Wesco Incorporated’s only product is a combination fertilizer/weedkiller called GrowNWeed. GrowNWeed is sold nationwide to retail nurseries and garden stores.

Zwinger Nursery plans to sell a similar fertilizer/weedkiller compound through its regional nursery chain under its own private label. Zwinger does not have manufacturing facilities of its own, so it has asked Wesco (and several other companies) to submit a bid for manufacturing and delivering a 35,000-pound order of the private brand compound to Zwinger. While the chemical composition of the Zwinger compound differs from that of GrowNWeed, the manufacturing processes are very similar.

The Zwinger compound would be produced in 1,000-pound lots. Each lot would require 31 direct labor-hours and the following chemicals:

The first three chemicals (AG-5, KL-2, and CW-7) are all used in the production of GrowNWeed. DF-6 was used in another compound that Wesco discontinued several months ago. The supply of DF-6 that Wesco had on hand when the other compound was discontinued was not discarded. Wesco could sell its supply of DF-6 at the prevailing market price less $0.08 per pound selling and handling expenses.

Wesco also has on hand a chemical called BH-3, which was manufactured for use in another product that is no longer produced. BH-3, which cannot be used in GrowNWeed, can be substituted for AG-5 on a one-for-one basis without affecting the quality of the Zwinger compound. The BH-3 in inventory has a salvage value of $520.

Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below:

The current direct labor wage rate is $18 per hour. The predetermined overhead rate is based on direct labor-hours (DLH). The predetermined overhead rate for the current year, based on a two-shift capacity with no overtime, is as follows:

Wesco’s production manager reports that the present equipment and facilities are adequate to manufacture the Zwinger compound. Therefore, the order would have no effect on total fixed manufacturing overhead costs. However, Wesco is within 130 hours of its two-shift capacity this month. Any additional hours beyond the 130 hours must be done in overtime. If need be, the Zwinger compound could be produced on regular time by shifting a portion of GrowNWeed production to overtime. Wesco’s direct labor wage rate for overtime is $27 per hour. There is no allowance for any overtime premium in the predetermined overhead rate.

Required:

1. Wesco has decided to submit a bid for the 35,000 pound order of Zwinger’s new compound. The order must be delivered by the end of the current month. Zwinger has indicated that this is a one-time order that will not be repeated. Calculate the lowest price that Wesco could bid for the order and still exactly cover its incremental manufacturing costs.

2. Refer to the original data. Assume that Zwinger Nursery plans to place regular orders for 35,000-pound lots of the new compound. Wesco expects the demand for GrowNWeed to remain strong. Therefore, the recurring orders from Zwinger would put Wesco over its two-shift capacity. However, production could be scheduled so that 60% of each Zwinger order could be completed during regular hours. As another option, some GrowNWeed production could be shifted temporarily to overtime so that the Zwinger orders could be produced on regular time. Current market prices are the best available estimates of future market prices.

Wesco’s standard markup policy for new products is 40% of the full manufacturing cost, including fixed manufacturing overhead. Calculate the price that Wesco, Inc., would quote Zwinger Nursery for each 35,000 pound lot of the new compound, assuming that it is to be treated as a new product and this pricing policy is followed.

Wesco Incorporated’s only product is a combination fertilizer/weedkiller called GrowNWeed. GrowNWeed is sold nationwide to retail nurseries and garden stores.

Zwinger Nursery plans to sell a similar fertilizer/weedkiller compound through its regional nursery chain under its own private label. Zwinger does not have manufacturing facilities of its own, so it has asked Wesco (and several other companies) to submit a bid for manufacturing and delivering a 27,000-pound order of the private brand compound to Zwinger. While the chemical composition of the Zwinger compound differs from that of GrowNWeed, the manufacturing processes are very similar.

The Zwinger compound would be produced in 1,000-pound lots. Each lot would require 33 direct labor-hours and the following chemicals:

The first three chemicals (AG-5, KL-2, and CW-7) are all used in the production of GrowNWeed. DF-6 was used in another compound that Wesco discontinued several months ago. The supply of DF-6 that Wesco had on hand when the other compound was discontinued was not discarded. Wesco could sell its supply of DF-6 at the prevailing market price less $0.10 per pound selling and handling expenses.

Wesco also has on hand a chemical called BH-3, which was manufactured for use in another product that is no longer produced. BH-3, which cannot be used in GrowNWeed, can be substituted for AG-5 on a one-for-one basis without affecting the quality of the Zwinger compound. The BH-3 in inventory has a salvage value of $560.

Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below:

The current direct labor wage rate is $10 per hour. The predetermined overhead rate is based on direct labor-hours (DLH). The predetermined overhead rate for the current year, based on a two-shift capacity with no overtime, is as follows:

Wesco’s production manager reports that the present equipment and facilities are adequate to manufacture the Zwinger compound. Therefore, the order would have no effect on total fixed manufacturing overhead costs. However, Wesco is within 130 hours of its two-shift capacity this month. Any additional hours beyond the 130 hours must be done in overtime. If need be, the Zwinger compound could be produced on regular time by shifting a portion of GrowNWeed production to overtime. Wesco’s direct labor wage rate for overtime is $15 per hour. There is no allowance for any overtime premium in the predetermined overhead rate.

Required:

1. Wesco has decided to submit a bid for the 27,000 pound order of Zwinger’s new compound. The order must be delivered by the end of the current month. Zwinger has indicated that this is a one-time order that will not be repeated. Calculate the lowest price that Wesco could bid for the order and still exactly cover its incremental manufacturing costs.

2. Refer to the original data. Assume that Zwinger Nursery plans to place regular orders for 27,000-pound lots of the new compound. Wesco expects the demand for GrowNWeed to remain strong. Therefore, the recurring orders from Zwinger would put Wesco over its two-shift capacity. However, production could be scheduled so that 60% of each Zwinger order could be completed during regular hours. As another option, some GrowNWeed production could be shifted temporarily to overtime so that the Zwinger orders could be produced on regular time. Current market prices are the best available estimates of future market prices.

Wesco’s standard markup policy for new products is 40% of the full manufacturing cost, including fixed manufacturing overhead. Calculate the price that Wesco, Inc., would quote Zwinger Nursery for each 27,000 pound lot of the new compound, assuming that it is to be treated as a new product and this pricing policy is followed.

PLEASE SHOW WORK

Stock A is selling for $40 per share, has an expected growth rate of 8 percent, is expected to pay a dividend of $4 per share next year, and its beta is estimated to be 2.00.The risk-free rate of interest is 4 percent and the market risk premium is 5 percent.

A.If the expected inflation rate is expected to return to 1 percent, but the market risk premium increases to 7 percent, what is the risk-free rate of interest?

What is the expected return on the market?4%; 11%

B. If the expected inflation rate is expected to remain at 1 percent and the market risk premium is 7 percent, is Stock A over, under, or correctly valued at a market price of $40?correctly valued

C. If the expected inflation rate is expected to remain at 1 percent and the market risk premium is 7 percent, what is Stock A’s equilibrium price?$40

(Gaddis) Programming Challenges 8. Search Function for Customer Accounts Program Program pág. 653, Cap. 11

Instruction: Add the exercise 1 to the program provided.

.1. Search Function for Customer Accounts Program Add a function to Programming Challenge 7 that allows the user to search the structure array for a particular customer’s account. It should accept part of the customer’s name as an argument and then search for an account with a name that matches it. All accounts that match should be displayed. If no account matches, a message saying so should be displayed.

#include<iostream>

using namespace::std;

C++ Program

#include"ArrayBag.h"

int main(){  

  ArrayBag<int> myArrayInteger;

  myArrayInteger.add(5);

  myArrayInteger.add(3);

  myArrayInteger.add(5);

  myArrayInteger.add(10);

  myArrayInteger.display();

  myArrayInteger.remove(5);

  myArrayInteger.display();

  myArrayInteger.add(3);

  myArrayInteger.add(3);

  cout << "El nuemo 3 esta "

<<myArrayInteger.getFrequencyOf(3)

<< "veces repetido en el arreglo\n";

if (myArrayInteger.contains(7)){

cout <"El numero 7 esta dentro del arreglo\n";

}

else{

  cout<<"El numero 7 no esta dentro del arreglo\n";

     }

system("pause");

return 0;

}//end main

Your colleague in a financial institution says that she has been tracking the movements
of the monthly returns of IBM and Yahoo stock returns. Using data on these returns over the last
10 years, she says that she has computed the COVARIANCE between these two returns series and
found that it is 0.00038. Since this COVARIANCE is so low and close to zero, she says that there
does not seem to be any linear association between the two return series.
You tell her that (choose one of the following)

(i) her reasoning is faulty because….. (must give reason)
(ii) her reasoning is correct because....(must give reason)

Write an app that works in both vertical and horizontal orientations. The app is a variety of the game of nim. Two players take turns removing identical objects from a set of objects. A player can remove one, two, or three objects at a time. The player who takes the last object loses. You can store the current number of objects in a TextView and get user input via an EditText. Include a Model. Generate randomly the starting number of objects, an integer between 10 and 20. The GUI should look nice in both orientations.

