3) If stock F has an average return of 12%,

1. find the expected return based on CAPM equation and beta 1.2

2. find the abnormal returns, alpha

Determine the value z* that satisfies the conditions below. (Round all answers to two decimal places.)

(a) Separates the largest 3.2% of all z values from the others
z* =  

(b) Separates the largest 0.8% of all z values from the others
z* =  

(c) Separates the smallest 5.6% of all z values from the others
z* =

(d) Separates the smallest 12.1% of all z values from the others
z* =

A reheat Rankine cycle operates with water as the working fluid. Steam enters the first turbine at 8 MPa and 450◦C and exits at 0.8 MPa. It is then reheated at 400◦C before entering the second turbine, where it exits at 10 kPa. If the amount of work into the pump is 8.04 kJ/kg and the net work per cycle produced is 1410.5 kJ/kg, determine the thermal efficiency. Assume no pressure losses in the condenser or the boiler.

A rigid reservoir with 3 m3 volume is connected to a supply line.
Initially the valve is closed and the reservoir contains steam at 800 kPa, and x = 0.8 quality.
The valve is opened and steam is allowed until the final pressure is 2.5 MPa and 250 oC.
a- Determine the mass of steam entered to the reservoir.
b- If the pressure is 3.5 MPa and temperature is 350oC at the supply line, evaluate the
transferred heat in kJ, and determine the direction of the heat.

A rigid reservoir with 3 m3 volume is connected to a supply line.

Initially the valve is closed and the reservoir contains steam at 800 kPa, and x = 0.8 quality.

The valve is opened and steam is allowed until the final pressure is 2.5 MPa and 250 C.

a- Determine the mass of steam entered to the reservoir.

b- If the pressure is 3.5 MPa and temperature is 350 C at the supply line, evaluate the transferred heat in kJ, and determine the direction of the heat.

1. Develop a BCG Matrix for the company.
2. Show the ideal flow of funds with arrows, show data points.
3. Comment in a paragraph the findings and significance and suggested strategy

Q-1

# of workers   Output (flags(

0 0

1         50

2       110

3 180

4 260

5            350

The table shows the number of flags that can be made per month depending on the number of workers at Acme Flag Company. Does the Acme Flag Company experience the law of diminishing returns in the table above?

Q-2

The major characteristic of a monopoly is

Q-3

Ceteris paribus, the demand curve faced by a firm that is a monopoly will be ______the demand curve faced by a firm in perfect competition.

Q-4

As output increases, marginal cost

Q-5

   # of workers   Output (flags)

      0    0

1     50

2 110

  3    180

4 260

3    350

The table shows the number of flags that can be made per month depending on the number of workers at Acme Flag Company. The price that Acme can charge for flags is $20. What is the average product of the 4th worker?

Q-7

Long-run competitive equilibrium implies that

Q-9

Which of the following statement is true?

Q-11

A price ceiling _______ output and ________ price in a monopoly market.

Q-13

Economic theory suggests that a monopoly is the best form of business organization when

Q-15

If a local movie theater is a monopolist, price discrimination means that;

Q-16

Monopolies generally offer consumers ___ and ____ than competitive firms.

Q-16

f output changes in fixed proportion to a change in all of a firm's productive resources, the firm has

Q-17

Profits for the profit maximizing monopolist will equal

Q-18

Unlike a firm in perfect competition, a monopolist may be able to

20

he point of diminishing returns occur at the point where

Soap Makers International

Several years ago, Ingrid Krause wanted some international expertise and applied for a transfer to her company’s soap division, which is located south of Warsaw, Poland. The soap division manufactures hand soap for use in a large number of settings, from hospitals to luxury hotels. Ingrid was awarded the transfer to the soap division and was assigned to the accounting department. She is responsible for overseeing the costing and probability analysis of the various soaps and soap-making processes. During her tenure in the soap division, there were numerous changes in the number of soaps manufactured and the processes to make the different soaps. Consequently, Ingrid’s position required her to consider changes in the accounting processes to reflect the changes in the soap division’s business.

