Q. Assume a basket that costs $100 in the U.S. would cost $120 in the United Kingdom. (18 pts)
a) What is the U.S. real exchange rate, qUS/UK, with the United Kingdom? Intuitively, what does this real exchange rate imply? (5 pts)
b) Does PPP hold true here? Why? (5 pts)
c) Instead, let’s assume that a basket that costs $100 in the U.S. would cost also $100 in the United Kingdom. For the next year, the Fed is predicted to keep U.S. inflation at 2% and the Bank of England is predicted to keep U.K. inflation at 3%. Does PPP hold true here? If so, use relative PPP to predict what will happen to the dollar’s value against the poundin one year’s time. (8 pts)
In: Economics
Q. Assume a basket that costs $100 in the U.S. would cost $120 in the United Kingdom. (18 pts)
a) What is the U.S. real exchange rate, qUS/UK, with the United Kingdom? Intuitively, what does this real exchange rate imply? (5 pts)
b) Does PPP hold true here? Why? (5 pts)
c) Instead, let’s assume that a basket that costs $100 in the U.S. would cost also $100 in the United Kingdom. For the next year, the Fed is predicted to keep U.S. inflation at 2% and the Bank of England is predicted to keep U.K. inflation at 3%. Does PPP hold true here? If so, use relative PPP to predict what will happen to the dollar’s value against the poundin one year’s time. (8 pts)
In: Economics
2. Sally and Tom decide to go into business, which they call “Pelatone,” which manufactures and sells exercise bicycles. They sign a partnership agreement that requires Sally to contribute $100,000 and Tom to contribute $140,000 in capital to start the firm. The partnership agreement says nothing about the management of the firm or the division of profits. Without Sally’s knowledge, Tom informs the owner of United Wheel Co, that he represents the Pelatone and signs a large contract with United to buy wheels to be used on Pelatone’s bicycles. In its first year of operations, Pelatone makes a profit of $240,000.
1. What are the Tom’s and Sally’s rights with respect to the management of the firm?
2. Is Pelatone bound to the contract with United? Why or why not?
3. How should Pelatone’s first year’s profits be divided between Tom and Sally? Why?
In: Operations Management
QUESTION 1
a. Given a population has a mean of 125. What is the sampling error for an eight items sample with the values 103, 123, 99, 107, 121, 100, 100 and 99?
b. United Manufacturing and Supply makes sprinkler valves for use in residential sprinkler systems. United supplies these valves to major companies such as Rain Bird and Nelson, who in turn sell sprinkler products to retailers. United recently entered into a contract to supply 40,000 sprinkler valves. The contract called for at least 97% of the valves to be free of defects. Before shipping the valves, United managers tested 200 randomly selected valves and found 190 defect-free valves in the sample. If the actual population of 40,000 valves is 97% defect-free, what is the probability of finding 190 or fewer defect-free valves?
c. Suppose a population is normally distributed with a mean 100 and a standard deviation of 15. When a sample of size n = 36 is collected a sampling distribution is created. Explain which is larger: the probability of a value randomly selected from the population being larger than 120, or the probability of a sample mean being larger than 120.
In: Statistics and Probability
Case 1–2: True Religion Jeans: Flash in the Pants or Enduring Brand?
Founded in 2002 by Jeff Lubell, True Religion had become one of the largest premium denim brands in the United States by 2012. Although True Religion made its debut in upscale department stores and trendy boutiques a decade earlier, the company owned 86 full price retail stores and 36 outlet stores in the United States as well as 30 stores in international markets by the end of 2012. The company’s domestic retail store business accounted for about 60% of revenues and 64% of operating profit before unallocated corporate expenses in 2012. Just five years earlier, the U.S. retail store segment generated only 17% of sales and 25% of operating profit before unallocated corporate expenses.
Jeff Lubell’s vision of the company had come true—at least partly. The company had transformed itself from a jeans designer into an apparel retailer with it own brand à la Buckle and Diesel. At the same time, True Religion had managed to shift its product mix so that sportswear accounted for almost 35% of sales in its company-owned stores. Lubell felt these two ingredients were critical to establishing True Religion as a “lifestyle brand.” The ultimate in product differentiation, many companies attempt to create so-called “lifestyle” brands that transcend product category and inspire deep consumer loyalty. Lubell felt becoming a lifestyle brand was the key to insulating True Religion from the inevitable fluctuations in fashion trends.