Glassworks and Clearsmooth compete in the local market for windshield repairs. The market size (total available in profits) is $10 million per year. Each firm can choose whether to advertise on local television. If a firm chooses to advertise in a given year, it costs that firm $3 million. If one firm advertises and the other doesn’t, then the former captures the whole market. If both firms advertise, they split the market 50:50. If both firms choose not to advertise, they also split the market 50:50.

1. Display this game in a game table in the space below:

2. What is the Cooperating strategy for each firm? __________________________________________________

3. What is the Defecting strategy for each firm? ____________________________________________________

4. Suppose the two firms know they will compete for just one year. List all Nash equilibria: ________________________________________________________________________________________

5. Suppose the firms play this game for five years in a row, and they know that both firms are quitting the business at the end of the five years. What is the subgame perfect equilibrium for this five-period game? Explain. _________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________

Suppose this game is played for five years in a row, and future profits are discounted with an interest rate of 20% per year.

6. What is the payoff for Glassworks if the Cooperating equilibrium prevails? ________________________________________________________________________________________ ________________________________________________________________________________________

7. Suppose Clearsmooth is playing a Grim Trigger strategy, and Glassworks decides to Defect in year 1. What is Glassworks’ payoff over the five year period? ________________________________________________________________________________________ ________________________________________________________________________________________

a. Should Glassworks Defect in year 1? _______________________________________________________

8. Suppose Clearsmooth is playing a Tit-for-tat strategy, and Glassworks decides to Defect in year 1, then return to Cooperate. What is Glassworks’ payoff over the five year period? ________________________________________________________________________________________ ________________________________________________________________________________________

a. Should Glassworks Defect in year 1? ___________________________________________________

Suppose this game is played for an indefinite period of time. 9. Below what interest rate should Glassworks refrain from Defecting if Clearsmooth is playing a Grim Trigger strategy? ________________________________________________________________________________________ ________________________________________________________________________________________

10. Below what interest rate should Glassworks refrain from Defecting if Clearsmooth is playing a Tit-for-tat strategy? ________________________________________________________________________________________ ________________________________________________________________________________________

Suppose there is a 25% probability (p = 0.25) that the game will continue for another period.

11. What is the effective rate of return? ___________________________________________________________ ________________________________________________________________________________________ a

. Should Glassworks Defect if Clearsmooth is playing a Grim Trigger strategy? Explain ________________________________________________________________________________________

b. Should Glassworks Defect if Clearsmooth is playing a Tit-for-tat strategy? Explain

Match the Weighted Average Cost of Capital to each of the scenarios given for ABC Corporation.

1. Target capital structure: 34% debt, 7% preferred stock and 59% common equity. Yield to maturity on bonds: 8.9%; Preferred stock dividend: $6.21 per year; current market price of preferred stock is $68.71. CAPM data for common equity: risk-free rate is 4.6%; market risk premium for the average stock is 4.2%; ABC has a beta of 1.69. ABC's marginal tax rate is 40%.

2. Target capital structure: 40% debt, 10% preferred stock and 50% common equity. Yield to maturity on bonds: 5.9%; Preferred stock dividend: $6.87 per year; current market price of preferred stock is $69.37. CAPM data for common equity: risk-free rate is 4.9%; market risk premium for the average stock is 4.1%; ABC has a beta of 1.96. ABC's marginal tax rate is 40%.

3. Target capital structure: 35% debt, 13% preferred stock and 52% common equity. Yield to maturity on bonds: 5.0%; Preferred stock dividend: $6.35 per year; current market price of preferred stock is $68.85. CAPM data for common equity: risk-free rate is 5.0%; market risk premium for the average stock is 3.0%; ABC has a beta of 2.35. ABC's marginal tax rate is 40%.

4. Target capital structure: 46% debt, 11% preferred stock and 43% common equity. Yield to maturity on bonds: 7.9%; Preferred stock dividend: $7.79 per year; current market price of preferred stock is $70.29. CAPM data for common equity: risk-free rate is 4.1%; market risk premium for the average stock is 5.5%; ABC has a beta of 1.87. ABC's marginal tax rate is 40%.

