Question 2 – ALL CALCULATIONS MUST BE SHOWN

A local theme park is losing money. The current price of admission is $60 per person with an average daily attendance of 750 people. You are an independent consultant employed to recommend a pricing strategy. The demand schedule estimated by the consultant is shown in the table below.

a. Fill in the blanks in the table above. There are 7 empty cells [marked as 0.5 marks per cell correctly filled]. Use the point method (ΔQ/ΔP)*(P/Q) to calculate the own-price elasticity of demand. (3.5 marks)

b. As a consultant what would be your recommendation regarding pricing strategy? Should the theme park change the price from $60? Justify your answer based on the price elasticity of demand. .

c. From the information in the table write the equation for the daily demand for theme park tickets in price dependent form (P=a-bQ). (2.5 marks)

d. Use the midpoint method to calculate the price elasticity of demand from $85 to $90. Explain whether demand is price elastic or price inelastic and interpret the value of this elasticity.

e. Theme park customers are able to purchase a $15 photographic package. At the current ticket price of $60, 34% of customers purchase photographic packages. The theme park estimates that a $3 price increase in theme park tickets would result in a 20% reduction in photographic packages purchased. Provide the name of, and calculate the value of, this elasticity. Interpret its value. What does this elasticity value tell the theme park managers about the relationship between theme park ticket prices and photographic packages? How many customers would purchase the photographic packages if theme park tickets increased by $3?

Georgia Movie Company has a capital structure with 43.00% debt and 57.00% equity. The cost of debt for the firm is 8.00%, while the cost of equity is 15.00%. The tax rate facing the firm is 35.00%.

The firm is considering opening a new theater chain in a local college town. The project is expected to cost $12.00 million to initiate in year 0. Georgia Movie expects cash flows in the first year to be $3.45 million, and it also expects cash flows from the movie operation to increase by 4.00% each year going forward. The company wants to examine the project over a 10.00-year period.

What is the NPV of this project? (express answer in millions, so 1,000,000 would be 1.00)

Submit

Answer format: Currency: Round to: 2 decimal places.

As manager of the Best Drinks Company in Hayward, you would like to sell drinks at a booth during the major celebration in the Hayward’s Central Park. The following table provides information about the drinks that you will be selling: You estimate labor cost to be $600 (2 people, $300 dollars each per day at the booth). Even if nothing is sold, your labor cost will be still $600, so you decide to consider this a fixed cost. Booth rental, $400, is also a fixed cost. Apply the total fixed cost for your break-even analysis, and do not annualize the fixed cost.

Questions What is the break-even volume (in dollars) for selling drinks at the booth? Show your calculations manually or use Excel. How much would you expect to sell at the break-even point? Present and explain your calculations.

Question:5

1. What is meant by the standard error of the mean?
2. What is meant by a Type I and a Type II error?
3. What is the difference between a one and two tail test?

4. In September 2019, a Travel Agent used a random sample of 36 holiday makers to find out the average cost per person of a one week holiday in Queen Elizabeth National Park. The following information was found:

September 2019

          Mean                       $372.40

         Standard deviation $26.10

         Sample size 36

In the previous year the average cost of each holiday was $356.20.

1. Test whether the cost of a one week holiday to Queen Elizabeth National Park has increased significantly since the previous year.
2. The company based its views on customer satisfaction from the letters it receives. In the previous year, 68% of the letters it received were of a positive nature.

The company wishes to adopt a more scientific approach to estimating customer satisfaction.

What sample size would be needed to estimate the proportion of customers’ views to within 2% of the true figure at the 95% confidence limit and Interval                                  

Nilam Patel is the primary stockholder in two hotel corporations. One corporation owns a 90‐room economy property located in the suburbs of a large western town. The other corporation is a 350‐room full‐service convention hotel in the downtown city center for which Nilam has employed a management company to operate the property. Nilam is preparing balance sheets for both properties using a common size format. Complete the two balance sheets. Then answer the questions that follow.

1. What was the amount of cash in the 90‐room property's Cash in House Banks account at year end?
2. What is the amount of Allowance for Doubtful Accounts in the 350‐room property? Do you think it is excessive? Explain your answer?
3. What would explain the lack of a beverage inventory value in the 90‐room hotel?
4. What was the dollar amount of Total Assets in the 90‐room hotel?
5. What was the dollar amount of Total Assets in the 350‐room hotel?
6. What was the dollar amount of Current Maturities of Long‐Term Debt in the 350‐room property? Why is that amount likely so much higher than for the 90‐room property?
7. What was the dollar amount of Paid in Capital for the 90‐room property?
8. What is the Owners' Equity percentage of Total Assets in the 90‐room property? What is it in the 350‐room property?

1. 8. BONUS: Nilam Patel is the primary stockholder in two hotel corporations. One corporation owns a 90‐room economy property located in the suburbs of a large western town. The other corporation is a 350‐room full‐service convention hotel in the downtown city center for which Nilam has employed a management company to operate the property. Nilam is preparing balance sheets for both properties using a common size format. Complete the two balance sheets. Then answer the questions that follow.

