Question 9

One of the key early tests of Einstein's General Theory of Relativity was

the bending of the path of starlight and resulting apparent shift in the position of stars because of the Sun's mass.

sending a twin in a spaceship to the nearest star and back at a high Lorentz factor.

the Michelson-Morley experiment.

measuring the time dilation effect from gas falling into a black hole.

Question 10

According to General Relativity,

Group of answer choices

you can think of space as "flowing in" towards massive objects.

space-time has curvature.

time runs fastest far away from massive objects.

the path of light is bent when photons move through curved space.

All of these choices are correct.

None of these choices is correct.

Question 11

You are in a rocket ship deep in space and are about to pass a fellow traveler going the opposite direction at 99.9% the speed of light. You think her clock is _________ than yours and she thinks that your clock is __________ than hers.

faster; faster

faster; slower

slower; slower

slower; faster

Question 12

By observing a _____________ in 1919, astronomers were able to test the prediction that a massive object bends the path taken by light.

Group of answer choices

transit of the planet Mercury across the Sun

transit of the planet Venus across the Sun

supernova

total solar eclipse

total lunar eclipse

Question 13

The twin paradox is

a hypothetical experiment that demonstrates that special relativity is wrong

a hypothetical situation that seemingly presents a paradox but is actually resolved by a clearer understanding of the situation

a real experiment that demonstrates that special relativity is wrong

a real experiment that is consistent with the predictions made by special relativity

Question 14

Within special relativity, time dilation refers to ...

the slowing of the passage of time due to motion near the speed of light.

the speeding up of the passage of time due to motion near the speed of light.

the gradual slowing of the rotation of pulsars.

the Doppler shift of light.

Question 15

The alteration of our perception of space and time due to motion near the speed of light is described by

Group of answer choices

special relativity

general relativity

Newton's laws of motion

Galileo's law of inertia

Question 16

The curving of space by a massive object is described by which theory?

Group of answer choices

special relativity

general relativity

Newton's laws of motion

Galileo's law of inertia

Case: Cost Structures for Global Shippers Inc.

Management from Global Shippers Inc, an international shipping business, is in the process of assessing the choice between two different cost structures for the business. Option A has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option B has the opposite—relatively lower variable costs in its cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision:

Management wants you to write a professional report, answering the following questions:

Questions

Case: Cost Structures for Global Shippers Inc.

Management from Global Shippers Inc, an international shipping business, is in the process of assessing the choice between two different cost structures for the business. Option A has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option B has the opposite—relatively lower variable costs in its cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision:

Management wants you to write a professional report, answering the following questions:

Questions

1) What is the break-even point, in terms of volume (i.e., number of shipments per year), for Option A? Option B?

(2) How many shipments would have to be made under Option A to produce operating income of $30,000 for an annual period?

(3) How many shipments per year would have to be made under Option A to produce an operating margin equal to 9% of sales revenue?  

(4) How many shipments are required under Option B to produce net income of $180,000 per year, given a corporate tax rate of 40%?

(5) Assume that for the coming year total fixed costs are expected to increase by 15% for each of the two options. What is the new break-even point, in terms of number of shipments, for each option? By what percentage did the break-even point change for each case? How do these figures compare to the percentage increase in budgeted fixed costs?

(6) Assume an average income-tax rate of 20%. What volume (number of shipments) would be needed to generate net income of 5% of revenue for each option?  

(7) Which option do you think is the more profitable one for this business? Explain.

(8) Which option do you consider to be more risky to the business? Explain (calculate degree of operating leverage to help answer this question).

A company is thinking about changing its credit policy to attract customers away from competitors. The present policy calls for a 1.37/10, net 30 cash discount. The new policy would call for a 3.48/10, net 50 cash discount. Currently, 21% of its customers are taking the discount, and it is anticipated that this number would go up to 60% with the new discount policy. It is further anticipated that annual sales would increase from a level of $427k to $686k as a result of the change in the cash discount policy. The average inventory carried by the firm is based on an EOQ. Assume sales increase from 16k to 21.3k units. The ordering cost for each order is $200 and the carrying cost per unit is $1.82 – these values will not change with the discount. Each unit in inventory has an average cost of $11. Cost of goods sold equates to 69% of net sales, general and administrative expenses are 16% of net sales, and interest payments of 14% will only be necessary for the increase in the accounts receivable and inventory balances*(see information below). Taxes will be 36% of before-tax income. Note: The term “k” is used to represent thousands (× $1,000).