Moreover, True Religion’s sales had grown at an average annual rate of almost 22% from 2007-2012. The company’s return on invested capital was an impressive 27% and its return on average assets was 12% in 2012. Despite these factors, press articles and analyst reports on True Religion described the company as, “the struggling maker of premium denim.”1 A New York Post article entitled “Escape From Hell for True Religion” described private equity firm, TowerBrook, as the company’s “savior,”2 when the company announced it had been acquired by TowerBrook in 2013. Other denim brands, such as Jeff Rudes’ J Brand, appeared to be usurping True Religion’s position as the “must have” denim brand for young consumers.
What had gone wrong at True Religion? Was the change in ownership the answer to the company’s problems? Was premium denim destined to go the way of Flash Dance legwarmers and Crocs as fast fashion from the likes of H&M became more mainstream? Private equity investors had snapped up stakes in both established and up-and-coming premium denim brands in the past five years—leaving just one publicly traded premium jeans maker, Joe’s Jeans. Should investors stay away from the industry?
In: Finance
P10-45. Analyzing and Interpreting Effects of TCJA Tax Law Changes.
Pfizer Inc. reports the following footnote disclosure in its 2018 Form 10-K.
The following table provides the components of Income from continuing operations before provision (benefit) for taxes on income:
Year Ended December 31, $ millions 2018 2017 2016
United States $(4,403) $(6,879) $(8,534)
International 16,288 19,184 16,886
Income from continuing operations before provision of taxes… 11,885 12,305 8,351
The following table provides the components of Provision (benefit) for taxes on income based on the location of the taxing authorities:
$ millions 2018 2017 2016
United States
Current income taxes:
Federal $668 $1,267 $342
State and Local 9 45 (52)
Deferred income taxes:
Federal (1,663) (2,064) (419)
State and local 16 (304) (106)
Total U.S. tax provision (970) (1,055) (235)
TCJA
Current income taxes (3,035) 13,135 -
Deferred income taxes 2,439 (23,795) -
Total TCJA tax provision (596) (10,660) -
International
Current income taxes 2,831 2,709 1,532
Deferred income taxes (558) (42) (175)
Total international tax provision 2,273 2,667 1,358
a.In the fourth quarter of 2017, we recorded an estimate of certain tax effect of the TCJA, including (i) the impact of deferred tax assets and liabilities from reduction in the U.S. Federal corporate tax rate from 35% to 21%, (ii) the impact on valuation allowances and other state income tax considerations, (iii) the $15.2 billion repatriation tax liability on accumulated post-1986 foreign earnings for which we plan to elect, with the filing of our 2018 U.S. Federal Consideration Income Tax Return, payments over eight years through 2026 that is reported in Other taxes payable in our consolidated balance sheet as of December 31, 2017 and (iv) deferred taxes on basis differences expected to give rise to future taxes on global intangible low-taxed income. As a result of the TCJA, in the fourth quarter of 2017, we reversed an estimate of the deferred taxes that are no longer expected to be needed due to the change to the territorial tax system.
Required.
In: Accounting
Operating exposure. Copy-Cat, Inc. has signed a deal to make vintage Nissan 240-Z sports cars for the next three years. The company will build the cars in Japan and ship them to the United States for sale. The current indirect rate is ¥114.0659 per dollar. The anticipated inflation rate for parts and labor in Japan is 2.4%over the next three years, and the anticipated overall inflation rate for Japan is 3.4%over the next three years. The expected overall inflation rate in the United States is 4.7% over the next three years. (The stated rates are on an annual basis.) If Copy-Cat plans to sell 600 cars a year at an initial price of $40,000 and the cost of production is ¥4,076,500, what is the annual profit in dollars for Copy-Cat? Assume it takes one year for production and all sales revenues and production costs occur at the end of the year. Is this profit rising or falling each year? Why?
What is the expected sales revenue per car in dollars forCopy-Cat in year 1?
$ (Round to the nearest cent.)
What is the expected sales revenue per car in dollars forCopy-Cat in year 2?