For several decades, the company’s soap-making process required a large labour force that manufactured and packaged the soap mainly by hand. Local economic changes meant that the labour force that the factory required was not as available as it had been in the past. As a result, the division was experiencing slower processing time, and more snap being rejected during inspections because of quality concerns. To address the issues related to the lack of labour availability, the division’s management decided three years ago that automation was the way to go. Consequently, over the last three years, the soap making processes have changed with the implementation of automation.

The automation of the soap making processes have allowed for a much larger variety of soap and packing, a reduced direct labour force and direct labour costs, and a higher level of traceability of costs to the various soaps because of technological improvements. Soaps made for industrial applications require different ingredients, less time in processing, less time in finishing, and less time in and cheaper packaging than do soaps for the hotel industry. The costs of materials and packaging are directly traceable to the various types of soaps through new software that uses bar codes and counters to trace material costs to the various soaps directly.

Ingrid feels that the current costing system should be revisited. The cost driver for allocation of the overhead costs (such as supervisory salaries and plant utilities) have always been direct labour hours cost. However, given the decline in the use of labour due to automation, Ingrid is questioning its suitability as a basis of allocation. Ingrid would like to explore activity based costing to allocate overhead costs.

Ingrid has gathered cost data for two representative soaps: one sold to hospitals and one sold to hotels. Further, Ingrid has gathered data from the automated system on the amount of time each type of soap spends in the three manufacturing processes: processing, finishing, and packaging. The soap is produced in large batches, consequently, the data are adjusted to reflect the average cost per 100g of soap. The data for type of soap for one month’s production are in Exhibit 1.

REQUIRED

Prepare a report for Ingrid Krause that addresses her interest in exploring an activity-based costing (ABC) system while including the following:

1. Is Ingrid’s expectation of changing her cost allocation of overhead from a traditional approach (one cost driver for allocation) to an ABC approach (multiple cost drivers applied to multiple cost pools) justifiable? If so, explain to her why it is.
2. Calculate the costs (of direct material, direct labour, and overhead) for each of the two representative types of soap using direct labour as the basis for the allocation of overhead.
3. Calculate the costs (of direct material, direct labour, and overhead) for each of the two representative types of soap using and ABC approach for the allocation of manufacturing costs.
4. Do the cost allocation calculations provide support for an ABC approach? Explain.
5. Would you advise Ingrid Krause to continue with her traditional costing approach or change to an ABC approach? Explain.

EXHIBIT 1 – COSTS FOR ONE MONTH’S PRODUCTION OF SOAP

EXHIBIT 2 – TIME REQUIRED FOR ONE MONTH’S PRODUCTION OF SOAP

A) Provide a PESTLE Analysis for the firm

B) Provide a SWOT Analysis for the firm

Freemark Abbey Winery

Earlier in September, William Jaeger, a member of the partnership that owned Freemark Abbey Winery, had to make a decision:  should he harvest the Riesling grapes immediately or leave them on the vines despite an approaching storm?A storm just before harvest is usually detrimental, often ruining the crop.  A warm, light rain, however, will sometimes cause a beneficial mold, botrytis cinerea, to form on the grape skins.  The result is a luscious, complex, sweet wine, highly valued by connoisseurs.

The Winery

Freemark Abbey is located in St. Helena, California, in the northern Napa Valley.  The winery produces only premium wines from the best grape varieties.  Of the 25,000 cases of wine bottled each year (about the same as Chateau Lafite-Rothschild), most were Cabernet Sauvignon and Chardonnay.  About 1,000 cases of Riesling and 500 cases of Petite Syrah were also bottled.  (A case contains twelve 750-ml bottles.)

The Napa Valley extends for 30 miles, from Calistoga in the north to Napa in the south.  The average temperature decreases as one moves south, closer to San Francisco Bay and the cold ocean waters.  Freemark Abbey’s grapes come from an ideal climate in the central and southern parts of the valley.

