2. Geniue Antique Egyptian Artifacts, Inc. produces three varieties of antique artifacts for sale to tourists: statuettes, lamps, and urns. All of the artifacts include special clay. A statuette requires 13 ounces of clay, a lamp uses 18 ounces, and each urn takes 17 ounces. Existing capacity of clay is 28,000 ounces per month. A special material is also used to produce the three artifacts, with each statuette needing 0.8 ounces, each lamp 0.7 ounces, and a typical urn requiring 1.0 ounces. The company has inventory of 1,200 ounces of special material per month. The owner of the company wishes to maintain a balanced marketing program, and has ordered that production of statuettes to be limited to 275. The overall per unit profit for artifacts is the following: $199 per statuette, $99 per lamp, and $145 per urn. The owner wants to know how much of each type of antique to fabricate monthly in order to optimize profit.

a. What are the objective function, decision variables, and constraints for this optimization problem?

b. Develop an Excel spreadsheet and use Excel-Solver to find an optimal solution for this problem.

c. Describe the optimal solution in words.

Jackie, a 44-year-old female, has had HIV for 12 years. Her physician has recently diagnosed her with AIDS due to a decline in her CD4+ T cells over the past five years, an elevated viral load, and recurrent bacterial pneumonia. She has ongoing lipodystrophy; she lost approximately 30 pounds in the past year and has had diarrhea for the past six weeks. Her roommate reports that Jackie’s appetite has been minimal lately and he attributes this to a thrush infection that has been resistant to medical treatment. Her current weight is 112 pounds.

1. Calculate Jackie’s estimated kcalorie and protein needs using the following factors: 30 to 35 kcalories/kilogram, 1.0 to 1.6 grams protein/kilogram (show your work).

2. What suggestions do you have for the chewing and swallowing problems Jackie is having related to thrush?

3. What advice do you have for Jackie and her roommate regarding food safety?

4. What can Jackie do to manage the metabolic complications associated with lipodystrophy?

5. What dietary modifications might help Jackie manage her ongoing diarrhea?

NDR, Inc., an unlevered firm, has expected earnings before interest and taxes of $2 million per year. NDR's tax rate is 40%, and the market value is V=E=$12 million. The stock has a beta of 1.0, and the risk free rate is 9%. [Assume that E(Rm)- Rf = 6%]. Management is considering the use of debt; debt would be issued and used to buy back stock, and the size of the firm would remain constant. The default free interest rate on debt is 12%. Since interest expense is tax deductible, the value of the firm would tend to increase as debt is added to the capital structure, but there would be an offset in the form of the rising cost of bankruptcy. The firm's analysts have estimated, approximately, that the present value of any bankruptcy cost is $8 million and the probability of bankruptcy will increase with leverage according to the following schedule: Value of Probability Debt of Failure $2,500,000 0.00% $5,000,000 8.00% $7,500,000 20.50% $8,000,000 30.00% $9,000,000 45.00% $10,000,000 52.50% $12,500,000 70.00% a. What is the cost of equity and WACC at this time? b. What is the optimal capital structure when bankruptcy costs are considered? c. What will the value of the firm be at this optimal capital structure?

Halogen Inc. is an unlevered firm, has expected earnings before interest and taxes of $2 million per yearHalogen Inc tax rate is 40%, and the market value is V=E $12 million. The stock has a beta of 1.0, and the risk free rate is 9%. Assume that E(Rm)-Rf-6%). Management is considering the use of debt; debt would be issued and used to buy back stock, and the size of the firm would remain constant. The default free interest rate on debt is 12%. Since interest expense is tax deductible, the value of the firm would tend to increase as debt is added to the capital structure, but there would be an offset in the form of the rising cost of bankruptcy. The firm's analysts have estimated, approximately, that the present value of any bankruptcy cost is $8 million and the probability of bankruptcy will increase with leverage according to the following schedule: Value of Probability Debt of Failure $2,500,000 0.00% $5,000,000 8.00% $7,500,000 20.50% $8,000,000 30.00% $9,000,000 45.00% $10,000,000 52.50% $12,500,000 70.00% a. What is the cost of equity and WACC at this time? b. What is the optimal capital structure when bankruptcy costs are considered? c. What will the value of the firm be at this optimal capital structure?

Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of “go” or “no go” on the project. Use your Investment Return Analysis as an example for this capital budget analysis. PLEASE show formulas

Project Inputs:

WACC – Debt is 70% and Equity is 30% of this firm’s capital structure. Interest rate on the debt is 7.5%, firm’s tax rate is 22%. Firm’s beta is 1.50, Risk Free Rate is 1.0%, Market Return Rate is 7.0%.

Project Investment Outlay, Year 0 - $1,000,000
Project Investment Life – 10 years
Project Depreciation - $100,000 / year
Project Salvage Value - $30,000

Working Capital Base of Annual Sales – 10%
Expected inflation rate per year – 3.0%
Project Tax Rate – 30%

Units sold per year – 40,000
Selling Price per Unit, Year 1 - $40.00
Fixed operating costs per year excluding depreciation - $175,000
Manufacturing (Variable) costs per unit, Year 1 - $30.00

Write a program to produce an array of integer random numbers. Your program should find out from the user how many numbers to store. It should then generate and store that many random integers (the random numbers must be between 1 and 999 inclusive). The program should then determine the smallest number, the largest number, and the average of all the numbers stored in the array. Finally, it should print out all the numbers on the screen, five numbers to a line with spaces in between. Once the contents of the array have been printed to screen, display the smallest number, largest number, and average determined previously. You should ensure that your program design in modular.

The Random class of Java library (java.util.Random) implements a random number generator. To generate random numbers, you construct an object of q the class Random, and then use the method nextInt(n) which returns a number between 0 (inclusive) and n (exclusive).

E.g.

import java.util.Random;

.....

Random generator = new Random();

.....

//generate a random number between 0 and 99 (inclusive)

int nextRand = generator.nextInt(100);

Alternatively use Math.random(), which returns a random value in the range 0.0 to 1.0 (then adjust to the correct range)

Portfolio Theory

1. What type of risk does a portfolio have with a beta of 1.5?

a. Systematic risk only. b. Unsystematic risk only. c. Systematic and unsystematic risk. d. Cannot determine from the question.

2. Which tools can help to determine an optimal investment portfolio?

1. Mean-variance optimization model. 2. Risk tolerance questionnaire. 3. Tactical asset allocation.

a. 1 only. b. 2 only. c. 1 and 2. d. All of the above.

3. The highest annual range of returns for the S&P 500 has occurred for which of the following?

a. 1-year rolling returns. b. 5-year rolling returns. c. 10-year rolling returns. d. 20-year rolling returns.

4. The _____ is a graphical representation of expected return and risk, as measured by beta.

a. ALA. b. CML. c. SML. d. Efficient frontier

5. Jocko was just told that the expected return for Echo stock was 20%, based on the CAPM. Assuming that the market return and the risk-free rate are 12% and 4%, respectively, what is the beta for Echo?

a. 1.0. b. 1.5. c. 2.0. d. 2.5.

Blitz Industries has a debt-equity ratio of 1.3. Its WACC is 8.5 percent, and its cost of debt is 6.2 percent. The corporate tax rate is 22 percent. a. What is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company’s unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. What would the cost of equity be if the debt-equity ratio were 2? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What would the cost of equity be if the debt-equity ratio were 1.0? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-3. What would the cost of equity be if the debt-equity ratio were zero? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)