Kolkmeyer Manufacturing Company is considering adding two machines to its manufacturing operation. This addition will bring the number of machines to ten. The president of Kolkmeyer asked for a study of the need to add a second employee to the repair operation. The arrival rate is 0.05 machines per hour for each machine, and the service rate for each individual assigned to the repair operation is 0.4 machines per hour.

1. Compute the operating characteristics if the company retains the single-employee repair operation. If required, round your answers to four decimal places.
   

   	P0	=
   	Lq	=
   	L	=
   	Wq	=  hours
   	W	=  hours

2. Compute the operating characteristics if a second employee is added to the machine repair operation. If required, round your answers to four decimal places.
   

   	P0	=
   	Lq	=
   	L	=
   	Wq	=  hours
   	W	=  hours

3. Each employee is paid $25 per hour. Machine downtime is valued at $75 per hour. From an economic point of view, should one or two employees handle the machine repair operation? Explain. If required, round your answers to two decimal places.
   
   Cost of one employee system: $  
   
   Cost of two employees system: $  
   
   From an economic point of view, two employees  should handle the machine repair operation.

Kolkmeyer Manufacturing Company is considering adding two machines to its manufacturing operation. This addition will bring the number of machines to eleven. The president of Kolkmeyer asked for a study of the need to add a second employee to the repair operation. The arrival rate is 0.05 machines per hour for each machine, and the service rate for each individual assigned to the repair operation is 0.6 machines per hour.

1. Compute the operating characteristics if the company retains the single-employee repair operation. If required, round your answers to four decimal places.

3. Compute the operating characteristics if a second employee is added to the machine repair operation. If required, round your answers to four decimal places.

6. Each employee is paid $20 per hour. Machine downtime is valued at $75 per hour. From an economic point of view, should one or two employees handle the machine repair operation? Explain. If required, round your answers to two decimal places.
   
   Cost of one employee system: $  

Cost of two employees system: $  

From an economic point of view,

• one employee
• two employees

should handle the machine repair operation.

Case II – Godiva Case

Any of irrelevant information to the question below, you can ignore from the description. This case is updated or continued from the first case study in week 7.

[Personal Info.]

Robinson Godiva is 46 years old, and his wife Geniece is 37 years old. Robinson and Geniece were married 8 years ago; it was Robinson’s second marriage and Geniece’s first marriage. Robinson and Geniece have one child Chaplin, who is 6 years of age. Robinson has two children by his prior marriage: Lorna, who is 14 years of age, and Eva, who is 12. All of children attend public schools.

Robinson is a chemistry professor at the university and is a partner in Lion Research Associates, a chemistry firm that Robinson started with three of his associates from the university.

[Asset Info.]

The Godivas own their personal residence in joint tenancy with right of survivorship, and it is valued currently at $250,000. They purchased the home seven years ago for $175,000. They have finished the basement and added a room and bathroom at a cost of $40,000. They have a mortgage balance of $150,000. The Godivas’ household furnishing are valued at $70,000, and Geniece’s jewelry and furs are valued at $30,000. Robinson and Geniece live in a state that follows the common-law forms of property ownership.

Robinson and Geniece have a joint checking account that contains $7,000 and a joint savings account that contains $15,000. Interest income on the savings account last year was $450. The Godivas also have $12,000 in money market mutual funds that paid dividends last year of $515. Robinson owns shares in a growth stock mutual fund that he purchased three years ago for $5,000, is now worth $5,750, and paid dividends last year of $100. Dividends on these shares are expected to grow by 8% per year, and Robinson believes that a 10% rate of return would be appropriate for these shares with their degree of risk. Geniece owns shares in a municipal bond fund purchased for $6,300, currently valued at $7,000, and yielding $400 per year tax-free. The Godivas jointly purchased 500 shares in Roters Power, Inc., a public utility company. These shares were acquired at a cost of $6,250, are currently vluaed at $8,000, and pay annual dividends of $480.

