1- DHL Company specializes in rapid parcel delivery. Cross sectional data from DHL’s regional hub in Palestine were used to estimate the demand equation for the company’s services. Holding income and prices of other goods constant, the demand equation is estimated to be

P = 66Q -1 /3

where P is the price per pound and Q is pounds delivered. The marginal cost of delivery is constant and equal to $2 per pound.

a. What is the point-price elasticity of demand?

b. What are the profit-maximizing price and quantity?

c. What are the total revenue maximizing price and quantity?

Have you ever traded any stocks? If yes, discuss how you personally decide about your portfolio(Have you change your methods in the past few years). Do you buy the majority of your stocks for a short sell or not? Which market/s have you used for your tradings? Do you prefer riskier stocks with a higher return or do you think of yourself as a risk-averse person? Explain why you find your method of trade the best. If you have a very successful trading story feel free to share it with the class. If you never traded any stocks, Discuss which market would be your preferred place to trade. What kind of stock you would choose and how you would determine the shape of your portfolio. (Basically, think about the questions above and try to answer how you would approach them if you want to start trading) Different financial institutions use various approaches to their trades and shaping their optimum portfolios. Most of them expect their potential employees to have a clear idea about the benefits of their approach and their objectives. Thinking about these questions and learning from other’s experiences can help you practice getting ready and prepare your answers more efficiently. Some companies like Dimensional fund advisors use more advanced financial methods such as more developed versions of the 3-factor model initially introduced by Nobel winner Fama and French for their trades. More companies are getting attracted to this approach

For every question, please write down each main step before you obtain the final answer. Correct final answer with incorrect related work (calculation) or without any work may receive 0 point. On the contrary, incorrect final answer with correct related work (calculation) will receive partial credits.

Question 3 – Financial Markets [10 points]: Kampfire, Inc., a very successful manufacturer of camping equipment, is considering going public next month to raise funds to help finance the company’s future growth. The financial manager of Kampfire has approached the investment banking firm at which you work seeking help with its decision. Your boss asked you to explain the nature of the U.S. financial markets and the process of issuing equity to the financial manager. To help with this task, your boss has asked you to answer the following questions in explaining the U.S. financial system to the financial manager:

What is a financial market? How are financial markets differentiated from markets for physical assets?

Differentiate between money markets and capital markets.

Differentiate between a primary market and a secondary market. If Microsoft decided to issue additional common stock and an investor purchased 1,000 shares of this stock from Merrill Lynch, the underwriter, would this transaction be a primary market transaction or a secondary market transaction?

Describe the three primary ways in which capital is transferred between savers and borrowers.

Securities can be traded on physical exchanges or in the over-the-counter market. Define each of these markets, and describe how stocks are traded in each one.

Look at the following demand and supply schedules for the new Pepsi product just being introduced. We will assume that the units are case lots bought by an individual family within the first six months of introduction.

1.    If the price of Crystal Pepsi were $2.00 per case, how many cases would be offered for sale?       

2.    If the price of Crystal Pepsi were $2.00 per case, how many cases would people be willing to buy?           

3.    How many cases would actually be traded (go through the market) if the price were left at this $2.00 level?                     

4.    Would this constitute a surplus or a shortage?                           

5.    How much of a surplus or shortage would there be?                         

6.    If the market process were allowed to work, what would you expect to happen to the price of Crystal Pepsi?                     

7.    If the price of Crystal Pepsi rose to $8.00 per case, how many cases would be offered for sale?     

8.    If the price of Crystal Pepsi rose to $8.00 per case, how many cases would be demanded by families.     

9.    If the price remained at $8.00 per case, how many cases would actually be traded (go through the market)                     

10.    Would this constitute a surplus or a shortage?                           

11.    How much of a surplus or shortage would there be?                       

12.    If the market process were allowed to work, what would you expect to happen to the price of Crystal Pepsi?                    

Find the relative frequency for the class with lower class limit 19

Relative Frequency = %

Give your answer as a percent, rounded to two decimal places

A Frequency Distribution Table using data
This list of 16 random numbers has been sorted:

Fill in this table with the frequencies as whole numbers and the relative frequencies as decimals with 4 decimal places for the relative frequencies. Remember: relative frequencies are between 0.0 and 1.0

(This problem does not accept fractions.)

Complete the table.

In a student survey, fifty-two part-time students were asked how many courses they were taking this term. The (incomplete) results are shown below:

Please round your answer to 4 decimal places for the Relative Frequency if possible.

