The accompanying data are the amounts of fat (in ounces of fat per one hundred ounces of meat) found in samples of two types of meat products. The fat contents are normally distributed and have equal variances for the two meat types. Do the meats have different fat contents? That is, test the null hypothesis that the means are equal vs. the alternative that they are not equal. Use alpha = 0.05. Meat 1 - 30 26 30 19 25 37 27 38 26 31 Meat 2 - 40 34 28 29 26 36 28 37 35 42

Consider two stocks, D and E, with expected returns and volatilities given by E[rD]=15%, sD=20%, E[rE]=20%, sE=40%. The riskless rate is 2%. Consider now two portfolios P and Q with the following expected returns and standard deviations: E[rP]=16.2%, sP=18.77% and E[rQ]=16%, sQ=19.23%. These portfolios are formed by investing in stocks D and E and the riskless asset. It is known that one of these portfolios is a tangency portfolio for the efficient frontier constructed by investing in stocks D and E and the riskless asset. Determine the tangency portfolio and its portfolio weights.

Variable Costing Income Statement for a Service Company

East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April are as follows:

Operating statistics from the management information system reveal the following for April:

a. Prepare a contribution margin by route report for East Coast Railroad Company for the month of April. Calculate the contribution margin ratio, rounded to one decimal place.

b. Evaluate the route performance of the railroad using the report in (a).

The route performs significantly worse than do the other two routes. A close examination of the operating statistics indicates that this route runs railcars, combined with fairly total mileage. This combination suggests that the railroad is running many trains on the railroad. That is, the railroad’s profitability is sensitive to the size, or length, of the train in railcar terms.

Problem 1

Bill can produce either tables or chairs. Bill can work up to 10 hours a day. His production possibilities are given in the table below:

1. Construct the production possibilities frontier (PPF) for Bill. Put tables on the Horizontal axis and chairs on the vertical axis.
2. What is Bill’s opportunity cost of producing one additional table?
3. What is Bill’s opportunity cost of producing one additional chair?
4. Currently Bill is producing 20 tables and 40 chairs.

1. Is this allocation of resources efficient? Why?
2. Show this allocation on the graph and advise Bill how he can be more efficient.

Problem 2

Suppose the market for corn is given by the following equations for supply and demand:

            QS = 2p − 2

            QD = 13 − p

where Q is the quantity in millions of bushels per year and p is the price.

1. Calculate the equilibrium price and quantity.
2. Sketch the supply and demand curves on a graph indicating the equilibrium quantity and price.
3. Calculate the price-elasticity of demand and supply at the equilibrium price/quantity.

4. The government judges the market price is under expectations and announces a price floor equal to $7 per bushel.

1. Would there be a surplus or a shortage?
2. What would be the quantity of excess supply or demand that results?
3. Use the graph to show you results.

Problem 1

Bill can produce either tables or chairs. Bill can work up to 10 hours a day. His production possibilities are given in the table below:

1. Construct the production possibilities frontier (PPF) for Bill. Put tables on the Horizontal axis and chairs on the vertical axis.
2. What is Bill’s opportunity cost of producing one additional table?
3. What is Bill’s opportunity cost of producing one additional chair?
4. Currently Bill is producing 20 tables and 40 chairs.

1. Is this allocation of resources efficient? Why?
2. Show this allocation on the graph and advise Bill how he can be more efficient.

Problem 2

Suppose the market for corn is given by the following equations for supply and demand:

            QS = 2p − 2

            QD = 13 − p

where Q is the quantity in millions of bushels per year and p is the price.

1. Calculate the equilibrium price and quantity.
2. Sketch the supply and demand curves on a graph indicating the equilibrium quantity and price.
3. Calculate the price-elasticity of demand and supply at the equilibrium price/quantity.

4. The government judges the market price is under expectations and announces a price floor equal to $7 per bushel.

1. Would there be a surplus or a shortage?
2. What would be the quantity of excess supply or demand that results?
3. Use the graph to show you results.