Robinson’s father died two year ago, and his mother died last year, leaving Robinson an inheritance of $150,000 in U.S. Treasury securities, paying 8% interest ($12,000 annually), and a one-half interest in common with his brother in a Florida condominium. The condominium was valued in his mother’s estate at $120,000 and was purchased six years ago for $1250,000. Real estate taxes on the condominium, half of which Robinson includes among his itemized deductions for federal income tax purposes, total $1,000. Both of Geniece’s parents are still living.

The Godivas are also joint owners of a parcel of undeveloped land in the mountains, where they plan to build a vacation home. The parcel of land cost them $75,000 and is currently valued at $70,000. They have a $30,000 mortgage on the property. Interest on the mortgage is $2,700 per year. Real estate taxes are $700.

Robinson owns an apartment building near the university that he rents to students. The apartment building was purchased four years ago for $95,000 and is currently valued at $125,000. The annual gross rental income from the property is $11,000. Robinson has a mortgage balance of $60,000, and his interest payments total $4,950. His real estate taxes and maintenance expenses are $3,000, and depreciation is $2,850.

The Godivas are joint owners of two automobiles. The cars are valued at $25,000 and $17,500. Robinson owns a sailboat which he bought for $35,000 and is valued now at $40,000.

Robinson has a one-fourth interest in the partnership Reptiles Chemicals, which is engaged in research for genetic engineering of various plants. There are no employment contracts for the partners. In addition to the partners, the firm has eight employees, including four research assistants, two secretaries, and two maintenance/hothouse workers. The research assistants are paid $30,000 each, the secretaries are paid $18,000 each, and the other workers are paid $20,000 each.

Robinson and his partners believe that the value of Reptile Chemicals is approximately $1 million. There has been no objective valuation, however. The largest assets of the firm are its building and grounds, where the firm has a laboratory, hothouses, and fields for growing experimental plants. The building and land were purchased for $250,000, and $150,000 was allocated to the building and $100,000 to the land. Additional buildings have been added at a cost of $75,000, and the current value is estimated to be $400,000. The firm has a mortgage balance on the building and land of $150,000. The partnership has been depreciating the building for tax purposes under the original accelerated cost recovery system.

[Income Tax Info.]

Robinson earns $60,000 in annual salary from the university, and he reports another $48,000 of net taxable income from the biotechnology firm. Geniece earns $30,000 working in public relations for a hospital. She also receives $5,000 at the beginning of each year from a trust established by her grandmother, with securities valued currently at $100,000. At Geniece’s death, the trust income will be paid to Charles, or if Charles is over age 25, the corpus will be distributed to him. The Godivas file joint tax returns.

Robinson pays child support for his two daughters in the amount of $400 each per month, and these payments are probably 75% of their support annually. Robinson’s daughters are in the custody of their mother and live with her for approximately nine months of the year. Robinson is required by his divorce degree to maintain a $100,000 life insurance policy to provide child support in the event of his death.

Several years ago, Robinson established custodian account for Lorna and Eva. Lorna’s account generate annual income of $900, and Eva’s account has annual income of $850.

Robinson and Geniece incur home mortgage interest costs of $12,000 per year. Real estate taxes on their home are $2,500. They will pay $4,500 in state income taxes this year and $150 in personal property taxes. Their contributions to charities totaled $2,000.

[Retirement Info.]

Geniece owns IRA accounts totaling $17,000. She is now an active participant in a defined-contribution pension plan through the hospital where she works, and her vested account value is $35,000. Eight percent of Robinson’s gross salary at the university is deducted each year and contributed to a tax-deferred annuity. The university contributes an additional six percent dollar for dollar on a tax-deferred basis. The plan is projected to pay Robinson $2,500 per month when he retires at age 65 or to Geniece at his death.

One of the partners in Reptile Chemicals is age 65 and about two years away from retirement, and two partners are age 55. The partners would like to prepare for the expected retirement of the age-65 partner, as well as the unexpected death or disability of any partner. The partners are also contemplating a retirement program for the firm and would like advice concerning the design.

[Insurance Info.]

