PAGE 1 Table 11-1 Boat Specifications Spring 2020 Group_Project MET 405 - Economic Analysis for Engineering and Technology Total points: 100 Due Date: April 23, 2020 by 11:59 pm Project Case: Harbor Delivery Service (HDS) is an over the water delivery service operating in several large port/metropolitan areas. Each branch office has from 5 to 15 boats in its fleet. Currently, each branch office purchases its boats locally based on the branch manager’s preferences. This has resulted in each branch having a mix of brands and models and both diesel- and gasoline-powered units in some ports. Maintenance for this mixed fleet is a major headache, and costs seem out of control. To better utilize resources, the company has been repositioning boats to avoid unnecessary purchases and idle resources. This has been far from a resounding success, as the receiving locations are not prepared to maintain the boats if they differ from those it currently has. The branch managers inevitably find major faults with the boats transferred into their site. Additionally, this causes the sites to need both diesel and gasoline refueling facilities, with the inevitable confusion and mistakes. The various types and brands also make it difficult to create a “brand image.” HDS has decided to centralize procurement of boats and to standardize on brands and fuel types. The task of standardizing the fleet has been assigned to a team consisting of the chief operating officer and three branch managers. The team has identified the size and configuration of boat that best meets the general needs of HDS but have been unable to agree on a common power unit. A poll of the branch managers finds that five out of ten branch managers prefer the gasoline option due to its higher speed, while two out of ten are indifferent to the choice of power unit. Marketing has expressed a preference for diesel power units. They claim that the customers perceive diesel units as less flammable and support this preference with data that shows that insurance premiums are $500 more per year for gasoline-powered boats. Marketing cannot show that demand has been impacted by power unit choice. You have been tasked with recommending the appropriate power unit. To support this task, you have constructed the following table (Table 11-1) based on the specifications of the two boats under consideration. Gasoline Diesel Purchase price $76,586 $97,995 Engine size 350 hp 300 hp Average speed (manufacturer’s estimate) Knots (nautical mile per hour) 21.1 17.4 Fuel consumption (gallons per hour) 26 17 Fuel capacity (gallons) 300 300 PAGE 2 The boat manufacturer (the only difference in the two boats is the engine) has supplied an estimate of the average speed of each unit and the fuel consumption based on this average speed. Since the boats are used in harbors and for fairly short runs, the higher speed of the gasoline engine is valued at only $50 per day. When not in use, the gasoline engines will be turned off, while the diesel units would idle and burn fuel at the rate of 1 gal per hour. Both units are seen as adequate to meet the delivery schedules/requirements of HDS. Your investigations into maintenance costs have determined that the diesel unit requires $9000 in annual maintenance (mainly for the cooling system), while the gasoline engine unit has an annual cost of $6000. Oil changes are $25 for the gasoline unit and $57 for the diesel unit. Oil changes occur every 100 hours of engine use. Diesel is estimated to run $2.95 per gallon while gasoline runs $3.15 per gallon. The branch offices are located adjacent to a fueling/service dock ran by another business unit of HDS’s parent company. The boats are docked at the fueling facility overnight and each evening the tanks are topped off before the boats are turned over to the maintenance crew for service and cleaning. Thus, nightly refueling stops cost $15, but if refueling must be done during the day it costs $55. The units will typically cover 200 nautical miles in the course of the day. Crews are changed every six hours. The delivery service operates 18 hours per day 7 days a week. The diesel units, if purchased, will be kept in service for 4 years before being sold for $48,000 each. The gasoline units will be sold after 3 years of service for $38,000. HDS’s minimum attractive rate of return (MARR) is 18%. How many nautical miles per day must be traveled to change your recommendation?

Business Class

21. Tsymbal owns a parcel of real estate unencumbered by any liens (“free and clear”). She can be said to own the real estate:

a. conditionally;

b. subject to a life estate;

c. in fee simple absolute;

d. pursuant to a bailment contract.

22. Washington is a community property state.

T / F

23. In this type of deed, the seller not only conveys ownership in a parcel of real estate, but the owner also guarantees good title to the buyer.

a. a quit claim deed;

b. a sheriff’s deed;

c. a deed in trust;

d. a warranty deed.