5. Target capital structure: 47% debt, 15% preferred stock and 38% common equity. Yield to maturity on bonds: 9.0%; Preferred stock dividend: $7.02 per year; current market price of preferred stock is $69.52. CAPM data for common equity: risk-free rate is 4.3%; market risk premium for the average stock is 11.0%; ABC has a beta of 0.80. ABC's marginal tax rate is 40%.

A.

8.51%

B.

9.03%

C.

9.35%

D.

8.87%

E.

9.59%

1. Consider two investments:
   1. Invest $1000 and receive $110 at the end of each month for the next 10 months.
   2. Invest $1200 and receives $130 at the end of each month for the next 10 months.

If this were your money, and you want to earn at least 12% interest on your money, which investment would you make, if any? What nominal interest rate do you earn on each investment?

(show all equations)

For a person that requires a10 percent annual return, which is better $1.00 today or $1.15 in one year?

Which is greater, the future value with compound interest of 4% or the future value with simple interest of 4%?

Which is greater, when 4% interest is compounded more than once a year, or 4% per year?

You have the right to receive $1000 in five years. Is the present value higher when the interest rate is 4% or when the interest rate is 8%.

If you want to know how long it will take to convert $100 to $400 at 8% interest, what type of problem is this and what function would you use?

If you want to know what you will have in 5 years at 8% if you invest $100 now, what type of problem is this and what function would you use?

If you want to know how much you need today to have $400 in 5 years at 8%, what type of problem is this and what function would you use?

If you want to know what rate of return is necessary to convert $200 to $600 over a 4 year period, what type of problem is this and what function would you use?

What is the difference between an ordinary annuity and an annuity due?

What is a perpetuity and how would you find the value of a perpetuity?

If small amounts of money occur before one large amount of money, what type of problem is this?

If you buy a house and take out a 5% mortgage and make payments over the next 30 years, what type of problem is this?

Loan A has a $100,000 borrowed at 10% for 10 years. Loan B has $100,000 borrowed at 11% for 10 years. Which loan will have the higher monthly payment?

Loan A has a $100,000 borrowed at 10% for 7 years. Loan B has $100,000 borrowed at 10% for 10 years. Which loan will have the higher monthly payment?

Tom puts $500 into a savings account for 20 years and earns 10% interest. Jerry puts $600 into a savings account for 20 years and earns 10% interest. Who has the higher future value?

Tom puts $500 into a savings account for 20 years and earns 8% interest. Jerry puts $500 into a savings account for 20 years and earns 10% interest. Who has the higher future value?

Tom puts $500 into a savings account for 10 years and earns 10% interest. Jerry puts $500 into a savings account for 10 years and earns 10% interest. Who has the higher future value?

18. Jesse just won the state lottery. He has been given the option of receiving either $5 million a year for the next 30 years, with the first payment paid today. Is this a present value or future value of an annuity due?

What is the difference between the coupon rate and the market rate or yield?

When, in a bond’s life, would the market rate (or yield) equal the coupon rate?

Why do these rates often diverge over time?

Do most corporations pay semi-annual interest payments or annual payments?

Do debtholders share in the upside of corporations or do they just get their interest payments and face value back (regardless of how well the company does in the future)?

What happens to bondholders when the company does poorly in the future and cannot make the interest payments?

Are all bondholders treated the same or do some bondholders have priority over others.

What is a debenture?

What are some typical secured bonds?

What is a mortgage?  

Would investors want higher interest payments (higher yields) or lower interest payments (lower yields).

Would Harley Davidson or Walmart pay a higher interest rate on a 20 year bond?

What influence does the number of years to maturity have on the risk and consequently the yield of a bond?

What do you call the agreement that delineates what the corporations will do during the life of the bond?

What is a sinking fund?

What are the two most common protective covenants in most corporate bonds?

Are most corporate bonds callable or not callable?

Is the call option good for the corporation or good for the investor?

When do corporations call their bonds when interest rates go up or when interest rates go down?

Who are the two largest credit rating agencies for corporate bonds?

What risk is the rating agencies rating when they rate bonds?

Securities that are rating with the top four credit ratings are considered what?

What are the inferior rated (less than the top four ratings) bonds called?

Are most bonds traded like stock or bought and sold (or held to maturity) through investment bankers?

PROBLEMS PORTION OF THE TEST:

Problem Section:

If an investment is expected to return of 11.75 percent in the future, a $200,000 investment will grow to how much in 25 years?