The university provides disability income coverage for one-third of Ronbinson’s salary, group medical expense insurance covering Robinson and his family through a health maintenance organization, and group term life insurance for Robinson, with a death benefit of $50,000. Robinson owns a whole life insurance policy that will pay a death benefit of $100,000 and has a cash value of $5,500, and he owns a universal life policy with a face value of $150,000 and a cash value of $3,000. The annual premium on the whole life policy is $2,000, and the annual premium on the universal life policy is $800. Geniece has group term life insurance through her employer in a face amount that is equal to her salary.

Property and liability insurance that insures the Godivas’ house for its replacement cost has an annual premium of $1,200. The Godivas’ cars are insured under a personal auto policy provising limits for bodily injury of $100,000/$300,000, property damage of $25,000, uninsured motorists coverage of $10,000/$20,000, no-fault benefits, and a collision deductible of $250. Robinson’s sailboat is insured under a yacht policy.

[Estate Planning Info.]

Robinson’s will leaves his entire estate to Genice, but if Geniece predeceases Robinson, the estat will be left in trust for Robinson’s three children equally. Geniece’s will leaves her entire estate to Robinson or, if he predeceases her, to Charles.

Question II-1. Which of the following statement concerning the Godivas’ use of other or additional insurance coverages is correct?

1. They could provide all-risks coverage for contents by replacing their HO-03 policy with an HO-04 policy.
2. They could provide coverage for the contents of their condominium in Florida by adding an HO-06 as an endorsement to their HO-03 policy.
3. They could have provided all-risks coverage for both their dwelling and its contents if they had purchased an HO-02 instead of an HO-03.
4. They could have provided contents coverage up to 50% of the dollar amount of the dwelling coverage if they had purchased either an HO-02 or an HO-03.
5. They could reduce the premium cost for their homeowners coverage by insuring their home for its replacement cost under an HO-08.

Question II-2. Which of the following items of personal property would be excluded under the Godiva family’s HO-03 policy?

(1) Animals, birds, and fish

(2) Business property

(3) Loss causes by the negligent use of the dwelling fireplace

(4) Loss of $2,000 of clothing in a hotel fire while the family is vacationing in Paris

1. (1) only
2. (2) and (3) only
3. (1), (2), and (3) only
4. (2), (3), and (4) only
5. (1), (2), (3), and (4)

Question II-3. Which of the following would be excluded from liability coverage under the Godiva family’s personal auto policy (PAP)?

(1) Robinson’s use of a motorcycle recently acquired for weekend recreation purposes

(2) Robinson’s use of one of the family’s cars for business purposes

(3) Robinson’s use of one of the family’s cars in the neighborhood car pool, for which service each passenger pays Robinson $5.00 weekly.

1. (1) only
2. (1) and (2) only
3. (2), and (3) only
4. (1), (2), and (3)
5. Neither (1), (2), nor (3)

Please use the following information to answer the next question:

For BB Incorporated:

Cash Flows from Assets -------------------------------------------------------------------- 100 dollars
EBIT (from 1999 INCOME STATEMENT) -------------------------------------------0 dollars
Depreciation Expense (from 1999 INCOME STATEMENT) ---------------------- 0 dollars
Taxes (from 1999 INCOME STATEMENT) ------------------------------------------ 0
Net Fixed Assets from BALANCE SHEET dated December 31, 1998-------------1400 dollars
Net Fixed Assets from BALANCE SHEET dated December 31, 1999------------ 1300 dollars
Additions to (Changes in) NWC for 1999 ---------------------------------------------- 0 dollars

For KK Incorporated:

Cash Flows from Assets ---------------------------------------------------------------------0 dollars
EBIT (from 1999 INCOME STATEMENT) -------------------------------------------500 dollars
Depreciation Expense (from 1999 INCOME STATEMENT) ----------------------100 dollars
Taxes (from 1999 INCOME STATEMENT) ------------------------------------------100
Net Fixed Assets from BALANCE SHEET dated December 31, 1998------------1400 dollars
Net Fixed Assets from BALANCE SHEET dated December 31, 1999------------1800 dollars
Additions to (Changes in) NWC for 1999 ----------------------------------------------0 dollars

For LL Incorporated:

Cash Flows from Assets --------------------------------------------------------------------100 dollars
EBIT (from 1999 INCOME STATEMENT) -------------------------------------------0 dollars
Depreciation Expense (from 1999 INCOME STATEMENT) ----------------------100 dollars
Taxes (from 1999 INCOME STATEMENT) -------------------------------------------0
Net Fixed Assets from BALANCE SHEET dated December 31, 1998-------------1400 dollars
Net Fixed Assets from BALANCE SHEET dated December 31, 1999-------------1300 dollars
Additions to (Changes in) NWC for 1999 -----------------------------------------------0 dollars

*Based only on the numbers provided, which Company is doing the BEST?
*In other words, if you were an individual investor, in which Company would you invest?

