Assume that a new professional coffee maker sales representative claims that the new coffee maker will increase coffee made by at least 30 cups per hour. A coffee shop chain manager buys the new machine for his 15 coffee shop branches in Dubai and finds that the average increase was 32 cups. Assume that the standard deviation is 7 cups for this coffee maker.

1. State the null and alternative hypotheses.

2. Test the hypotheses at the 5% significance level. What is the p-value of the test?

3. What is your conclusion in the context of the question?

4. Interpret the p-value you found above.

5. What type of error you can commit here? Explain in the context of the question. Also, what are the

   implications of this error?

(New project analysis​) Garcia's Truckin' Inc. is considering the purchase of a new production machine for $200,000. The purchase of this machine will result in an increase in earnings before interest and taxes of $50,000 per year. To operate the machine​ properly, workers would have to go through a brief training session that would cost $5,000 after taxes. It would cost $5,000 to install the machine properly.​ Also, because this machine is extremely​ efficient, its purchase would necessitate an increase in inventory of $20,000. This machine has an expected life of 10 years, after which it will have no salvage value.​ Finally, to purchase the new​ machine, it appears that the firm would have to borrow​ $100,000 at 8 percent interest from its local​ bank, resulting in additional interest payments of $8,000 per year. Assume simplified​ straight-line depreciation and that the machine is being depreciated down to​ zero, a 34 percent marginal tax​ rate, and a required rate of return of 10 percent.

a. What is the initial outlay associated with this​ project?

b. What are the annual​ after-tax cash flows associated with this project for years 1 through​ 9?

c. What is the terminal cash flow in year 10 (what is the annual​ after-tax cash flow in year 10 plus any additional cash flows associated with the termination of the​ project)?

d. Should the machine be​ purchased?

Nature’s Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate additional annual sales of 7,600 units at $30 each. The new manufacturing equipment will cost $90,500 and is expected to have a 10-year life and $6,900 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:

Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.

You have just started a new job and are thrilled to learn that your new employer offers a 401(k) retirement plan to its employees. Your annual salary is $40,000. Assume the IRS allows you to contribute up to $24,000 to your 401(k). You’ve decided to contribute 7% of your annual salary to the plan.

Questions:

1. How much more money would you need to contribute to meet the maximum allowable contribution set forth by the IRS?

2. The company offers you a $.50 match for each dollar that you contribute between 2 and 5 percent of your annual salary. How much is the company match based on your 7% contribution?

3. Is this a defined benefit plan or defined contribution plan? Why?

Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 12.5 percent.

Year/ Annual Operating Cash Flow/ Salvage Value

0/ $22,500/ $22,500

1/ 6,250/ 17,500

2/ 6,250/ 14,000

3/ 6,250/ 11,000

4/ 6,250/ 5,000

5/ 6,250/ 0

a. What is the optimal number of years to operate the truck?

b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?

I. No. Salvage possibilities could only raise NPV and IRR. II. Yes. Salvage possibilities could only lower NPV and IRR. III. Salvage possibilities would have no effect on NPV and IRR.

2. Your lab manager asks you to create the new control range for the new lot of hematology control level 1. The following 10 hemoglobin values are gathered to determine the control limits. Using a calculator or website SD function, calculate and record the mean, the standard deviation, and the 95% confidence interval for this set of values. (3 pts)

4.2, 4.7, 4.3, 4.4, 4.6, 4.7, 4.9, 5.0, 4.6, 4.0,

Mean:____4.54______ 1 SD:__0.2963______ 95% Confidence range (2 SD range):_____1.96___________

Perot Corporation is developing a new CPU chip based on a new type of technology. Its new chip, the Patay2 chip, will take two years to develop. However, because other chip manufacturers will be able to copy the technology, it will have a market life of two years after it is introduced. Perot expects to be able to price the chip higher in the first year, and it anticipates a significant production cost reduction after the first year as well. The relevant information for developing and selling the Patay2 is given as follows:

PATAY2 CHIP PRODUCT ESTIMATES

Development cost $ 20,000,000

Pilot testing $ 5,000,000

Debug $ 3,200,000

Ramp-up cost $ 3,000,000

Advance marketing $ 5,400,000

Marketing and support cost $ 1,000,000 per year

Unit production cost year 1 $ 655.00

Unit production cost year 2 $ 545.00

Unit price year 1 $ 820.00

Unit price year 2 $ 650.00

Sales and production volume year 1 - 250,000

Sales and production volume year 2 - 150,000

Interest rate 10 % Assume all cash flows occur at the end of each period.

a. What is the net present value (at the discount rate of 10%) of this project? (Negative value should be indicated by a minus sign. Enter your answer in thousands of dollars. Round your answer to the nearest thousand.)

b. Perot’s engineers have determined that spending $10 million more on development will allow them to add even more advanced features. Having a more advanced chip will allow them to price the chip $50 higher in both years ($870 for year 1 and $700 for year 2). What is the NPV of the project if this option is implemented? (Negative value should be indicated by a minus sign. Enter your answer in thousands of dollars. Round your answer to the nearest thousand.)

c. If sales are only 200,000 the first year and 100,000 the second year, what would the NPV of the project be? Assume the development costs and sales price are as originally estimated. (Negative value should be indicated by a minus sign. Enter your answer in thousands of dollars. Round your answer to the nearest thousand.)

New technologies impact a firm by way of costs. Using two new graphs of a perfectly competitive firm’s cost structure and a given market price, compare and contrast the effect on profit maximising level of production, and profits, of each of:

                       i.        increased rent on factory premises.

                      ii.        increased prices for raw materials.

Fairfax Pizza is considering buying a new oven. The new oven would be purchased today for 20,800 dollars. It would be depreciated straight-line to 1,200 dollars over 2 years. In 2 years, the oven would be sold for an after-tax cash flow of 1,900 dollars. Without the new oven, costs are expected to be 10,400 dollars in 1 year and 17,400 in 2 years. With the new oven, costs are expected to be -3,800 dollars in 1 year and 9,800 in 2 years. If the tax rate is 50 percent and the cost of capital is 6.28 percent, what is the net present value of the new oven project?