1. The bonds issued by Jensen & Son bear a 6 percent coupon, payable semiannually. The bond matures in 8 years and has a $1,000 face value. Currently, the bond sells at par. What is the yield to maturity?

2. A General Co. bond has an 8 percent coupon and pays interest annually. The face value is $1,000 and the current market price is $1,020.50. The bond matures in 20 years. What is the yield to maturity?

3. You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months ( semiannual). If your nominal annual required rate of return is 10 percent with semiannual payments, how much should you be willing to pay for this bond?

4. The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows as follows:

Years 1 through 4       $30,000 per year

Years 5 through 9       $35,000 per year

Year 10                         $40,000 per year

This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What is the NPV for this investment?

5. Your firm wants to save $250,000 to buy some new equipment three years from now. The plan is to set aside an equal amount of money on the first day of each year starting today. The firm can earn a 4.7 percent rate of return. How much does the firm have to save each year to achieve their goal?

6. Your great-aunt left you an inheritance in the form of a trust. The trust agreement states that you are to receive $2,500 on the first day of each year, starting immediately and continuing for fifty years. What is the value of this inheritance today if the applicable discount rate is 6.35 percent?

7. Your car dealer is willing to lease you a new car for $299 a month for 60 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.9 percent, what is the current value of the lease?

8. Toni adds $3,000 to her savings on the first day of each year. Tim adds $3,000 to his savings on the last day of each year. They both earn a 9 percent rate of return. What is the difference in their savings account balances at the end of thirty years?

9. Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,000, $9,000, and $15,000 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a 14 percent rate of return is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?

10. You have some property for sale and have received two offers. The first offer is for $189,000 today in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years from today. If the applicable discount rate is 8.75 percent, which offer should you accept and why

11. On December 1, you borrow $210,000 to buy a house. The mortgage rate is 8.25 percent. The loan is to be repaid in equal monthly payments over 20 years. The first payment is due on January 1. Which one of the following statements is true assuming that you repay the loan as agreed?

12. What is the net present value of a project that has an initial cash outflow of $12,670 and the following cash inflows? The required return is 11.5 percent.

Year     Cash Inflows

                                                   1          $4,375

                                                   2          $      0

                                                   3          $8,750

                                                   4          $4,100

13. You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is 8 p ercent rather than 11 percent? If so, what should you do?

                                    Year                 Project A          Project B

                                       0                   -$240,000        -$198,000

                                       1                   $           0        $110,800

                                       2                   $         0         $ 82,500

                                       3                   $325,000        $ 45,000

14. It will cost $2,600 to acquire a small ice cream cart. Cart sales are expected to be $1,400 a year for three years. After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart?

15. Yancy is considering a project which will produce cash inflows of $900 a year for 4 years. The project has a 9 percent required rate of return and an initial cost of $2,800. What is the payback period?

16. Braun Industries is considering an investment project which has the following cash flows:

                  Year              Cash Flow

                  0                -$1,000

                  1                     400

                  2                     300

                  3                     500

                  4                     400

The company's cost of funds is 10 percent. What is the project's payback, internal rate of return, and net present value?

17. As the director of capital budgeting for Denver Corporation, you are evaluating two mutually exclusive projects with the following net cash flows:

Project X Project Z

            Year        Cash Flow Cash Flow

            0          -$100,000 -$100,000

            1             50,000 10,000

            2             40,000 30,000

            3             30,000 40,000

            4             10,000 60,000

If Denver's cost of capital is 15 percent, which project would you choose?