# 7: How to Fix the Great American Growth Machine

What seems to be Alan Greenspan's thesis toward achieving sustained economic growth?

Imagine that a version of the World Economic Forum was held in Davos four centuries ago. From across the globe, the great and the good of 1618 gather in the Alpine village: Chinese scholars in their silk robes, British adventurers in their doublets and jerkins, Turkish civil servants in their turbans and caftans. They have come together to discuss the great question of who will dominate the centuries ahead.

The Chinese point to their superb civil service and mighty navy. A Turk boasts that the Ottoman Empire is expanding westward and will soon hold Europe in the palm of its hand. A plucky Briton argues that his tiny country has broken with the corrupt, ossified continent and is developing dynamic new institutions, including a powerful parliament and a new sort of organization, the chartered corporation, which can trade all over the world. Yet in the entire discussion one region goes unmentioned: North America.

Four hundred years ago, North America was little more than an empty space on the map -- an afterthought in educated minds and a sideshow in European great-power politics. The entire continent produced less wealth than the smallest German principality.

Today, the United States has the most powerful economy in the world: With less than 5% of the world's population, it still accounts for almost a quarter of global GDP. America has the world's highest standard of living apart from a handful of countries with small populations, such as Qatar and Norway. It also dominates the industries that are inventing the future -- intelligent robots, driverless cars, life-extending drugs. The fact that 15 of the world's top 20 universities are based in the U.S., according to the QS World University Ranking, suggests that it is well-placed to dominate the ideas economy.

The rise of the U.S. to economic greatness is an extraordinary story. But it is a story with a sting in the tail. Productivity growth in the U.S. has all but stalled in recent years. The number of new companies being created has reached a modern low. Geographical mobility has been in decline for three decades. Economists worry that America's potential rate of growth -- the pace at which annual output can expand without pushing up inflation -- is also falling.

Why did America become the world's greatest economy? Why has it lost its momentum in recent years? And what light can history throw on the question of whether the U.S. can be as successful in the future as it was in the past?

The key to America's success lies in its unique toleration for "creative destruction," the destabilizing force described by the economist Joseph Schumpeter in 1942. Creative destruction reallocates society's resources from less productive pursuits to more productive ones -- from spinning jennies to factories, for example, or from horse-and-buggies to motorcars.

A range of things, from geography to political culture, have contributed to this enduring preference for change over stability. Consider the sheer size of the U.S., which has allowed it to suck in millions of immigrants and construct continent-spanning companies. It has also allowed the country to shift relatively easily from one industry to another. In Britain, railroads had to make strange loops to avoid ancient settlements. In America, they could carve a straight line from "Nowhere-in-Particular to Nowhere at All," as the Times of London put it in 1874. The U.S. has sometimes paid a heavy price, both aesthetically and economically, for rapid development, but unlike its European peers, it has avoided chronic stagnation.

There is also the fact that the U.S. was the first country to be born in the modern world of growth and perpetual change. The War of Independence began a year before the publication of the greatest work of free-market economics ever written, Adam Smith's "The Wealth of Nations" (1776). For most of recorded history, people had inhabited a society that was static and predictable. Smith advanced a vision of society in which the market transformed the pursuit of individual self-interest into the creation of universal progress. Many European countries took generations to come to terms with this insight (some still haven't). America was born dynamic.

But size and newness are not enough on their own, or else Brazil would be an economic colossus. The U.S. possessed two secret ingredients that turned it into a growth machine.

