Problem: Suppose you are part of an economic analysis team charged with recommending a policy response to pesticide risks. Your team decides to use risk-benefit analysis as its risk management strategy. On the risk side of the analysis, your team reviews the following data from the risk assessment process. Interpret each of these quantitative findings about pesticide risk, by stating precisely what the numerical value(s) mean or imply in each case. Be specific. (i) Pesticide W: Reference Dose (RfD) = 0.005 (10 points) (ii) Pesticide X: threshold level of 0 for infants and children (10 points) (iii) Pesticide Y: carcinogenic risk of 0.0075 percent (10 points) (iv) Pesticide Z: a dose (D)-response (R) function modeled as R = 0 for all D < 0.6, R = – 0.3 + 0.5D for all D ≥ 0.6. (10 points) On the benefit side of the analysis, briefly describe two distinct benefits to society that are relevant to a risk-benefit analysis of pesticides. ((10 points))

FINANCIAL LEVERAGE EFFECTS

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $16 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $5.8 million with a 0.2 probability, $3 million with a 0.5 probability, and $0.8 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0.

Debt/Capital ratio is 10%, interest rate is 9%.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $17 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 25%. The CFO has estimated next year's EBIT for three possible states of the world: $5.5 million with a 0.2 probability, $2.4 million with a 0.5 probability, and $500,000 with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places.

Debt/Capital ratio is 0.

Debt/Capital ratio is 10%, interest rate is 9%.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $16 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 25%. The CFO has estimated next year's EBIT for three possible states of the world: $5.2 million with a 0.2 probability, $2 million with a 0.5 probability, and $400,000 with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places.

Debt/Capital ratio is 0.

Debt/Capital ratio is 10%, interest rate is 9%.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

FINANCIAL LEVERAGE EFFECTS

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $10 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $4.3 million with a 0.2 probability, $2.2 million with a 0.5 probability, and $0.9 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0.

Debt/Capital ratio is 10%, interest rate is 9%.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $11 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $5.5 million with a 0.2 probability, $2.2 million with a 0.5 probability, and $0.6 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0. RÔE = % σ = % CV =

Debt/Capital ratio is 10%, interest rate is 9%. RÔE = % σ = % CV =

Debt/Capital ratio is 50%, interest rate is 11%. RÔE = % σ = % CV = Debt/Capital ratio is 60%,

interest rate is 14%. RÔE = % σ = % CV =

1. Energy bars produced by a certain machine are labeled 24 grams to comply with advertising rules and regulations. However, the distribution of the actual weight of these energy bars is claimed to be normal with a mean of 24.3 grams and a standard deviation of 0.3 grams. Note: You must show all your work for full marks.

a) Define the random variable x.

b) What percentage of energy bars produced by this machine would be expected to be between 24 and 24.6 grams? b) What percentage of energy bars produced by this machine would be expected to be more than 24.6 grams?

c) How much weight of these energy bars exceeded by only 10% of all energy bars?

d) If the quality control manager takes a random sample of nine energy bars from the production line,

i. identify the sampling distribution of mean of x.

ii. what is the probability that the sample mean weight of the nine sample energy bars will be less than 24 grams?

iii. What is the probability that the sample mean weight of the nine sample energy bars will be exceed 24.6 grams?

Chapter 18

1Mr. De Cat is the CEO of an oil company. If he decides to drill, he will drill only one well. He believes the outcomes of the drilling are

Dry Well                                              $0

Small Amount                                   Large Amount

$25 Million                                          $60 Million

It costs $ 10 million to drill a well. Mr. De Cat’s u-curve is

u1x2 = 56.37*x - 324.5

Mr. De Cat asks the company geologist to assess the probabilities of each possibility. The geologist says this assessment depends on whether or not a dome exists. The geologist says there is a 0.7 chance that a dome does exist. He also provides Mr. De Cat with the following information:

5Dry Hole兩Dome, &6 = 0.5 5

Small amount of oil 兩Dome, &6 = 0.3 5

Dry Hole兩No Dome, &6 = 0.7 5

Small amount of oil 兩 no dome, &6 = 0.25

a. What is Mr. De Cat’s certain equivalent for this drilling site?

b. What is the value of information on the presence of the dome?

c. What is the value of information on the amount of oil present?

Zed and Adrian and run a small bicycle shop called "Z to A Bicycles". They must order bicycles for the coming season. Zed and Adrian estimate that the demand for bicycles this season will be 20, 30, 40, or 50 bicycles with probabilities of 0.2, 0.4, 0.3, and 0.1 respectively. Orders for the bicycles must be placed in quantities of twenty (20). The cost per bicycle is $70 if they order 20, $64 if they order 40, $56 if they order 60. The bicycles will be sold for $76 each if they are not on sale. Any bicycles left over at the end of the season will go on sale and will be sold at $46 each. Create a payoff table that helps Z to A Bicycle decide how many bicycles (20, 40, or 60) to order. Answer the following questions based on the payoff table.

1. How much is the profit of the shop, if they order 40 bicycles and the demand is 20?
2. How much is the profit of the shop, if they order 40 bicycles and the demand is 30?
3. How much is the profit of the shop, if they order 40 bicycles and the demand is 40?
4. How much is the profit of the shop, if they order 40 bicycles and the demand is 50?

Direct Labor Cost Budget

Ace Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for July for the two rackets is as follows:

Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated as follows:

The direct labor rate for each department is as follows:

Prepare the direct labor cost budget for July.