   Nilam Patel's Two Hotel's Balance Sheets

   	December 31		Common Size
   	90‐Room Property	350‐Room Property	90‐Room Property (%)	350‐Room Property (%)
   ASSETS
   Current Assets
   Cash
   Cash in House Banks		$86,000
   Cash in Demand Deposits	85,000	330,250
   Total Cash	103,500	416,250
   Short‐Term Investments	56,000	165,000
   Receivables
   Accounts Receivable	150,000	327,150
   Notes Receivable	35,000	136,250
   Other	750	30,800
   Total Receivables	185,750	494,200
   Less Allowance for Doubtful Accounts	19,250
   Net Receivables	166,500	431,900	1.4	1.1
   Due from Management Company	—	50,000	0.0	0.1
   Food Inventories	15,125	69,750	0.1	0.2
   Beverage Inventories	—	42,550	0.0	0.1
   Gift Shop Inventories	300	6,950	0.0	0.0
   Supplies Inventories	6,550	13,550	0.1	0.0
   Prepaid Expenses	56,000	120,100	0.5	0.3
   Deferred Income Taxes—Current	48,000	135,000	0.4	0.3
   Total Current Assets
   Investments	72,500	274,150	0.6	0.7
   Property and Equipment
   Land	2,000,000	8,450,000
   Building	6,500,000	18,500,000
   Leaseholds and Leasehold improvements	2,037,250	5,850,000
   Furnishings and Equipment	1,288,000	3,105,000
   Total Property and Equipment	11,825,250	35,905,000
   Less Accumulated Depreciation and Amortization	575,000	2,575,000
   Net Property and Equipment	11,250,250	38,480,000
   Other Assets
   Intangible Assets	—	75,000	0.0	0.2
   Deferred Income Taxes—Non‐current	66,000	158,000	0.6	0.4
   Operating Equipment	35,100	111,000	0.3	0.3
   Restricted Cash	25,000	95,000	0.2	0.2
   Total Other Assets	126,100	439,000	1.1	1.1
   TOTAL ASSETS			100.0	100.0
   LIABILITIES AND OWNERS' EQUITY
   Current Liabilities
   Notes Payable
   Banks	17,500	116,250	0.1	0.3
   Others	8,000	17,500	0.1	0.0
   Total Notes Payable	25,500	133,750	0.2	0.3
   Accounts Payable	2,500	125,100
   Accrued Expenses	45,000	42,500
   Advance Deposits	500	42,250
   Income Taxes Payable	15,000	78,000
   Deferred Income Taxes—Current	40,000	235,000
   Current Maturities of Long‐Term Debt	420,000
   Other	50,000	58,000
   Total Current Liabilities	598,500	2,399,600	5.0	5.9
   Long‐term Debt, Net of Current Maturities
   Mortgage Note		24,383,030
   Obligations Under Capital Leases	18,000	385,000	0.2	0.9
   Total Long‐Term Liabilities	6,868,000
   Owners' Equity
   Common Stock	500,000	2,000,000
   Paid in Capital		8,711,500
   Retained Earnings	879,325	2,765,070
   Total Owners' Equity	4,434,325	13,476,570
   TOTAL LIABILITIES AND OWNERS' EQUITY			100	100

   1. What was the amount of cash in the 90‐room property's Cash in House Banks account at year end?
   2. What is the amount of Allowance for Doubtful Accounts in the 350‐room property? Do you think it is excessive? Explain your answer?
   3. What would explain the lack of a beverage inventory value in the 90‐room hotel?
   4. What was the dollar amount of Total Assets in the 90‐room hotel?
   5. What was the dollar amount of Total Assets in the 350‐room hotel?
   6. What was the dollar amount of Current Maturities of Long‐Term Debt in the 350‐room property? Why is that amount likely so much higher than for the 90‐room property?
   7. What was the dollar amount of Paid in Capital for the 90‐room property?
   8. What is the Owners' Equity percentage of Total Assets in the 90‐room property? What is it in the 350‐room property?

In the 2009 film 2012, there is a scene in which a supervolcano erupts under Yellowstone National Park. It has been fairly recently discovered that in at least some volcanic eruptions, the magnetic field of the earth is reversed in the region of the volcano (only while it is erupting). The magnetic field during this eruption would have a magnitude of 5.3 ⋅ 10−4 ? and be oriented 68.6∘ south of down. During the eruption, there is a pyroclastic flow (this is the fast lava-looking “liquid” that flows down the volcano first), which can move at speeds upwards of 200 ?⁄?. One particular rock flowing in this has a mass of 150 ????? and an electric charge of +1.2 ⋅ 104 ?.

1. Find the Lorentz (magnetic) force (magnitude and direction) acting on this rock when it has just started flowing near the top of the volcano. At this point, it flows at a speed of 50 ?⁄? vertically downward.

2. Find the Lorentz (magnetic) force (magnitude and direction) acting on this rock when it has just reached the bottom of the volcano. At this point, it flows at a speed of 200 ?⁄? horizontally east.

Based on this data calculate:

a) M1 +

b) M2

c) M3

d) M2+