24. This power allows the government to condemn private property and commit it to public use, after duly compensating the owner.

a, the power of fee simple absolute;

b. zoning;

c. eminent domain.

d. force majeure.

25. While she is attending a movie, McCulloch visits the restroom. While in the restroom, she removes her wristwatch and leaves it on the sink. Hasso finds the watch. The legal owner of the watch is:

a. McCulloch;

b. Hasso;

c. the owner of the theater;

d. the state of Washington.

You are given the sample mean and the population standard deviation. Use this information to construct the​ 90% and​ 95% confidence intervals for the population mean. Interpret the results and compare the widths of the confidence intervals. If​ convenient, use technology to construct the confidence intervals. A random sample of 6060 home theater systems has a mean price of ​$135.00135.00. Assume the population standard deviation is ​$15.8015.80. Construct a​ 90% confidence interval for the population mean.

The​ 90% confidence interval is ​(_,_​). ​(Round to two decimal places as​ needed.)

Construct a​ 95% confidence interval for the population mean. The​ 95% confidence interval is ​(_,_). ​(Round to two decimal places as​ needed.) Interpret the results.

Choose the correct answer below.

A. With​ 90% confidence, it can be said that the population mean price lies in the first interval. With​ 95% confidence, it can be said that the population mean price lies in the second interval. The​ 95% confidence interval is wider than the​ 90%.

B. With​ 90% confidence, it can be said that the population mean price lies in the first interval. With​ 95% confidence, it can be said that the population mean price

Question 4 [20 marks] Analyze if the statements that are presented below are True or False. You MUST justify your answer to get credit. Answers without justification (even if they are correct) will be given zero marks.

(a) In any Pareto-optimal allocation of a two-good economy, each consumer has to consume a positive amount of both goods.

(b) A monopolist never produces on the elastic segment of its average revenue curve.

(c) If a firm’s production exhibits increasing returns to scale, then the firm’s marginal costs are decreasing and below its average costs.

(d) Maroon Theater practices third-degree price discrimination and sells tickets to three groups of customers: students, regular customers and senior citizens. The inverse demand of the three groups is linear. Furthermore, the students’ and senior citizens’ elasticities of demand for tickets are −4 and −3, respectively. Because the price charged to regular customers is greater than the price charged to senior citizens, we know with certainty that the ticket price for students will be lower than the ticket price for regular customers.

Use the six-step hypothesis testing where appropriate:

1. You have been told that the mean price of two movie tickets including online service charges, a large popcorn, and two medium soft drinks is $38. Based on a sample of 10 theater chains and assuming a normal distribution, the sample mean was found to be $36.53 and the standard deviation was $3.38. At the 0.05 level of significance, is there enough evidence to indicate that the average price is now less than $38?

a. What is the appropriate null and alternative hypothesis for problem 1? Use both words and notations

b.What level of significance and sample size is used in this problem?

c.What type of problem is this? What formula will you use? Why?

d. What is the correct critical value for the problem? How did you find it?

e.What is the correct value for the test statistic? Provide the formula used and show work

f. Should you accept or reject the null hypothesis? How much confidence do you have in your decision? Restate the null of alternative hypothesis. What policy decision would you make?

Can you use Twitter activity to forecast box office receipts on the opening weekend? The following data (stored in TwitterMovies indicate the Twitter activity (“want to see” and the receipts ($) per theater on the weekend a movie opened for seven movies. Solve this problem to two significant digits.

1. What is the independent variable (X) in this question?
2. What is the dependent variable (Y) in this question?
3. Create a scatter plot of the X and Y variables.
4. What is the Y intercept when X = 0?
5. What is the slope?
6. What is the correlation between the X and Y variables as measured by the R Square? How strong is this correlation?
7. Predict the mean receipts for a movie that has a Twitter activity of 100,000.
8. Should you use the model to predict the receipts for a movie that has a Twitter activity of 1,000,000? Why or why not?
   

