The following financial information was presented to potential investors for the launch of a new high-end portable barbecue:

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Use the random numbers .09, .16, .89, .23, .56, .32, .26, and .78 to simulate eight trials. What is the net profit for each trial?

What is the average net profit?

Copy your Excel table(s) for the simulation.

1. If a firm has two groups of customers whose elasticities of demand are different, how does it determine what prices to charge each group?

a. Sets the price (P) equal to marginal revenue (MR) equal to marginal cost (MC) in each market.

b. Sets the MR in each market equal to the firm’s MC and sets the price for each group by finding the prices on each group’s demand curve above where MR=MC.

c. Sets MC equal to P in each market.

d. None of the above.

1. On January 3, 2017, Pecan Company acquires $100,000 of Pie Company's 10-year, 10% bonds at a price of $103,220 to yield 9.5%. Interest is payable each June 30 and December 31. The bonds are classified as held to maturity.

a) Assuming that Pecan Company uses the effective interest method, what is the amount of interest revenue that would be recognized in 2018 related to these bonds?

b) Assuming that Pecan Company uses the straight line method, what is the amount of premium amortization that would be recognized in 2019 related to these bonds?

Doyle Company issued $420,000 of 10-year, 6 percent bonds on January 1, Year 2. The bonds were issued at face value. Interest is payable in cash on December 31 of each year. Doyle immediately invested the proceeds from the bond issue in land. The land was leased for an annual $57,500 of cash revenue, which was collected on December 31 of each year, beginning December 31, Year 2.

b. Prepare the income statement, balance sheet, and statement of cash flows for Year 2 and Year 3.

a) Do the following production functions exhibit constant returns to scale, increasing returns to scale, or decreasing returns to scale? For full credit, show why.

1) Q= 10L^ 0.5K^0.3

2) Q= 10L^0.5K^0.5

3) Q= 10L^0.5K^0.7

4) Q= min{K, L}

b) Which objects pin down a_LC and a_KC? Explain carefully.

c) Why does labor being mobile across sectors automatically imply revenue maximization for firms? Explain carefully.

PROVINCIAL INCOME ALLOCATION

WGH Operations LTD. (WHG) has permanent establishments in 4 Canadian provinces.

The breakdown of the revenues and the salaries attributable to each permanent establishment is as follows:

WGH had Taxable Income of $25,000,000 in 2019.

REQUIRED:   Determine the amount of Taxable Income to allocate to each province.

Please do it by type not pics.

1.$2,000,000 ten year note with 10% interest. The market rate is 8.5%. The interest payments are made monthly and interest compounds monthly.

·         How much cash was received in year 1?    

·         What was the amortized amount of the premium in year 2 - month 3?      

·         How much interest revenue was recognized in year 3 - month 4?

·         What is the carrying value of the note at the end of year 4?          

·         What is the balance of the discount account correlated with this note at the end of year 3?

5. Assume the demand for plastic surgery is price inelastic. Are the following statements true of false? Explain.

a. When the price of plastic surgery increases, the number of operations decreases.

b. The percentage change in the price of plastic surgery is less than the percentage change in quantity demanded.

c. Changes in the price of plastic surgery do not effect the number of operations.

d. Quantity demanded is quite responsive to changes in price.

e. If more plastic surgery is performed, expenditures on plastic surgery will decrease.

f. The marginal revenue of another operationis negative.

2 Taxes: Suppose liquor stores are required to pay a $5 tax on each case of beer sold.

a. Illustrate this policy, make sure to indicate consumer surplus, producer surplus, government revenue and deadweight loss.

b. In a separate diagram, illustrate the tax burden on consumers and the tax burden on producers due to this policy.

c. Suppose the supply of beer is relatively elastic while the demand is relatively inelastic, which side of the market will bear the larger tax incidence (i.e. pay a larger portion of the tax)?