The higher the wind speed, the quicker a body cools. To quantify this wind speed chilling effect, both the U.S. and Canadian weather services have determined wind chill temperatures for temperatures below 50°F and wind speeds above 4 mph in the United States and temperatures below 10°C and wind speeds above 4.8 km/hr in Canada. An approximation of the official wind chill temperature, for both metric and English units, is given by this formula:

WCI = K1 + 0.6125 Ta - K2Ws0.16 + K3TaWs0.16
The following chart lists the correct dimensions and values for both systems of units:

Using the wind chill formula, write, compile, and run a C++ program that displays a table of wind chill indexes for temperatures from 2°C to 10°C, in 4-degree increments, and for each temperature, wind speeds from 5 km/hr to 11 km/hr in 2-km/hr increments.

The following cross-tabulation shows household income by the educational level of the head of the household (Statistical Abstract of the United States, 2008).

a. Develop the joint probability table below.

b. What is the probability of a head of household not being a high school graduate?

c. What is the probability of a head of household having a bachelor’s degree or more education?

d. What is the probability of a household headed by someone with a bachelor’s degree earning $100,000 or more?

e. What is the probability of a household having income below $25,000?

f. What is the probability of a household headed by someone with a bachelor’s degree earning less than $25,000?

g. Is household income independent of educational level? Clearly show your work in the space below.

Assume that the spot rate is €0.8144/$, the 180-day forward rate is €0.7933/$, and the 180-day dollar interest rate is 6 percent per year. What is the 180-day euro interest rate per year that would prevent arbitrage?

The consumer price index for the United States (U.S.) rose from approximately 121.4 in 1990 to approximately 199.3 in 2010.

a. How much inflation was there in the U.S. during the twenty-year period?

b. What is the significance of the consumer price index to a multinational corporation?

If the price level in Canada is C$18,500, the price level in France is €13,095, and the spot exchange rate is C$1.25/€, please answer the following questions:

a. What is the internal purchasing power of the Canadian dollar? (Hint: it may be best to calculate the purchasing power of C$10,000 first and divide by the price level of C$18,500 to obtain the number of consumption bundles for C$18,500).

b. What is the internal purchasing power of the euro in France? (Hint: it may be best to calculate the purchasing power of €10,000 first and divide by the price level of €13,095 to obtain the number of consumption bundles for €13,095).

c. What is the implied exchange rate of C$/€ that satisfies absolute PPP?

d. Is the euro overvalued or undervalued relative to the Canadian dollar? Explain the reasoning for your answer.

Problem 7-20 Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income [LO7-1, LO7-2, LO7-3]

High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant’s operation:

Management is anxious to assess the profitability of the new camp cot during the month of May.

Required:

1. Assume that the company uses absorption costing.

a. Determine the unit product cost.

b. Prepare an income statement for May.

2. Assume that the company uses variable costing.

a. Determine the unit product cost.

b. Prepare a contribution format income statement for May.

International Trade

Think of the importance of trade in your life. Look simply at what you’re wearing today. When you shop, do you look for the “Made in the USA” label? Perhaps you believe we might be better off as a nation economically if we produced more goods in the attempt to become more self-supportive. Perhaps you believe we should increase the amount of goods traded internationally. Opinions and speculation vary as much as the number of economists that predict economic climate. Having said this, as a nation, simply put, we trade. And with that activity come many rules and regulations to try and ensure our best interests are protected. Based on this;

How is international trade regulated? Log on to www.wto.org and click the “Trade Topics” tab to learn about the scope of trade agreements and trade controversies. What is involved in “trade agreements”? Explain in detail.

Log on to www.bea.gov and view the “International” tab, then “Trade in Goods and Services.” What is the current balance of trade for the United States? Has this balance been increasing or decreasing? Based on the current economic conditions, how do you thing this balance will move in the near future, and why? Explain in detail.

**Provide a different answer than previous answers of this same question. Answer in minimum 250 words**

France stands as one of the world's leading economic powers, possessing large agricultural, industrial and service sectors. France operates a mixed economy that combines capitalist and socialist characteristics. Capitalism involves private ownership of capital and other means of production. Under socialism, the government directs economic activity and owns all or part of most industries. Despite extensive reforms over the years that have reduced government intervention in the economy, the French government still exercises great control over the economy, owning shares in many of the country's largest companies.

Quick Facts:

• French Republic
• Capital: Paris
• Population 63.5 million
• Area 543,965 sq km (210,026 sq miles)
• Major language French
• Major religion Christianity
• Life expectancy 78 years (men), 85 years (women)
• Currency Euro
• President: Emmanuel Mac

How does the French anti-globalization movement make sense given their culture and economic system? Why?

