1. In the short run, monopolistically competitive firms:
| a) |
will earn zero economic profits by acting like a monopolist. |
|
| b) |
can earn positive economic profits by acting like a monopolist. |
|
| c) |
will earn zero economic profits by acting like a perfectly competitive firm. |
|
| d) |
can earn positive economic profits by acting like a perfectly competitive firm. |
2. Product differentiation refers to:
| a) |
the process of informing the public of differences in products as a result of error. |
|
| b) |
firms who offer similar products to their competitors' products, but that are more attractive in some way. |
|
| C) |
the process of creating a standardized product with a lower-cost method than the competitors' method. |
|
| d) |
consumers who sort and group goods based on similar characteristics. |
3. In the short run, product differentiation enables firms in monopolistically competitive markets to:
| a) |
produce a good for which there are exact substitutes. |
|
| b) |
act like price takers. |
|
| c) |
produce a good for which there are no close substitutes. |
|
| d) |
act like monopolists. |
4. If equilibrium quantity for a monopolistic competitive firm is 80 while quantity at minimum efficient scale is 100, then excess capacity is equal to
| a) |
100 |
|
| b) |
20 |
|
| C) |
80 |
|
| d) |
10 |
5. Knowing that Coke controls 80 percent of the cola market and Pepsi controls 20 percent, we can conclude the cola market is:
| a) |
perfectly competitive. |
|
| b) |
monopolistically competitive. |
|
| c) |
an oligopoly. |
|
| d) |
a monopoly. |
6. A defining characteristic of an oligopoly is:
| a) |
firms in the industry know they are competing with a few large firms with market power. |
|
| b) |
barriers to entry prevent newcomers to such an industry. |
|
| c) |
easy entry and exit prevent long-run profits from being possible. |
|
| d) |
all firms sell a standardized product. |
7. Competition between oligopolists drives:
| a) |
some firms out until the market becomes a monopoly. |
|
| b) |
collusion to happen frequently. |
|
| c) |
price and profits down to below the monopoly level. |
|
| d) |
price and profits down to the perfect competition level. |
In: Economics
Norister Inc. is considering introducing a new product line. This will require the purchase of new fixed assets of $2.4 million. The company estimates that demand for the new product will be approximately 15,000 units per year, with a price per unit of $100. The variable cost of producing each unit of the product is $35, and fixed costs per year will be $100,000. Demand for the product will remain constant for six years, after which both demand and production will cease, and the associated fixed assets will have no salvage value. Depreciation on the fixed assets will be straight-line to zero. The company’s marginal tax rate is 35%, and the required return on the project is 13%. How will the after-tax operating cash flow (ATOCF) change if the number of units sold is 10% less than the projected demand of 15,000 units?
Select one:
a. ATOCF will increase by 10%.
b. ATOCF will decrease by 10%.
c. ATOCF will increase by 8.94%.
d. ATOCF will decrease by 8.94%.
e. ATOCF will remain unchanged.
Norister Inc. is considering introducing a new product line. This will require the purchase of new fixed assets of $2.4 million. The company estimates that demand for the new product will be approximately 15,000 units per year, with a price per unit of $100. The variable cost of producing each unit of the product is $35, and fixed costs per year will be $100,000. Demand for the product will remain constant for six years, after which both demand and production will cease, and the associated fixed assets will have no salvage value. Depreciation on the fixed assets will be straight-line to zero. The company’s marginal tax rate is 35%, and the required return on the project is 13%. Due to forecasting risk, the company estimates that price per unit, variable cost, fixed costs, and quantity sold could vary by ±10%, ±15%, ±5%, and ±10%, respectively. What is the project’s net present value in the worst case scenario?
Select one:
a. -$656,606
b. -$543,413
c. -$368,020
d. -$103,677
e. $43,502
In: Finance
Rate of Return for Stocks and Bonds
Purpose of Assignment
The purpose of this assignment is to allow the student an opportunity to calculate the rate of return of equity and debt instruments. It allows the student to understand the effects of dividends; capital gains; inflation rates; and how the nominal rate of return affects valuation and pricing. The assignment also allows the student to apply concepts related to CAPM, WACC, and Flotation Costs to understand the influence of debt and equity on the company's capital structure.
Assignment Steps
Resources: Corporate Finance
Calculate the following problems using Excel or a Word document:
Stock Valuation: A stock has an initial price of $100 per share, paid a dividend of $2.00 per share during the year, and had an ending share price of $125. Compute the percentage total return, capital gains yield, and dividend yield.
Total Return: You bought a share of 4% preferred stock for $100 last year. The market price for your stock is now $120. What was your total return for last year?
CAPM: A stock has a beta of 1.20, the expected market rate of return is 12%, and a risk-free rate of 5 percent. What is the expected rate of return of the stock?
WACC: The Corporation has a targeted capital structure of 80% common stock and 20% debt. The cost of equity is 12% and the cost of debt is 7%. The tax rate is 30%. What is the company's weighted average cost of capital (WACC)?
Flotation Costs: Medina Corp. has a debt-equity ratio of .75. The company is considering a new plant that will cost $125 million to build. When the company issues new equity, it incurs a flotation cost of 10%. The flotation cost on new debt is 4%. What is the initial cost of the plant if the company raises all equity externally?
Submit your summary and all calculations. Please show all of your work.
Click the Assignment Files tab to submit your assignment.