What percent of students take exactly one courses? %

50 part-time students were asked how many courses they were taking this term. The (incomplete) results are shown below:

a. Complete the table.

b. What percent of students take exactly two courses? %

70 adults with gum disease were asked the number of times per week they used to floss before their diagnoses. The (incomplete) results are shown below:

a. Complete the table (Use 4 decimal places when applicable)

b. What is the cumulative relative frequency for flossing 1 time per week? %

Question 6 [24] Hardware House (Pty) Ltd is a retailer of a wide range of hardware products. It has branches throughout the country and its strategy is to increase its sales revenue by opening more stores. The company rents the premises of all its stores. The executive management, however, is concerned that its strategy could be very harmful to operating profits should there be a downturn in the economy, such as a recession. One of the financial tools management wants to use to assess the vulnerability of its profits is to determine the operating leverage of the business. At the last executive management meeting, the following information was tabled, discussed and approved to be used to determine operating leverage: 2019 Actual 2020 projected increase (decrease) Revenue R25 670 000 R30 804 000 Cost of goods sold 17 110 000 20 874 200    Operating expenses 3 523 000 3 748 460 Selling expenses 1 080 000 1 004 400 General and administrative expenses 1 870 000 1 944 800 Property rent expense 350 000 549 500 Depreciation 223 000 1249 760 Required: 6.1. Complete the information in the table for 2019 and 2020, and then use the information in the table to calculate Hardware House’s degree of operating leverage (DOL) and explain its effect on operating profit. (18) 6.2. Should the company be concerned about the possible negative effect that its strategy can have on profits in poor economic conditions? Give reasons for your answer. (6)

Problem 19-8 (Part Level Submission)

The following information was disclosed during the audit of Elbert Inc.

E. Prepare the journal entry to record income taxes for 2018.

F. Draft the income tax section of the income statement for 2018, beginning with “Income before income taxes.”

Novak Miniature Golf and Driving Range Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March. Mar. 1 Invested $52,900 cash in the business in exchange for common stock. 3 Purchased Michelle Wie’s Golf Land for $36,660 cash. The price consists of land $10,170, building $20,650, and equipment $5,840. (Make one compound entry.) 5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,540. 6 Paid cash $1,415 for a one-year insurance policy. 10 Purchased golf equipment for $2,440 from Singh Company, payable in 30 days. 18 Received golf fees of $1,101 in cash. 25 Declared and paid a $550 cash dividend. 30 Paid wages of $827. 30 Paid Singh Company in full. 31 Received $777 of fees in cash. Novak uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock, Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense. Journalize the March transactions. (Use Service Revenue account to record fees.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit Mar. 3

Your company has spent $250,000 on research to develop a new computer game. The firm is planning to spend $1,400,000 on a machine to produce the new game. Shipping and installation costs for the new machine total $200,000 and these costs will be capitalized and depreciated together with the cost of the machine. The machine will be used for 3 years, has a $200,000 estimated resale value at the end of three years, and will be depreciated straight line over 4 years. Revenue from the new game is expected to be $1,200,000 per year, with costs of $500,000 per year. The firm has a tax rate of 35 percent, a cost of capital (discount rate) of 6 percent, and it expects net working capital (NWC) to increase by $150,000 at the beginning of the project. This investment in NWC will be wholly recouped at the end of the project. . a) Complete the table below. b) In the second table below calculate the Net Present Value (NPV) of the project. c) Calculate the Profitability Index (PI) of the project. d) Is the Internal Rate of Return (IRR) of the project greater than, equal to, or less than the cost of capital (discount rate)? e) Should your company proceed with this project? Explain based on the decision criteria for NPV, PI, and IRR. Year 0 1 2 3 Revenue Costs Depreciation EBIT Taxes Net Income Operating Cash Flow Change in Net Operating Working Capital Change in Gross Fixed Assets Total Free Cash Flow Net Present Value Profitability Index Internal Rate of Return >, =, or < the cost of capital (discount rate)? Proceed with the project? Explain.

Revise your calculations based the new information provided below and then answer the questions that follow.

A company lends $372,000 to an owner and accepts a three year, 7% note in return. The note was issued on June 1st of the current year, and will be due on June 1st of the final year of the note.

Required:
(a) Prepare the journal entry to be made when the company makes the loan and accepts the note in return. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

• Record the 7% note receivable accepted for a loan amount of $372,000.

(b) Calculate the interest revenue to be recorded at the end of each year the note is outstanding.

(c) Prepare the journal entries to accrue the interest receivable for each year the note is outstanding. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Dec 31

• Record the interest receivable during the period ending December 31 for year 1.
• Record the interest receivable during the period ending December 31 for Year 2.
• Record the interest receivable during the period ending December 31 for Year 3.

(d) Prepare the journal entry to record receiving the cash at the note's maturity. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
June 01

• Record the receipt of cash on account of 7% note receivable.