4. President Kennedy acknowledges that the U.S. response could provoke a nuclear war, from which no one would gain anything. The U.S. will not "shrink from that risk," directing that a number of steps be taken immediately. Summarize the major points of those 7 steps in your own words.

1. What is "household production" and how is its value measured?

2. Describe in detail the long-run trends in the value of U.S. household production?

3. If the value of household production were included in GDP, how would this change the growth patterns of U.S. GDP over time?

Sales and Production Budget II You have been assigned to prepare the cash budget, which is one portion of the master budget for Marble Company. According to a credit agreement with the company’s bank, Marble Company promises to have a minimum cash balance of $65,000 at each month-end. In return, the bank has agreed that the company can borrow up to $175,000 at a monthly interest rate of 2%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $40,000 on the last day of each month. The company has a cash balance of $60,000 and a loan balance of $125,000 at January 1. Marble Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year.

1. Prepare monthly cash budgets for January, February, and March. (Negative balances and Loan repayment amounts (if any) should be indicated should be indicated in parentheses “( )”.)
2. If the cash receipts and payments changed to the values shown in the table below, how would the budget change?

3. Cash Receipts		Cash Payments
   January February March	$500,000    $475,000 $500,000	$450,000 $375,000 $525,000

4. Write a business letter to the CEO analyzing the cash budgets of this company and state your recommendations based on the initial cash receipts and cash payments and on the cash receipts and cash payments changes.

Case Study Eagersaver.com Eagersaver.com was established in 2005 by the CEO Colette Bevan as an online comparison site primarily focused on car insurance and related products. Since then it has grown, both organically and by acquisition of other companies into an organisation that now compares home insurance, legal insurance, pet insurance, travel insurance, life insurance and accident insurance. It has diversified into other comparison services in financial products, travel services and utilities. It has moved offline with the opening of call centre activities and a TV shopping channel. The company’s turnover is £100m. The Managing Director Dirk Bradfield now wishes to float the company on the stock exchange and following a due diligence exercise by Colette’s corporate advisors she has been advised to ‘professionalise the procurement activities throughout the group.’ The due diligence uncovered the following facts: • There are five locations within the UK, situated at Chester, Edinburgh, Sheffield, Bristol and Cardiff. They work independently and only one location has a Purchasing Manager (TV shopping channel). • The largest spend across the group is on marketing (£12m online and £8m TV). • Marketing is centrally managed by the Marketing Director. • Most other procurement is undertaken by service heads including IT and agency staff. • Numerous media companies are engaged often without competition. • The same or similar products and services are procured from different suppliers. • There is a range of prices paid for the same product or service, some ranging by ±30%. • Most contracts are under the vendor’s terms and conditions and in some cases there are verbal arrangements. • The company has outgrown many of its original supplier’s who are finding it difficult to cope with demand and there are instances where contract performance has slipped. • The Chief Executive is responsible for many of these problematic relationships based upon personal friendship at the inception of the company. Tasks You have been appointed into the new position of Group Procurement Director and have a meeting arranged with Colette to discuss the way forward. In considering your plan, how specifically would you deal with?

1. Structuring the procurement activities

2. Rationalising the product and supply chain

3. Managing the Marketing Director who states corporate expenditure is his budget and he will decide who has the last say on contract awards

4. Managing the expenditure attributed to other Service Heads.

14. A CFO and CEO potentially are subject to huge financial penalties if they incorrectly certify to the SEC that their company’s internal controls function properly, and they do not. They similarly are subject to huge penalties if they certify that their company’s financial statements fairly present its financial position, but they do not. Should these executives be allowed to obtain insurance that will reimburse them for the amount of these penalties if they mistakenly submit a certification to the SEC that proves to be erroneous? Identify the pros and cons of insurance coverage being available.

We are interested in the relationship between the compensation of Chief Executive Officers (CEO) of firms and the return on equity of their respective firm, using the dataset salary.xlsx. The variable salary shows the annual salary of a CEO in thousands of dollars, so that y = 150 indicates a salary of $150,000. Similarly, the variable ROE represents the average return on equity (ROE)for the CEO’s firm for the previous three years. A ROE of 20 indicates an average return of 20%.

1. Draw a boxplot and a histogram of the salary of CEO. Are there any apparent outliers in the data? Are there high leverage points?

2. Use your software to estimate the relationship and report your results.

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3. Looking at a plot of the residuals against predicted values and at the normal probability plot of residuals, does the estimated model appear satisfactory?

4. Use your software to estimate the model, this time by using the database salaryalt.xlsx which excludes all the data points for which the salary of the CEO appears extraordinarily large considering the ROE of their firm. Report your results.

5. Produce a histogram and a normal probability plot of the residuals of this regression. Does this regression appear to meet the conditions of absence of outliers and near normality?

6. What are the units of the slope coefficient b1 in this equation? What is the impact on the salary of the CEO of firm i if the ROE increases by 1%?

7. Use your results to calculate a 95% interval to estimate the mean salary of CEOs whose firms have an ROE of 20 per cent.

We are interested in the relationship between the compensation of Chief Executive Officers (CEO) of firms and the return on equity of their respective firm, using the dataset below. The variable salary shows the annual salary of a CEO in thousands of dollars, so that y = 150 indicates a salary of $150,000. Similarly, the variable ROE represents the average return on equity (ROE)for the CEO’s firm for the previous three years. A ROE of 20 indicates an average return of 20%.

a) Draw a boxplot and a histogram of the salary of CEO. Are there any apparent outliers in the data? Are there high leverage points?

b) Use your software to estimate the relationship and report your results.

??????? = ?0 + ?1???? + ??

c) Looking at a plot of the residuals against predicted values and at the normal probability plot of residuals, does the estimated model appear satisfactory?