The first is its entrepreneurial culture. Americans admire business people in the same way that the English admire gentlemen and the French admire intellectuals. Americans are more inclined to found companies than the people of other countries and are also better at turning small companies into giant ones. The U.S. was the first country to make it easy to create companies without going cap in hand to local bureaucrats who had a right to tell them what to do.

This spirit of entrepreneurship was built into the country's DNA. The U.S. was founded by settlers who wanted to escape from the restrictions of Europe's ancient regime: Puritans who wanted to escape from the grip of established churches, younger sons who wanted to escape from the consequences of primogeniture, adventurers who wanted to escape from closed societies.

A striking proportion of America's entrepreneurial heroes have been immigrants or the children of immigrants. Alexander Graham Bell and Andrew Carnegie were born in Scotland. Andy Grove and Sergey Brin were born, respectively, in Hungary and the Soviet Union.

The U.S. has also benefited enormously from its founding political structure. The Constitution, written in 1787 and ratified in 1788, did its best to constrain the ability of politicians to interfere in the economy. It limits the reach of the federal government by guaranteeing the rights of citizens, not least the right to property, and by dividing power among its branches and with the states. Though governmental powers to tax and regulate have grown enormously over the past century, they remain a world apart from the state control that has long prevailed among America's chief rivals.

The most remarkable period of creative destruction in U.S. history was the era from 1865 to 1900, when government confined itself to providing a stable environment for growth. Titans such as Carnegie and John D. Rockefeller built the world's biggest and most efficient companies. Railway barons knitted a continent together into the world's biggest single market.

Though this great revolution was sometimes brutal, it laid the foundations of an era of mass prosperity. Carnegie and Rockefeller reduced the price of steel and oil by almost 90%. R.H. Macy sold "goods suitable for the millionaire at prices in reach of the millions." Henry Ford trumpeted the Model-T as "a car for the common man." Their efforts gave Americans a richer diet than their European contemporaries and earlier access to innovations such as electric lights, telephones and cars.

As for the travails of today's economy, much of it has to do with a retreat from the dynamism of the past. The Economist recently found that more than three-quarters of America's major economic sectors have seen a decline in competition, with the top handful of firms taking an increasing market share. In 1980, according to the Census Bureau, one in eight companies had been founded in the past year; in 2015 (the last year for good data), the ratio had fallen to fewer than one in 12.

The financial crisis of 2007-2008 showed creative destruction at its worst. The combination of fear and herd behavior led people to overreact to bad news and to plunge economies into self-reinforcing cycles of decline. Nor did the federal government's heavy-handed regulatory response to the crisis help matters.

Fiscal policy has also hurt the economy. The growth of entitlements such as Social Security and Medicare has crowded out the funding of long-term investment in the private sector and in crucial infrastructure such as roads and airports. Millions of baby boomers are retiring and starting to receive benefits while still quite capable of being productive. In 1965, entitlement spending amounted to 5% of GDP. Today it stands at 14% and is projected to increase still more as the baby boomers retire.

The relative economic stagnation of the past decade has had serious political consequences, breeding discontent and dysfunction in both parties. While President Donald Trump imposes growth-restricting tariffs and bullies errant companies, Democrats embrace ever more interventionist plans to make companies embrace "social purposes."

The threats now facing the U.S. are bigger than in the past. For the first time in its history, the country confronts, in China, an economic power that is even more populous than itself. But America still has a chance to solve its problems, not least because it continues to have a unique genius for business.

The most important item on an agenda for reform is to address the fragility in the American financial system exposed by the financial crisis. Financial institutions play a vital role in allocating society's savings to fund new ideas and new businesses. Consider how venture capitalists have funded Silicon Valley startups, persuading investors to take long-term risks in return for a stake in a potential breakthrough company.

But too many recent financial innovations have been problematic, not least because they are so sophisticated that even senior bankers don't fully understand them. They have increased risk by encouraging financiers to package and sell questionable products, such as subprime mortgages. They have also encouraged financiers to become rent-seekers, more interested in serving their own interests than those of the economy as a whole.