In: Accounting
Ellis Animal Health, Inc., produces a generic medication used to treat cats with feline diabetes. The liquid medication is sold in 100 ml vials. Ellis employs a team of sales representatives who are paid varying amounts of commission. Given the narrow margins in the generic veterinary drugs industry, Ellis relies on tight standards and cost controls to manage its operations. Ellis has the following budgeted standards for the month of April 2017:
Average selling price per vial $ 8.30
Total direct materials cost per vial $ 3.60
Direct manufacturing labor cost per hour $ 15.00
Average labor productivity rate (vials per hour) 100
Sales commission cost per vial $ 0.72
Fixed administrative and manufacturing overhead $990,000
Ellis budgeted sales of 700,000 vials for April. At the end of the month, the controller revealed that actual results for April had deviated from the budget in several ways:
Unit sales and production were 90% of plan.
Actual average selling price decreased to $8.20.
Productivity dropped to 90 vials per hour.
Actual direct manufacturing labor cost was $15.20 per hour.
Actual total direct material cost per unit increased to $3.90.
Actual sales commissions were $0.70 per vial.
Fixed overhead costs were $110,000 above budget.
Calculate the following amounts for Ellis for April 2017:
Required
1. Flexible budgets for 600,000 700,000 and 800,000 units
2. Static-budget and actual operating income
3. Static-budget variance for operating income
4. Flexible-budget operating income
5. Flexible-budget variance for operating income
6. Sales-volume variance for operating income
7. Price and efficiency variances for direct manufacturing labor
8. Flexible-budget variance for direct manufacturing labor
In: Accounting
Suppose an investor can purchase a 20 year, 5% coupon bond that pays interest semi annually and the price of the bond is 97%. The Par Amount is $100. The yield to maturity is 5.95%. Assume the investor can reinvest the coupon payments at an annual rate of 3%. The bond is only held for 5 years and sold at 89%. Compute the following:
What is the Total Coupon plus Interest on Interest in Dollars?
What is the (Total Interest on Interest) component in Dollars?
What is the Total Rate of Return (in percent) on this bond when sold after 5 years?
What is the Total Accounting Rate of Return (semiannual equivalent) in percent?
In: Finance
|
Potential Gross Income 100,000 sq. ft for the coming year |
||
|
average rent $15.00 per ft. |
$ 1,500,000 |
|
|
Less Vacancy Allowance (average 8%) |
$ (120,000) |
|
|
Effective Gross Income |
$ 1,380,000 |
|
|
Cleaning expenses (5% of net rev) |
$ (69,000) |
|
|
Insurance ($ 0.02 per dollar replacement, R.C. = $40 per ft. |
$ (80,000) |
|
|
Management & Maintenance (11% of revenue) |
$ (151,800) |
|
|
Reserve for Replacement (savings for major repairs) |
$ (50,000) |
|
|
Property Taxes ($0.10 per $100 of R.C.) |
$ (4,000) |
|
|
$ (354,800) |
||
|
Estimated Net Operating Income |
$ 1,025,200 |
|
What is the NPV of this investment at a discount rate of 12% ? (use purcahse price of 9,500,00)
In: Finance
Suppose an investor can purchase a 20 year, 5% coupon bond that pays interest semi annually and the price of the bond is 97%. The Par Amount is $100. The yield to maturity is 5.95%. Assume the investor can reinvest the coupon payments at an annual rate of 3%. The bond is only held for 5 years and sold at 89%. Compute the following:
What is the Total Coupon plus Interest on Interest in Dollars?
What is the (Total Interest on Interest) component in Dollars?
What is the Total Rate of Return (in percent) on this bond when sold after 5 years?
What is the Total Accounting Rate of Return (semiannual equivalent) in percent?
In: Finance
|
Potential Gross Income 100,000 sq. ft for the coming year |
||
|
average rent $15.00 per ft. |
$ 1,500,000 |
|
|
Less Vacancy Allowance (average 8%) |
$ (120,000) |
|
|
Effective Gross Income |
$ 1,380,000 |
|
|
Cleaning expenses (5% of net rev) |
$ (69,000) |
|
|
Insurance ($ 0.02 per dollar replacement, R.C. = $40 per ft. |
$ (80,000) |
|
|
Management & Maintenance (11% of revenue) |
$ (151,800) |
|
|
Reserve for Replacement (savings for major repairs) |
$ (50,000) |
|
|
Property Taxes ($0.10 per $100 of R.C.) |
$ (4,000) |
|
|
$ (354,800) |
||
|
Estimated Net Operating Income |
$ 1,025,200 |
|
What is the NPV of this investment at a discount rate of 12% ? (use purcahse price of $9,500,000)
In: Finance
Question 6 – 8 refer to prospect H and K below
? = ($100, 0.4; $200, 0.6) ? = ($120, ?; $300, 1 − ?)
6. ?V(?) = ?V(?). What value of p makes this statement true?
7. Carol owns prospect H and is interested in selling it. Her utility of wealth function is given by ?(?) = ?^0.5. What is the lowest price for which Carol would be willing to sell prospect H?
8. True or False: The lowest value of K is greater than the lowest value of H, and the highest value of K is greater than the highest value of H, so everyone – regardless of risk preferences – will prefer K to H.
In: Economics
Taku-Tau company has provided you with the following information:
Selling price per unit = N$90
Variable cost per unit= N$30
Activity driver Cost driver rate Level of activity driver
Set-ups N$ 800 90
Inspection N$ 65 500
Other data:
Total fixed costs (traditional) N$900 000
Total fixed costs (ABC) N$450 000
If the company reduces the setup costs by N$100 per set up and reduces the number of inspections needed to 400, how many units must be sold to break even?
In: Accounting