18. Lucinda Diamanti is 10 years old today (August 15th) and while all she’s interested in is her new bike, her parents Mr. & Mrs. Diamanti are considering how they will pay for her college education beginning in 8 years. They decide to set up a meeting with their financial adviser Cindy Morgan to discuss an education savings plan. During the meeting, the Diamanti’s inform Cindy that they have $8,000 they can use to begin the savings plan, and from what they can determine, Lucinda will require 4 years to complete her undergraduate degree in molecular biology. Cindy consults a reputable college reference to see that tuition costs are currently estimated at $32,000 per year and are expected to grow at 4% each year for the foreseeable future. The Diamanti’s are concerned that they won’t have enough money and ask Cindy how to make sure they have enough to completely pay for Lucinda’s undergraduate education. The Diamanti’s inform Cindy that they want to make deposits into the education savings plan on an annual basis until Lucinda’s first year in college at which point they will stop making contributions. Cindy tells them they can earn 8% annual interest on their savings plan. Your job to answer the following two questions (You may assume there are 8 years between today and the beginning of Lucinda’s first day in college):

Assuming the estimates on tuition costs are correct, how much money needs to be in the account when Lucinda begins college in 8 years to fund 4 years of college? Round your answer to a whole number.

19. How much money do the Diamanti’s need to deposit annually in order to reach their goal to fund Lucinda’s education fully? Remember that the  Diamanti’s have $8,000 to invest today. Round your answer to a whole number.

20. Please use the following facts to analyze this nest two questions:

Assume you just received a bill for services you and have the following two payment options:

Option 1:

Pay the entire bill of $600 now

Or

Option 2:

Pay:

$130 now

    And

$130 for each of the next 4 months

What annual interest rate (APR) are you paying if you choose Option 2? Assume monthly compounding. Round you answer to the nearest two decimal points. Do not use $, commas or %. For example, 25.34% would be entered as 25.34.

21. What Effective Annual Rate are you paying if you choose Option 2? Assume monthly compounding. Round you answer to the nearest two decimal points. Do not use $, commas or %. For example, 25.34% would be entered as 25.34.

22. Please use the following facts to analyze the next two questions:

What is the NPV of the lease? Round you answer to the nearest whole number. Do not use $, commas, or decimal points and enter as a positive number. For example, -$34,567.50 would be entered as 34568.

23. What would it cost you to buy the car today if you were paying cash? Round you answer to the nearest whole number. Do not use $, commas, or decimal points and enter as a positive number. For example, $34,567.50 would be entered as 34568.

Given two independent random samples with the following results

: n1=16

x‾1=92

s1=24   

n2=12

x‾2=130

s2=31

Use this data to find the 80% confidence interval for the true difference between the population means. Assume that the population variances are equal and that the two populations are normally distributed.

Step 1 of 3: Find the point estimate that should be used in constructing the confidence interval.

Step 2 of 3: Find the margin of error to be used in constructing the confidence interval. Round your answer to six decimal places.

Step 3 of 3: Construct the 80% confidence interval. Round your answers to the nearest whole number.

1. Baseball America has noticed the number of homeruns has been increasing in recent years in the MLB. They want to develop a 95% confidence interval that captures the true home run percentage. Home run percentage is defined as the number of home runs per 100 at bats. To do so, they randomly selected 64 current MLB players and calculated their homeruns per at bat for the previous year, and obtained a sample mean and sample standard deviation of 2.2 and 1.7, respectively.

a. Compute a 95% confidence interval for the population mean ? of the home run rate for all MLB players. Interpret with context to the problem.

b. The home run percentages for three MLB players are:

• Player 1: Primetime Peanuts: 2.1

• Player 2: Spleens “No Pop” McGillicuddy: 4

• Player 3: Big Dog Lebowski: 1.5

Assess the confidence interval you calculated and describe how the home run rate for these three players compare to the interval calculated for the population mean.


c. If the confidence level was increased to 99%, would the interval be wider or narrower? Why?

d. Before collecting any data, Baseball America wants to achieve a maximum bound on error of 0.3. They suspect the range of home run rates to be 1.5 to 8. How large a sample should be used to be 95% confident of achieving this level of accuracy?

PLEASE SHOW ALL FORMULA AND WORK.

THANK YOU :)