂ > 0. Reject H₀ if z_calc > 1.645
2. H₁:π₁ – π₂ ≤ 0 vs. H₁:π₁ – π₂ > 0. Reject H₀ if z_calc < 1.645

• b

• a

(c-3) Based on the data reject H₀.

• False

• True

Electrolux

AB Electrolux, popularly known as Electrolux, is a global

leader in home and professional appliances, including

refrigerators, cookers, dishwashers, washing machines,

vacuum cleaners, air conditioners, and small domestic

appliances. It sells more than 50 million products in

150 countries. Headquartered in Stockholm, Sweden,

Electrolux was founded in 1919, as a result of a merger

between AB Lux, and Svenska Electron AB. In 2013,

Electrolux had revenues of approximately $14.5 billion

and employed 61,000 people worldwide.

The Electrolux group consists of six business divisions,

including four major appliances divisions, a small

appliances division, and a professional products division.

The core markets for Electrolux are Western Europe,

North America, and Australia, New Zealand and Japan

accounting for 65 percent of group sales. These markets

are characterized by low population growth and

high replacement product sales. The growth markets for

Electrolux are Africa, Middle East and Eastern Europe,

Latin America, and Southeast Asia and China contributing

35 percent to its sales. Given the rising living standards

in the growth markets, Electrolux aims to increase

its share of sales in these markets to 50 percent by introducing

innovative product offerings in the next two years.

In 2013, Electrolux was among the top five global

players in the household appliances industry, along

with Whirlpool, the Haier Group, Bosch-Siemens, and

LG Electronics. These companies contributed to nearly

50 percent of the global appliances sales. The major

drivers of this industry are increased per capita income,

changing lifestyles, consumer spending, housing activities,

and urbanization. Economic growth in emerging

markets is expected to boost the industry. The

main competitive advantages of Electrolux are global brand portfolio through horizontal integration. In the last

40 years, the group has had a series of acquisitions

around the world that strengthened its global position

through effective targeting and brand positioning

in domestic and regional markets. Examples of such

acquisitions

include Zanussi in Europe; AEG in Germany;

Frigidaire, Kelvinator, and White Westinghouse in North

America; Refripar in Brazil; and the Olympic Group in

Middle East and North Africa.

In September 2014, Electrolux unveiled its agreement

to acquire the appliance business of General Electric, GE

Appliances, for a cash consideration of $3.3 billion. GE

Appliances is one of the leading manufacturers of kitchen

and laundry products in North America, and makes more

than 90 percent of its sales in this region and runs its own

distribution and logistics network. The acquisition also

included a 48.4 percent shareholding in the Mexican appliance

company Mabe that develops and manufactures a

portion of the GE Appliances product range as part of a joint

venture with GE. According to Keith McLaughlin, President

and CEO of Electrolux, the acquisition was expected

presence, consumer insight, design, professional legacy,

Scandinavian heritage, wide product range, people and

culture, and sustainability leadership.

The vision of the Electrolux Group is to become the

best appliance company in the world as measured by

its customers, employees, and shareholders. It bases its

strategy on four pillars: innovative products, operational

excellence, profitable growth, and dedicated employees.

Its brand portfolio is strategically planned to serve luxury,

premium, and mass markets. Alongside the Electrolux

brand, the group has seven other strategic brands,

namely Grand Cuisine, AEG, Zanussi, Eureka, Frigidaire,

Molteni, and Westinghouse.

The “innovation triangle” at Electrolux encourages

close cooperation between its marketing, R&D, and design

functions to ensure faster reach to the market based

on solid consumer insights. This enables Electrolux to

use “same product architecture, differentiated design” to

develop global modularized platforms. These platforms

facilitate planning across divisions by making it easier to

spread a successful launch from one market to another

with adaptations to local preferences, and deliver greater

customer value.

By maintaining strategic emphasis on increasing operational

efficiency, Electrolux has restructured its production

across divisions globally. Electrolux has shifted nearly

65 percent of its manufacturing from mainly Western

Europe and North America to low-cost regions.

Pursuing its strategy of profitable growth, Electrolux

continuously innovates to enhance its current products

and ranges to penetrate existing markets. In 2013, it

launched many innovative products in North America and

Japan. Expanding to growth markets, Electrolux tapped

the potential of the Chinese market by launching a full

range of kitchen and laundry appliances of more than 60

products designed exclusively for China.

An important aspect of Electrolux’s strategy is

to grow through mergers and acquisitions, and build to give the company more financial horsepower on its

balance sheet to do even more business around the world.

With a growing portfolio of smartly positioned brands,

global reach, innovations based on consumer insight,

operational excellence and manufacturing efficiency, and

increased financial power, Electrolux is all set to establish

greater dominance in the global home appliances industry.

Questions

1. Evaluate Electrolux’s strategy in light of its vision and

the global trends in the household appliance industry.

2. What benefits will Electrolux receive from the acquisition

of GE Appliances? How does it fit in with the

strategic direction of the group? What other strategic

options can Electrolux pursue for future growth to

achieve greater global dominance?

Suppose that a bag contains 3 red chips and 7 white chips. Suppose that chips are drawn from the bag with replacement, i.e. the chips are returned to the bag and shuffled before the next chip is selected. Identify the correct statement.

An activity consists of choosing a student at random and recording their gender and their grade level. Which one of the following gives the sample space for the activity?

1. Let     A = {a, e, k, m} B = {b, g, h, r, w} C = {d, k n}     D = {m, r}.

   Which of the following pairs of sets are disjoint? Choose all that apply.

   	a.	A and B are disjoint.
   	b.	B and C are disjoint.
   	c.	A and C are disjoint.
   	d.	C and D are disjoint.
   	e.	A and D are disjoint.
   	f.	B and D are disjoint.
   	a.	0.65
   	b.	0.40
   	c.	0.90
   	d.	0.15

2. At a popular coffee shop one Saturday morning 60% of the customers purchase coffee, 30% purchase a bagel, and 25% purchase both. Suppose that a customer is selected at random. What is the probability that the customer purchases a coffee or a bagel?

   	a.	0.65
   	b.	0.40
   	c.	0.90
   	d.	0.15

   Which one of the following does not describe an activity that results in independent outcomes?

   	a.	Drawing five cards one-at-a-time, with replacement, from a well-shuffled deck.
   	b.	Picking four M&Ms from a bowl and eating each one before the next pick.
   	c.	Rolling a six-sided die two times.
   	d.	Flipping a coin three times.