In the wake of the crisis, the federal government passed the monstrously complicated Dodd-Frank Act, which tried to reduce risk in the financial system through regulation. A better approach would have been to focus on the amount of capital that banks are required to hold in order to operate. In the run-up to the crisis, banks on average kept about 8 to 10% of their assets as equity capital. If regulators had forced them to keep 25%, or better still 30%, it would have radically reduced the probability of contagious defaults -- the root of all financial crises. Today, despite Dodd Frank, they've only increased it to a little over 11%.

Such a move would greatly increase overall confidence in the financial system. It would allow lawmakers and regulators to repeal the bank-related provisions in the Dodd-Frank leviathan with a clear conscience because any bank losses would be absorbed by shareholders rather than by taxpayers. It would also allow them to focus their energies where they are best employed, in stamping out fraud.

The usual objection to increasing capital requirements is that it would suppress banks' earnings and therefore their ability to lend. But a look at history says otherwise. From 1870 to 2017, with rare exceptions, the net income of commercial banks as a percentage of their equity capital fluctuated within a narrow range of 5% to 10% a year, regardless of the size of their capital buffers. This suggests that a gradual rise in banks' mandated amount of capital would not damage their rate of return or their ability to lend.

A second crucial reform would be to get entitlement spending under control. Putting the system on a more sustainable footing could be done by raising the retirement age by a couple of years, indexing it to life expectancy so that the problem doesn't keep cropping up -- and more importantly, in the longer term, shifting from a system of defined benefits to one of defined contributions, as Sweden accomplished in the 1990s.

Such reforms would assure long-term solvency, release more savings for productive investment and bring down the federal budget deficit. Nor would the reforms impose great suffering on America's retiring baby boomers. The retirement age was fixed in 1935, when the system was set up, at a time when life expectancy was much shorter.

America's problems, in short, are problems of poor policy-making rather than of senescent technology or a lack of entrepreneurial drive. This does not mean that they are insignificant. Unless the U.S. changes course, its economy will continue to flag, holding out the unhappy prospect of a self-reinforcing cycle of low growth and populist rage.

Some economists think that the U.S. is mired in a swamp of low growth. We prefer to think that it is trapped in an iron cage of its own making. Out-of-control entitlements and ill-considered regulations are condemning the economy to perform well below its potential. Swamps by their nature are very difficult to escape. Cages can be opened, provided that you have the right keys -- and are willing to turn them.

Given your risk tolerance, and your need to diversify, explain how the Selected Realized Returns (1926–2013) page 269 and the Effects of Portfolio Risk for Average Stocks will impact your future investment decisions and why

Selected Realized Returns, 1926-2013:

                                        Average Return             Standard Deviation

Small-Company Stocks           16.9%                                32.3%

Large Company stocks             12.1                                    20.2

Long term corporate bonds        6.3                                     8.4

Long-term government bonds     5.9                                     9.8

US Treasury Bills                         3.5                                    3.1

The company would like to buy a machine for 20 mil. USD. Machine would be depreciated for 3 years using 3-years MACRS method. Company has following options:

Loan: maturity 3 years, monthly payment, interest 6 % p.a., equal annuity payment
Leasing: leasing coefficient 1.3; advanced payment 30 %; maturity 3 years; monthly payment Corporate tax rate is 19 %.

Which type of financing is better for us? PS: please use Excel to calculate it and share the formula please.

Many publicly listed companies include some segment information in their annual report. Usually this information can found in their forms 10-K under Item 6: Selected Financial Data and Item 7: Management's Discussion and Analysis. Please pick any company of your choice, find their most recent form 10-K on the internet and summarize the type of segment data they publish. Also provide us with the most important findings you discovered when reading the segment information of your company.

The table below shows the life expectancy for an individual born in the United States in certain years.

1. Find the estimated life expectancy for an individual born in 1973

2. Use the two points in part (e) to plot the least squares line on your graph from part (b).

3. Are there any outliers in the data?Yes, 1930 and 2010 are outliers.Yes, 1930 and 1950 are outliers.     Yes, 1950 is an outlier.No, there are no outliers

4. Using the least squares line, find the estimated life expectancy for an individual born in 1870. (Round your answer to one decimal place.)
Does the least squares line give an accurate estimate for that year? Explain why or why not. Yes, because the estimate is over 50 years.No, because 1870 is outside the domain of the least squares line.