1)

Which of the following may cause a departure from Equilibrium GDP:

a. imports

b. taxes

c. increase in savings

d. all the above

2)

Which of the following is NOT an ‘injection’ into the income-expenditures stream:

a. exports

b. government purchases

c. investment

d. imports

3)

A limitation of the Aggregate Expenditures model is that it doesn’t directly show:

a. price level changes

b. any role for net exports

c. investment spending

d. none of the above

4)

The Aggregate Demand (AD) curve may shift to the right due to:

a. rise in household debt spending

b. an increase in interest rates

c. higher business taxes

The Aggregate Demand (AD) curve may shift to the left due to:

1. decline in real income

2. higher business taxes

3. fall in the price level

4. reduction in household debt

In April 2019, the U.S. unemployment rate fell to 3.6 percent, its lowest level in almost 50 years. In Texas, the unemployment rate was 3.4 percent in June 2019, its lowest level since individual state data began being kept in 1976. Unemployment rates this low are often viewed as being very good for the economy, so explain how low unemployment rates benefit the economy in terms of the following:

• productivity and GDP growth
• wages and wage growth
• consumer confidence
• labor supply & demand
• entitlement spending (make sure you understand the term “entitlement spending”)

Unemployment rates this low can also be viewed as being detrimental to the economy, so explain how low unemployment rates may also damage the economy in terms of the following:

• productivity and GDP growth
• employee loyalty
• potential inflation
• labor supply & demand

E8-26

ComplexChemComplexChem​,

​Inc., produces chemicals for large biotech companies. It has the following data for manufacturing overhead costs during August

20172017​:

Requirement

Fill in the blanks. Use F for favorable and U for​ unfavorable:

​(If no variance exists leave the dollar value blank. Label the variance as favorable​ (F), unfavorable​ (U) or never a variance​ (N).)

Greenpoint Corporation is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 25 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Suppose the appropriate discount rate is 12 percent. Determine the net working capital spending for Year 4 then calculate the NPV of the project. What is the project NPV? Year 0 Year 1 Year 2 Year 3 Year 4 Investment $118,000 Sales revenue $75,000 $75,800 $77,000 $78,500 Operating cost 18,000 18,600 19,600 21,000 Depreciation 29,500 29,500 29,500 29,500 Net working capital spending 10,000 4,000 2,000 1,000 ? $30,532.66 $29,744.78 $28,568.41 $27,520.33 $26,244.80

Greenpoint Corporation is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 25 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Suppose the appropriate discount rate is 12 percent. Determine the net working capital spending for Year 4 then calculate the NPV of the project. What is the project NPV?

Greenpoint Corporation is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 25 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Suppose the appropriate discount rate is 12 percent. Determine the net working capital spending for Year 4 then calculate the NPV of the project. What is the project NPV? Year 0 Year 1 Year 2 Year 3 Year 4 Investment $118,000 Sales revenue $75,000 $75,800 $77,000 $78,500 Operating cost 18,000 18,600 19,600 21,000 Depreciation 29,500 29,500 29,500 29,500 Net working capital spending 10,000 4,000 2,000 1,000 ? $30,532.66 $29,744.78 $28,568.41 $27,520.33 $26,244.80

You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,130,000 this year. Depreciation, the increase in net working capital, and capital spending were $239,000, $104,000, and $485,000, respectively. You expect that over the next five years, EBIT will grow at 20 percent per year, depreciation and capital spending will grow at 25 per year, and NWC will grow at 15 per year. The company currently has $17,900,000 in debt and 515,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 35 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $

You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,130,000 this year. Depreciation, the increase in net working capital, and capital spending were $239,000, $104,000, and $485,000, respectively. You expect that over the next five years, EBIT will grow at 20 percent per year, depreciation and capital spending will grow at 25 per year, and NWC will grow at 15 per year. The company currently has $17,900,000 in debt and 515,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 35 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price

You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,130,000 this year. Depreciation, the increase in net working capital, and capital spending were $239,000, $104,000, and $485,000, respectively. You expect that over the next five years, EBIT will grow at 20 percent per year, depreciation and capital spending will grow at 25 per year, and NWC will grow at 15 per year. The company currently has $17,900,000 in debt and 515,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 35 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $

You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,230,000 this year. Depreciation, the increase in net working capital, and capital spending were $244,000, $109,000, and $510,000, respectively. You expect that over the next five years, EBIT will grow at 13 percent per year, depreciation and capital spending will grow at 18 percent per year, and NWC will grow at 8 percent per year. The company has $18,900,000 in debt and 395,000 shares outstanding. You believe that sales in five years will be $22,100,000 and the price-sales ratio will be 3.2. The company’s WACC is 9.4 percent and the tax rate is 25 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Share Price?