$(Round to the nearest cent.)
What is the expected sales revenue per car in dollars forCopy-Cat in year 3?
$(Round to the nearest cent.)
What is the expected production cost per car in dollars forCopy-Cat in year 1?
$(Round to the nearest cent.)
What is the expected production cost per car in dollars forCopy-Cat in year 2?
$(Round to the nearest cent.)
What is the expected production cost per car in dollars forCopy-Cat in year 3?
$(Round to the nearest cent.)
What is the expected profit in dollars for Copy-Cat in year 1? Enter a negative number for a loss.
$(Round to the nearest dollar.)
What is the expected profit in dollars for Copy-Cat in year 2? Enter a negative number for a loss.
$(Round to the nearest dollar.)
What is the expected profit in dollars for Copy-Cat in year 3? Enter a negative number for a loss.
$(Round to the nearest dollar.)
Will these new anticipated inflation rates affect the production of vintage 240-Zs? Why? (Select the best response.)
A. The profit (loss) is rising (falling) each year as the revenue is growing at a higher inflation rate than the production costs despite the weakening yen against the dollar.
B. The profit (loss) is falling (rising) each year as the revenue is growing at a higher inflation rate than the production costs despite the weakening yen against the dollar.
C. The profit (loss) is falling (rising) each year as the yen is weakening against the dollar despite different inflation rates in the two countries.
D. The profit (loss) is rising (falling) as the revenue is growing at a higher inflation rate than the production costs and the weakening yen against the dollar allows for the production costs to fall even more.
In: Accounting
What are your top 3 take aways from this article and how would you apply them as a manager or supervisor?
Workplace violence is any act or threat of physical violence, harassment, intimidation, or other threatening disruptive behavior that occurs at the work site. It ranges from threats and verbal abuse to physical assaults and even homicide. It can affect and involve employees, clients, customers and visitors. Homicide is currently the fourth-leading cause of fatal occupational injuries in the United States. According to the Bureau of Labor Statistics Census of Fatal Occupational Injuries (CFOI), of the 4,679 fatal workplace injuries that occurred in the United States in 2014, 403 were workplace homicides. [More...] However it manifests itself, workplace violence is a major concern for employers and employees nationwide.
Who is at risk of workplace violence?
Nearly 2 million American workers report having been victims of workplace violence each year. Unfortunately, many more cases go unreported. Research has identified factors that may increase the risk of violence for some workers at certain worksites. Such factors include exchanging money with the public and working with volatile, unstable people. Working alone or in isolated areas may also contribute to the potential for violence. Providing services and care, and working where alcohol is served may also impact the likelihood of violence. Additionally, time of day and location of work, such as working late at night or in areas with high crime rates, are also risk factors that should be considered when addressing issues of workplace violence. Among those with higher-risk are workers who exchange money with the public, delivery drivers, healthcare professionals, public service workers, customer service agents, law enforcement personnel, and those who work alone or in small groups.
How can workplace violence hazards be reduced?
In most workplaces where risk factors can be identified, the risk of assault can be prevented or minimized if employers take appropriate precautions. One of the best protections employers can offer their workers is to establish a zero-tolerance policy toward workplace violence. This policy should cover all workers, patients, clients, visitors, contractors, and anyone else who may come in contact with company personnel.
By assessing their worksites, employers can identify methods for reducing the likelihood of incidents occurring. OSHA believes that a well-written and implemented workplace violence prevention program, combined with engineering controls, administrative controls and training can reduce the incidence of workplace violence in both the private sector and federal workplaces.
This can be a separate workplace violence prevention program or can be incorporated into a safety and health program, employee handbook, or manual of standard operating procedures. It is critical to ensure that all workers know the policy and understand that all claims of workplace violence will be investigated and remedied promptly. In addition, OSHA encourages employers to develop additional methods as necessary to protect employees in high risk industries.