The answer is _______________.

To intend to buy a retirement home in 18 years and you expect that you will need $370,000 at the end of 18 years. If funds can be invested at an effective return of 7 percent a year, how much must you invest today to have the needed amount?

The amount needed to invest today is _________.

How long does it take to have a million dollars if you have $50,000 today and can earn 9% annually?

The number of years is _______________.

If you received a 18 cent dividend 12 years ago and you now receive a 77 cent dividend, how much has the dividend grown over this time period? (or at what rate of return has this dividend grown)?

The growth rate is _______________.

You decide to max-out your annual investment into your Individual Retirement Account and invest $5,500 at the end of each year for the next 32 years. Because you were frightened by the recent two market declines in the last 17 years, you decide to invest in a bond portfolio expected to earn only 4.8% annually (assume annual interest payments at the end of the year). How much will you have at the end of this investment period?

The answer is _______________.

What is the answer if you put the money into the account at the beginning of the year instead of the end of the year _________.

You decide to max-out your annual investment into your Individual Retirement Account and invest $5,500 at the end of each year for the next 32 years. If you are NOT frightened by the recent two market declines and decide to invest in a large stock portfolio, you expect to earn 10% annually. How much will you have at the end of this investment period?

The answer is _______________.

What is the answer if you put the money into the account at the beginning of the year instead of the end of the year _________.

You want $1,750,000 to upgrade your store in 15 years. The treasurer wants to make equal payments at the end of each year into a fund for the purpose of accumulating this amount. If the fund can earn an effective annual return of 8 percent, how much must the company invest at the end of each year?

The annual payment is _______________.

You borrowed $342,000 for the purchase of your new home. This loan carries an annual percentage rate of 4.9 percent. It will be paid off through equal monthly installments, including both principal and interest, over a 30-year period. What is the monthly payment required?

The monthly payment is _______________.

A credit card company runs an ad quoting a nominal interest rate of 29 percent on charges. What is the effective interest rate if interest is compounded quarterly? monthly?

The effective annual rate is ________if compounded quarterly and _______ if compounded monthly.

You plan to retire in 37 years and can invest to earn 8.5 percent. You estimate that you will need $102,000 at the end of each year for an estimated 16 years after retirement, and you expect to earn 6.5 percent during those retirement years. How much do you need to set aside at the end of each year to accumulate the money necessary for your retirement? (Assume year-end cash flows.)

I will need this much at retirement _____________and will need to set aside ___________per year (at the end of each year.

Using the no growth perpetuity formula, assume that you can receive $19,000 per year forever and that your cost of money is 8%. What is this opportunity worth today?

The opportunity is worth _______________.

Using the constant growth perpetuity formula, assume that you will receive $19,000 at the end of the first year this cash flow will grow 4% annually forever after that. With a cost of money of 9 percent, what is this opportunity worth today?

The opportunity is worth _______________.

You start a business and expect the following cash flows

How much is this series of cash flows worth today if you can earn 8% elsewhere on investments with similar risk? __________

What would this series be worth is the risk was higher and the required return is 12% instead of 8%?   _____________

B Corporation has $1000 par value bonds with 7 years left to maturity, a stated annual coupon rate of 4.5 percent (with annual interest payments).

What are these bonds worth today if the required market rate of return is 6 percent? _________

What are these bonds worth today if the required market rate of return is 5 percent? __________

What are these bonds worth today if the required market rate of return is 3 percent? __________

What is the relationship between the coupon rate, changes in the market rate and the value of these bonds?

D Corporation has three bonds outstanding. All three have a coupon rate of 7 percent and a $1000 par value. The first bond has one year left to maturity. The second bond has 4 years left to maturity. The last bond has 8 years left to maturity. Assume for simplicity that the market rate for all three bonds is now 4 percent.

What is the value for the first bond with one year left to maturity? ___________

What is the value for the second bond with four years left to maturity? ______________

What is the value for the first bond with eight years left to maturity? ___________

Assuming the same stated interest rate, in an environment of increasing interest rates which bonds will decrease in value the most -- the one with a longer term (duration/maturity) or shorter term (duration/maturity)?

H Corporation has a bond outstanding. It has a coupon rate of 8 percent and a $1000 par value. The bond has 5 years left to maturity but could be called after three years for $1000 plus a call premium of $50. The bond is selling for $1060.

The yield to maturity on this bond is __________The yield to call on this bond is _________