Q1- Katherine, a biology major at the University of Texas, is a pretender. She wants to run for office one day and pretends that she cares about the elderly. She wants to provide meals to elderly care centers, and in order to do that she needs refrigerators to keep the food in a cold and dry environment. She has two option for mobile refrigerators. Applying annual cash flow techniques (EAUW), and considering a MARR of 8%, which option should she pick? please explain all steps and what equations are use thank you.

Professor Fair believes extra time does not improve grades on exams. He randomly divided a group of 300 students into two groups and gave them all the same test. One group had exactly 1 hour in which to finish the test, and the other group could stay as long as desired. The results follow. Test at the 0.01 level of significance that time to do a test and test results are independent.

A. What is the null hypothesis?

B. What is the alternative hypothesis?

C. What distribution are you using?

D. What test are you running?

E. What is your conclusion?

1- The BCG matrix is used for what purpose?

to find the target markets where firms can position one or more of their product together(co- branding).

to segment the company products into more targeted groups

to identify the products in a firms portfolio that they should invest in

to make an easy chart for marketers to understand

2- new product failure ranges between:

15-30%

50-75%

30-50%

40-60%

A researcher interviews 50 employees of a large manufacturer and collects data on each worker’s hourly wage (Wage), years of higher education (EDUC), experience (EXPER), and age (AGE). The data is shown below; the data set can also be found on the text website; labeled Hourly Wage. You will be examining the relationships between the following variables: wage and any relationship of this variable to 1) education and 2) experience. Must use either Minitab or Excel to develop both the scatter plots and find the correlation coefficients.

Please use either Minitab or Excel to develop both the scatter plots and find the correlation coefficients.



A. Which variable is the response variable? Which variables are the explanatory variables?

B. Develop a scatter plot comparing wage to education. Interpret the plot.

C. Develop a scatter plot comparing wage to experience. Interpret the plot.

D. Compute the correlation coefficients for wage and education and wage and experience. Then perform a hypothesis test for both correlations to determine if the correlations are statistically significant. Be sure to show the null and alternative hypotheses, decision rule, decisions and conclusions. Use alpha = .05. Note: Since the hypotheses and decision rule are the same for both tests, only need to write those steps once.  

E. Which of the explanatory variables provides the best predictor of the response variable? Support your response by citing both the scatter plot and correlation test.

A researcher interviews 50 employees of a large manufacturer and collects data on each worker’s hourly wage (Wage), years of higher education (EDUC), experience (EXPER), and age (AGE). The data is shown below; the data set can also be found on the text website; labeled Hourly Wage. You will be examining the relationships between the following variables: wage and any relationship of this variable to 1) education and 2) experience. Must use either Minitab or Excel to develop both the scatter plots and find the correlation coefficients.

Please use either Minitab or Excel to develop both the scatter plots and find the correlation coefficients.



A. Which variable is the response variable? Which variables are the explanatory variables?

B. Develop a scatter plot comparing wage to education. Interpret the plot.

C. Develop a scatter plot comparing wage to experience. Interpret the plot.

D. Compute the correlation coefficients for wage and education and wage and experience. Then perform a hypothesis test for both correlations to determine if the correlations are statistically significant. Be sure to show the null and alternative hypotheses, decision rule, decisions and conclusions. Use alpha = .05. Note: Since the hypotheses and decision rule are the same for both tests, only need to write those steps once.  

E. Which of the explanatory variables provides the best predictor of the response variable? Support your response by citing both the scatter plot and correlation test.

Zetta Company has unleveraged beta 1.3, risk free rate 7% and market risk premium for 5%. The applicable tax rate is 40%. The company needs to finance its new project under two different scenarios.

Scenario Debt ratio Interest rate EPS
1 0% 0% $2.40
2 30% 10% $3.40

6. WACC under scenario number 2 equals to *

a)12.42%

b)11.55%

c)13.50%

d)14.24%

e)None of the above

7. The price per share under scenario number 2 equals to *

a)$28.50

b)$26.50

c)$24.30

d)$22.40

e)None of the above

8. Which of the following statements is correct? *

a)The optimal capital structure refers to the debt ratio that can minimize the WACC and maximize the share price.

b)The optimal capital structure refers to the debt ratio that can maximize the WACC and minimize the share price.

c)The optimal capital structure refers to the debt ratio that can maximize the WACC and maximize the share price.

d)The optimal capital structure refers to the debt ratio that can minimize the WACC and minimize the share price.

e)None of the above

Zetta Company has unleveraged beta 1.3, risk free rate 7% and market risk premium for 5%. The applicable tax rate is 40%. The company needs to finance its new project under two different scenarios.

Scenario Debt ratio Interest rate EPS
1 0% 0% $2.40
2 30% 10% $3.40

6. WACC under scenario number 2 equals to *

a)12.42%

b)11.55%

c)13.50%

d)14.24%

e)None of the above

7. The price per share under scenario number 2 equals to *

a)$28.50

b)$26.50

c)$24.30

d)$22.40

e)None of the above

8. Which of the following statements is correct? *

a)The optimal capital structure refers to the debt ratio that can minimize the WACC and maximize the share price.

b)The optimal capital structure refers to the debt ratio that can maximize the WACC and minimize the share price.

c)The optimal capital structure refers to the debt ratio that can maximize the WACC and maximize the share price.

d)The optimal capital structure refers to the debt ratio that can minimize the WACC and minimize the share price.

e)None of the above

Question 5 (25 marks / Risk, Return and CAPM)
(Each of the following parts is independent.)
(a) According to the Capital Asset Pricing theory, what return would be required by an investor whose portfolio is made up of 40% of the market portfolio (m) and 60% of Treasury bills (i.e. risk-free asset)? Assume the risk-free rate is 3% and the market risk premium is 7%?  

(b) You are considering investing in the following two stocks. The risk-free rate is 7 percent and the market risk premium is 8 percent.

Stock ,Price Today , Expected Price in 1 year, Expected Dividend in 1 year, Beta
X $20 $22 $2.00 1.0
Y $30 $32 $1.78 0.9

i) Compute the expected and required return (using CAPM) on each stock.   
ii) Which asset is worth investing? Support your answer with calculations.     

(c) Which pair of stocks used to form a 2-asset portfolio would have the greatest diversification effect for the portfolio? Briefly explain.
                   
                            Correlation
Stocks A & B            -0.66
Stocks A & C            -0.42
Stocks A & D                0
Stocks A & E               0.75
         
(d) Explain the terms systematic risk and unsystematic risk and their importance in determining investment return.          

(Each of the following parts is independent.)

1. According to the Capital Asset Pricing theory, what return would be required by an investor whose portfolio is made up of 40% of the market portfolio (m) and 60% of Treasury bills (i.e. risk-free asset)?  Assume the risk-free rate is 3% and the market risk premium is 7%?

2. You are considering investing in the following two stocks. The risk-free rate is 7 percent and the market risk premium is 8 percent.

1. Compute the expected and required return (using CAPM) on each stock.
2. Which asset is worth investing? Support your answer with calculations.

3. Which pair of stocks used to form a 2-asset portfolio would have the greatest diversification effect for the portfolio? Briefly explain.

(d)   Explain the terms systematic risk and unsystematic risk and their importance in determining investment return.

Please provide stepping for all if possible, much appreciated.