1. Which leverage ratio yields the highest expected return on equity?
2. Which leverage ratio yields the highest variability (risk) in expected return on equity?
3. What assumptions was made about the cost of debt (that is, the interest rates) under the various capital structures (that is, the leverage ratio)? How realistic is the assumption?

In writing, explain the Circular Flow of Income model and why total expenditures equal total income

6. Explain the relationship between the elasticity and total revenue. (Remember Total Revenue = Price x Quantity Sold)

11. After economic class one day, your friend suggests that taxing tobacco would be a good way to raise revenue. In what sense is taxing tobacco a "good" way to raise revenue? In what sense is it not a "good" way to raise revenue?

What is total utility?

What is marginal utility?

Give examples of how to calculate total utility and marginal utility.

What’s the law of diminishing marginal utility?

Give an example of using the formula MUx/Px = MUy/Py.

2. The Burger Hut has sales of $29 million, total assets of $43 million, and total debt of $13 million. The profit margin is 11 percent. What is the return on equity?

3. Gladstone Pavers has a long-term debt ratio of 0.6 and a current ratio of 1.3. Current liabilities are $700, sales are $4,440, the profit margin is 9.5 percent, and the return on equity is 19.5 percent. How much does the firm have in net fixed assets?

1). Contribution Margin is:

a). Sales - Total Variable expenses b). Sales - Total variable expenses - Total fixed expenses c). Sales revenue per unit x Sales quantity d). Variable expense per unit x Sales quantity

2). When preparing segmented income statements fixed expense are separated into the following categories:

a). Traceable and common b).Fixed and Variable c).Direct and indirect d).Product and period

3).A Co. reported: Sales $125000; Contribution margin $62000; Total fixed expenses $42000; Common fixed expenses $15000. How much are traceable fixed expenses?

a).$27,000 b).$20,000 c).$83,000 d).$63,000

4). A Co. reported: Sales $98000; Contribution margin $33000; Total fixed expenses $27000; Traceable fixed expenses $13000. How much are common fixed expenses?

a).$14,000 b).$65,000 c).$6,000 d).$27,000

5).A Co. has two units B and C. Total fixed expenses are $66000, unit contribution margins are B $30000; C $45000. Traceable fixed expenses B $24000; C $41000. B's segment margin is:

a). 6,000 b).4,000 c).1,000 d).30,000

6).A Co. has two units B and C. Total fixed expenses are $66000, unit contribution margins are B $30000; C $45000. Traceable fixed expenses B $24000; C $41000. C's segment margin is:

a).4,000 b).6,000 c).1,000 d).45,000

A company has the following historic pattern of total manufacturing costs versus total number of products produced: MONTH UNITS TOTAL COSTS PRODUCED January 12,500 $430,000 February 17,000 $490,000 March 19,000 $512,000 April 10,000 $400,000 May 14,000 $434,000 June 9,000 $360,000 July 20,000 $550,000 August 21,000 $525,000 September 24,000 $605,000 October 23,000 $589,000 November 28,000 $702,000 December 18,000 $496,000 1) From this information, what are my approximate fixed costs and what is my estimated variable cost per product produced? (20 POINTS)

Fixed Costs =

Variable Cost per Unit =

1. Economic profit is equal to

a. total revenue minus explicit and implicit costs.

b. total revenue minus explicit costs.

c. marginal revenue minus marginal cost.

d. total revenue minus implicit costs.

e. total revenue minus dividends and interest.

2. If the price elasticity of demand is 4, a 5 percent decrease in price will increase quantity demanded by

a. 25%

b. 10%

c. 8%

d. 20%

3. If the calculated elasticity of demand between two points is 2.26, demand is considered

a. very inelastic.

b. very elastic.

c. unitary elastic.

d. very inelastic in the short run.

e. the responsiveness to price change.

Edelman Engines has $19 billion in total assets — of which cash and equivalents total $90 million. Its balance sheet shows $3.8 billion in current liabilities — of which the notes payable balance totals $0.89 billion. The firm also has $9.5 billion in long-term debt and $5.7 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $24 per share. The firm's EBITDA totals $1.08 billion. Assume the firm's debt is priced at par, so the market value of its debt equals its book value. What are Edelman's market/book and its EV/EBITDA ratios? Do not round intermediate calculations. Round your answers to two decimal places.

M/B: ___×

EV/EBITDA: _____

For each of the following cases, fill in the blank with the appropriate dollar amount.