John Bruno owns a factory producing electric cords. John observes that recently the number of cords with defect has increased. He monitors the 3 processing machines for 30 days for 100 cords per observation per machine. The results of John Bruno’s observations are presented in the table below. What can he do to make sure that the number of cords with defect to go down?

You need to find the number of defects per machine, then based on your results give your recommendations. You need to show your work and spread sheet if excel is used.

1. TAX Inc. has 1,000 shares of stock issued and outstanding, which are owned by the following shareholders:

Instructions:

Under the IRC Sec. 318 constructive ownership rules, how many shares of TAX Inc.

stock is shareholder A considered to own (directly and constructively)?

A monopolist facing a market demand Q = 240 – 2p has the total cost function TC(q) = q².

1. What is the monopolist’s profit maximizing quantity and price? How many units are produced in each plant?

Now the government notices that the monopolist is actually composed of two production plants, the first plant has a total cost function TC1(q) = 2q^2+ 16q

2. Derive the marginal cost of the second plant, MC2(q).

Consider an annuity contract that pays out $45 at the end of each of the next four 6-month intervals (payments are to be made 6, 12, 18, and 24 months from today). What is this annuity's Macaulay duration (in years)? Assume this contract is currently trading at a yield of 6%.

Round your answer to 3 decimal places. For example if your answer is 5.5175, then please write down 5.518.

Hint: First price this contract, and then calculate its duration accordingly.

Suppose you have a production technology that can be characterized by a learning curve.

Every time you increase production by 1 unit, your costs decrease by $6.

The first unit costs you $64 to produce.

1)You estimate you can win another project for two more units. Have your returns diminished? Why or why not?

2)If you receive a request for 4 units, what is your break-even price?

Calculate the price of an 8% coupon, $1000 face value, 2-year bond that pays semi-annual coupons if the appropriate annual discount rate is 12%. Suppose the annual discount rate on this bond rises to 16% after six months and you sell the bond at the end of the first year. What return did you actually make for the one year that you held this bond? Please show all work and do not use excel or a finance calculator.

Corso Books has just sold a callable bond. It is a thirty-year quarterly bond with an annual coupon rate of 9% and $1,000 par value. The issuer, however, can call the bond starting at the end of 12 years. If the yield to call on this bond is 10% and the call requires Corso Books to pay one year of additional interest at the call (4 coupon payments), what is the bond price if priced with the assumption that the call will be on the first available call date?

A company has just paid its first dividend of $3.94. Next year's dividend is forecast to grow by 9 percent, followed by another 9 percent growth in year two. From year 3 onwards dividends are expected to grow by 3.2 percent per annum, indefinetely. Investors require a rate of 14 percent p.a for investments of this type. The current price of the share is (round to nearest cent). a.$41.79, b.$38.19, c.$22.13, d.$21.84

Questions 3 & 4 are more important.

1. Explain consumer and producer surplus and provide an example of each.
2. What happens to the consumer surplus and producer surplus when price increases or decreases?
3. Explain the relationship between the tax size and deadweight loss.
4. When tax causes deadweight loss then why it is imposed in the first place? Who gains in this situation? Also if tax has to be imposed how to determine what size of tax will generate optimum tax revenue for the government?

You are a risk-averse investor who is considering investing considering in two economies. The expected return and volatility of all stocks in both economies is the same. In the first economy, all stocks move together in good times all prices rise together, and in bad times they all fall together. In the second economy, stock returns are independent, one stock increasing in price has no effect on the prices of other stocks. Which stock would you choose to invest in?