Winemaking

Wine is produced when the fruit sugar, which is naturally present in the juice of grapes, is converted to yeast, through fermentation, into approximately equal molecular quantities of alcohol and carbon dioxide.  Sparkling wines excepted, the carbon dioxide is allowed to bubble up and dissipate.  The wine then ages in barrels for one or more years, until it is ready for bottling.

By various decisions during wine-making – for example, the type of wooden barrel used for aging – the vintner or winemaker influences the style of wine produced.  The style adopted by a particular winery depends mainly on the owners’ preferences, though it is influenced by marketing considerations.  Usually, as the grapes ripen, the sugar levels increase and the acidity levels decrease.  The winemaker tries to harvest the grapes when they have achieved the proper balance of sugar and acidity for the style of wine sought.  The ripening process is variable, however, and if the weather is not favorable, the proper balance might never occur.

Several different styles of Riesling (more accurately, Johannisberg Riesling) are on the market. If the grapes are harvested at 20% sugar, the wine is fermented “dry” (all the sugar is converted to alcohol and carbon dioxide) or “near dry.”  The resulting wine, at bout 10% alcohol, is light bodied.  If the grapes are harvested at 25% sugar, the winemaker can produce a wine with the same 10% alcohol but with 5% residual sugar; this wine is sweet and relatively full bodied.

A third and rare style results when almost-ripe Riesling grapes are attacked by the botrytismold.  The skins of the grapes become porous, allowing water to evaporate while the sugar remains.  Thus, the sugar concentration increases greatly, sometimes to 35% residual sugar, has extraordinary concentration, and the botrytisitself adds to the wine’s complexity.  Freemark Abbey had already produced a botrytisedRiesling from an earlier vintage.

Jaeger’s Decision Problem

From the weather reports, Jaeger concluded that there was a 50 – 50 chance that the rainstorm would hit the Napa Valley.  Since the storm had originated over the warm waters off Mexico, he thought there was a 40% chance that, if the storm did strike, it would lead to the development of the botrytismold.  If the botrytisdid not form, however, the rainwater, which would be absorbed into the grapes through the roots of the vines, would merely swell the berries by 5 – 10%, decreasing their concentration.  This would yield a thin wine that would sell wholesale for only about $2.00 per bottle, about $0.85 less than Jaeger could obtain by harvesting the not-quite-ripe grapes immediately and eliminating the risk. Freemark Abbey always had the option of not bottling a wine that was not up to standards.  It could sell the wine in bulk, or it could sell the grapes directly. These options would bring only half has much revenue, but would at least avoid damaging the winery’s reputation, which would be risked by bottling an inferior product.

If Jaeger decided not to harvest the grapes immediately in anticipation of the storm, and the storm did not strike, Jaeger would probably leave the grapes to ripen more fully. With luck, the grapes would reach 25% sugar, resulting in a wine selling for around $3.50 wholesale.  Even with less-favorable weather, the sugar levels would probably top 20%, yielding a lighter wine selling at around $3.00. Jaeger thought these possibilities were equally likely.  In the past, sugar levels occasionally failed to rise above 19%.  Moreover, while waiting for sugar levels to rise, the acidity levels must also be monitored.  When the acidity drops below about 0.7%, the grapes must be harvested whatever the sugar level.  If this happened, the wine would be priced at only about $2.50.  Jaeger felt that this even had only about a 0.2 probability.

The wholesale price for a botrytised Riesling would be about $8.00 per bottle.  Unfortunately, the same process that resulted in increased sugar concentration also caused a 30% reduction in the total juice.  The higher price was, therefore, partly offset by a reduction in quantity. Although fewer bottles would be produced, there would be essentially no savings in vinification costs.  The costs to the winery were about the same for each of the possible styles of wine and were small relative to the wholesale price.