• How do these article relate other countries with anti-globalization sentiments like Great Britain, India, and the United States or do they?
• What current economic and cultural influences will effective globalization in the near future? Are these factors going to have a positive or negative effect? Why?
• In your opinion, is globalization beneficial?

Pacific Jewel Airlines is a U.S.-based air freight firm with a wholly owned subsidiary in Hong Kong. The subsidiary, Jewel Hong Kong, has just completed a long-term planning report for the parent company, in which it has estimated the following expected earnings and payout rates for 2014.

Earnings before interest and taxes $10,000

Less interest expense $1,000

Earnings before taxes $9,000

The current Hong Kong corporate tax rate on this category of income is 16.5 percent. Hong Kong imposes no withholding taxes on dividends remitted to U.S. investors (per the Hong Kong-United States bilateral tax treaty). The U.S. corporate income tax rate is 35 percent. The parent wants to repatriate 75 percent of net income as dividends.

1)Calculate the net income available for distribution by the Hong Kong subsidiary in 2014.

2)What is the expected amount of the dividend to be remitted to the U.S. parent next year?

3)After estimating the theoretical U.S. tax liability on the expected dividend (what is often terms gross-up in the U.S.), what is the total dividend after tax, including all Hong Kong and U.S. taxes, expected next year?

4)What is the effective tax rate on this foreign-sourced income next year?

Pacific Jewel Airlines is a U.S.-based air freight firm with a wholly owned subsidiary in Hong Kong. The subsidiary, Jewel Hong Kong, has just completed a long-term planning report for the parent company, in which it has estimated the following expected earnings and payout rates for 2014.

Earnings before interest and taxes           $10,000

Less interest expense                                    $1,000

Earnings before taxes                                   $9,000

The current Hong Kong corporate tax rate on this category of income is 16.5 percent. Hong Kong imposes no withholding taxes on dividends remitted to U.S. investors (per the Hong Kong-United States bilateral tax treaty). The U.S. corporate income tax rate is 35 percent. The parent wants to repatriate 75 percent of net income as dividends.

1. Calculate the net income available for distribution by the Hong Kong subsidiary in 2014.
2. What is the expected amount of the dividend to be remitted to the U.S. parent next year?
3. After estimating the theoretical U.S. tax liability on the expected dividend (what is often terms gross-up in the U.S.), what is the total dividend after tax, including all Hong Kong and U.S. taxes, expected next year?
4. What is the effective tax rate on this foreign-sourced income next year?

The Asian Carp Corp. (ACC) has developed a new line of spinning reel it plans to produce and sell in the United States. The cost of the necessary equipment will be $835,000 plus $37,000 for installation and delivery. The equipment falls into the MACRS 5-year class. The equipment will be scrapped in 5 years for an estimated $100,000. ACC estimates that sales in the first year of production will be $750,000, and due to intense marketing and word-of-mouth advertising, they believe sales will double in the second year. Sales are estimated to grow at 20% in the third year and 10% in the fourth year. Sales in year 5 will be the same as in year 4. Thereafter, the market will be saturated for this project and they will have to think of something new. Production costs will be $55,000 in fixed costs plus 70% of sales in variable operating costs. Net operating working capital requirements will be 4% of the increase in sales in the following year. If ACC is in the 40% tax bracket, calculate the initial cash outlay, operating cash flows in years 1 and 2, and the terminal cash flows for this project. Also calculate the project’s Net Present Value and Modified Internal Rate of Return assuming ACC has a 12% cost of capital and that operating cash flows in years 3, 4, and 5 are $350,770, $363,582 and $363,582 respectively. Should the project be accepted?  

Dell Computers would like to borrow pounds, and Virgin Airlines wants to borrow dollars. Because Dell is better known in the United States, it can borrow on its own dollars at 7 percent and pounds at 9 percent, whereas Virgin can on its own borrow dollars at 8 percent and pounds at 8.5% a. Suppose Dell wants to borrow £10 million for two years, Virgin wants to borrow $16 million for two years, and the current ($/£) exchange rate is $1.60. What swap transaction would accomplish this objective? Assume the counterparties would exchange principal and interest payments with no rate adjustments. b. What savings are realized by Dell and Virgin? c. Suppose, in fact, that Dell can borrow dollars at 7 percent and pounds at 9 percent, whereas Virgin can borrow dollars at 8.75 percent and pounds at 9.5 percent. What range of interest rates would make this swap attractive to both parties? d. Based on the scenario in part (c), suppose Dell borrows dollars at 7 percent and Virgin borrows pounds at 9.5 percent. If the parties swap their current proceeds, with Dell paying 8.75 percent to Virgin for pounds and Virgin paying 7.75 percent to Dell for dollars, what are the cost savings to each party?