In: Operations Management
Moveover Motors Ltd (MML), located in Melbourne, produces and sells a medium-sized family car called the Moveover Magnet. The company has been producing cars for the Australian market for over 30 years and began exporting a limited number of cars to the United States about 10 years ago. MML is a subsidiary of a Polish multinational that has not been satisfied with the losses that the company has been making in the last few years. The parent company in Poland is threatening to close the Australian factory unless MML can produce a profit in the next year of operations. The factory currently has a capacity to produce 50,000 cars per year but all realistic estimates of its market size, including the exports to the United States, suggest that it will not sell more than 30,000 cars per year in any of the next 5 years.
Jane Woodall, MML’s CEO, was very concerned about MML’s poor profitability. She asked Lester Bush, financial controller and Max Lemond, production manager, to see if there were ways to reduce costs and improve profitability.
Lester analysed the cost structure of MML and found the following:Variable cost- $15,000 per car
Fixed cost- $450,000,000 for 30,000 cars, or $15,000 per car
Selling and administrative expenses: Variable cost- $5,000 per car
Fixed cost- $180,000,000
During the year end 30 June 2017, MML sold 28,000 Moveover Magnets
for $40,000 each.
Lester considered the fact that the capacity of the factory significantly exceeds the production levels and realised that significant savings could be made in both the production and administrative fixed expenses if some of the factory were disposed of. He estimated that by reducing the capacity to 30,000 cars per year, the fixed manufacturing costs would fall to $300 million and the fixed administrative costs would decrease to $160 million.
Before Lester could report back to Jane, Max returned with a proposal to reduce the variable costs to 30% of revenues by reducing the costs MML incurred for safe disposal of wasted metals. Lester was concerned that this would expose the company to potential environmental liabilities and he let Max know it.
3
Case Study
Case Study Presentation (10%)
Lester: Max, we would need to estimate the potential environmental costs and include them in your Analysis.
Max: You can’t do that. We are not violating any laws. There is some possibility that we may have to incur environmental costs in the future, but if we bring it up now, this proposal will not go through because our senior management always assumes these costs to be larger than they turn out to be. The market is tough, and we are in danger of shutting down the company. I don’t want all my colleagues to lose their jobs. The only reason our competitors are making money is because they are doing exactly what I am proposing...
Make recommendations for improving the profitability of Moveover Magnets.
In: Accounting
1. Which of the following is true for trade based on increasing returns?
A) the two countries differ in their production technologies
B) the two countries differ in their factor endowments
C) the pattern of trade is undetermined
D) there is no benefit from trade
2. If Japan is relatively capital rich and the United States is relatively land rich, then trade between those two formerly autarkic countries will:
A) lead to perfect specialization with Japan alone producing manufactures
B) create a world relative price of food that is lower than that of the US
C) lower the price of food in both countries
D) raise the price of food in both countries
E) none of the above
3. Which of the following is true?
A) for external economics, average cost decrease with industry level output; for internal returns to scale, average cost decreases with firm's level of output
B) for external economics, average cost increases with industry level output; for internal returns to scale, average cost increases with a firm's level of output
C) external economics is the same as internal returns to scale
D) for external economics, average cost decreases with firm level of output; for internal returns to scale, average cost decreases with industry level of output
4. For the monopolistic competition model:
A) it takes collusion among firms into consideration
B) it takes firms' strategic behavior into consideration
C) it takes both collusion and strategic behavior into consideration
D) it does not take strategic behavior into consideration
5. For the Ricardian Model:
A) the relative derived demand for home labor increases when the ratio of home to foreign wage increases
B) the relative derived demand for home labor does not change when the ratio of home to foreign wage increase
C) the relative derived demand for home labor decreases when the ratio of home to foreign wage increases as home labor becomes more expensive relative to foreign labor, goods produced in home also become more expensive, and world demand for these goods fall
D) there is no systematic relationship between the relative derived demand for home labor and the ratio of home to foreign wage
6. The Ricardian model is based on all of the following EXCEPT:
A) only two nations and two products
B) no diminishing returns
C) labor is the only factor of production
D) product quality varies among nations
E) none of the above
7. In order to know whether a country has a comparative advantage in the production of one particular product we need information on at least ----- unit labor requirements.
A) 1
B) 2
C) 3
D)4
E)5
8. The simultaneous export and import of widgets by the United States is an example of:
A) decreasing returns to scale
B) perfect competition
C) intra-industry trade
D) inter-industry trade
E) none of the above
In: Economics