Amazing Productions performs London shows. The average show sells 1,000 tickets at $60 per ticket. There are 120 shows per year. No additional shows can be held as the theater is also used by other production companies. The average show has a cast of 60, each earning a net average of $320 per show. The cast is paid after each show. The other variable cost is program-printing cost of $8 per guest. Annual fixed costs total $459,200.

1)Compute revenue and variable costs for each show.

2)Use the equation approach to compute the number of shows Amazing Productions must perform each year to break even.

3)Use the contribution margin ratio approach to compute the number of shows needed each year to earn a profit of $4,264,000. Is this profit goal realistic? Give your reasoning.

4)Prepare Amazing Production's contribution margin income statement for 120 shows performed in 2016. Report only two categories of costs: variable and fixed.

A company which manufactures compact discs has found that demand for its product has been increasing rapidly over the last 12 months. A decision now has to be made as to how production capacity can be expanded to meet this demand. Three alternatives are available: (i) Expand the existing plant; (ii) Build a new plant in an industrial development area; (iii) Subcontract the extra work to another manufacturer. The returns which would be generated by each alternative over the next 5 years have been estimated using three possible scenarios: (i) Demand rising at a faster rate than the current rate; (ii) Demand continuing to rise at the current rate; (iii) Demand increasing at a slower rate or falling. These estimated returns, which are expressed in terms of net present value, are shown below (net present values in $000s): Scenario Course of action Demand rising faster Demand rising at current rate Demand increasing slowly or is falling Expand 500 400 ?150 Build new plant 700 200 ?300 Subcontract 200 150 ?50 Exercises 239 (a) The company’s marketing manager estimates that there is a 60% chance that demand will rise faster than the current rate, a 30% chance that it will continue to rise at the current rate and a 10% chance that it will increase at a slower rate or fall. Assuming that the company’s objective is to maximize expected net present value, determine (i) The course of action which it should take; (ii) The expected value of perfect information. (b) Before the decision is made, the results of a long-term forecast become available. These suggest that demand will continue to rise at the present rate. Estimates of the reliability of this forecast are given below: p(forecast predicts demand increasing at current rate when actual demand will rise at a faster rate) = 0.3 p(forecast predicts demand increasing at current rate when actual demand will continue to rise at the current rate) = 0.7 p(forecast predicts demand increasing at current rate when actual demand will rise at a slower rate or fall) = 0.4 Determine whether the company should, in the light of the forecast, change from the decision you advised in (a). (c) Discuss the limitations of the analysis you have applied above and suggest ways in which these limitations could be overcome.

The accompanying data set provides the closing prices for four stocks and the stock exchange over 12 days:

With the help of the Excel Exponential Smoothing tool, I was able to forecast each of the stock prices using simple exponential smoothing with a smoothing constant of 0.3 (ie, damping factor of 0.7).

I was also able to calculate the Mean Absolute Deviation (MAD) of each of the stocks: MAD of Stock A = 1.32 MAD of Stock B = 0.37 MAD of Stock C = 0.41 MAD of Stock D = 0.26 MAD of Stock Exchange = 83.85.

The Mean Square Error (MSE) of the stocks: MSE of Stock A = 2.22, MSE of Stock B = 0.17, MSE of Stock C = 0.21, MSE of Stock D = 0.08, MSE of Stock Exchange = 7963.44.

Help me to understand the concept of Mean Absolute Percentage Error (MAPE). I realize that MAPE is the average of absolute errors divided by actual observation values. I'm wondering if this is just the MAD divided by the total observation values for a particular stock. For example, for Stock A, If my understanding is correct (which I don't think it is), the MAPE of Stock A would be 1.32 / each of the observation values individually. Or, would it be [(127.15 - 127.37) / 127.15]. Or, do I need to add up all the absolute errors for Stock A and all the actual observation values for Stock A and divide the former by the latter and then multiply by 100. As you can see, I'm confused. Please help.

Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity. Note: Turnover and the average collection period are calculated using start-of-year, not average, values. (Enter your answers in millions. Round intermediate calculations and final answers to 2 decimal places.)