Required: Calculate the percentage in earnings after taxes (EAT) between the current policy (before the discount) and the new policy (after the discount).

1) Rainbow Ltd. manufactures two industrial compounds. In the month of May, 15,000 litres of direct material costing $160,000 were processed at a cost of $400,000. The joint process yielded 16,000 containers of a compound known as Jarlon and 4,000 containers of a compound known as Kharton. The respective selling prices of Jarlon and Kharton are $38 and $58. Both products may be processed further. Jarlon may be processed into Jaxton at an incremental cost of $8 per jar of the final product while Kharton may be processed into Kraxton at an additional cost of $32 per jar of the final product. The volume of jars of the final product are: 12,000 and 3,000 for Jaxton and Kraxton respectively. The selling price of Jaxton is $48 per jar. The selling price of Kraxton is $102 per jar.

A) Using the sales value at splitoff method, the percentage weightings for joint cost allocations for Jarlon and Kharton respectively are?

B) Using the sales value at splitoff, the joint costs allocated to Jarlon would be?

C) Using the sales value at splitoff method, the joint costs allocated to Kharton would be?

D) Assuming Cranbrook uses the sales value at splitoff method and 2,000 containers of Jarlon and 75 containers of Kharton are unsold at the end of the period, Cranbrook would report ending inventory of?

Suppose that you are again working for your state government but that instead of working on health and human services issues, you are running the highway department. Your state turnpike is in poor shape, with large potholes and crumbling shoulders that slow down traffic and pose an accident risk. You have been charged by the governor with the task of considering whether the state should invest in repairing this road assuming it will last for 100 years.

The data for the project is indicated in the Table below. Note that all values are in nominal dollar terms (actual market values).

Benefit and Cost:                        

Making improvements will require the following inputs:

1. Initial cost: 1 million bags of asphalt, $100/bag;
2. Initial cost: 1 million hours of construction labor (500 workers for 2,000 hours each), at $20/hour
3. $10 million per year in the future for maintenance costs

There are two main benefits to these road improvements:

1. Driving time for producers (trucks) and consumers will be reduced by 500,000 hours per year. Hourly value is $19/hour.
2. The road will be safer, resulting in five fewer fatalities per year. The estimated life value (using wages) is $8.7 million/life.

Question 1: What is the net present value of the investment at 5%, 7%, and 10%? Should the project be undertaken?

Question 2: Now assume that the maintenance cost is increasing at the rate of 5% per year in nominal terms. Hourly value of the reduced driving time is rising at 2% per year in nominal terms. Life values increase by 1% per year in nominal terms. The inflation rate is 2% per annum. All annual values accrue at the end of each year. Assume the nominal discount rate is 7%.

1. What is the real discount rate?
2. What is the Net Annual Worth (annualized net benefit) of this project?
3. What is the net present value? Should the project be undertaken?

Suppose that you are working for the state highway department. The state turnpike is in poor shape, with large potholes and crumbling shoulders that slow down traffic and pose an accident risk. The governor has charged you with the task of considering whether the state should invest in repairing this road, assuming it will last for 100 years.

The data for the project is indicated in the Table below. Note that all values are in nominal dollar terms (actual market values).

Benefit and Cost:                        

Making improvements will require the following inputs:

1. Initial cost: 1 million bags of asphalt, $100/bag;
2. Initial cost: 1 million hours of construction labor (500 workers for 2,000 hours each), at $20/hour
3. $10 million per year in the future for maintenance costs

There are two main benefits to these road improvements:

1. Driving time for producers (trucks) and consumers will be reduced by 500,000 hours per year. Hourly value is $19/hour.
2. The road will be safer, resulting in five fewer fatalities per year. The estimated life value (using wages) is $8.7 million/life.

Question 1: What is the net present value of the investment at 5%, 7%, and 10%? Should the project be undertaken?

Question 2: Now assume that the maintenance cost is increasing at the rate of 5% per year in nominal terms. Hourly value of the reduced driving time is rising at 2% per year in nominal terms. Life values increase by 1% per year in nominal terms. The inflation rate is 2% per annum. All annual values accrue at the end of each year. Assume the nominal discount rate is 7%.

1. What is the real discount rate?
2. What is the Net Annual Worth (annualized net benefit) of this project?
3. What is the net present value? Should the project be undertaken?

A US multinational corporation (MNC) is evaluating a capital project for a Brazilian subsidiary. Project cost is 400 Million Brazilian Real (BR). 300 Million will be financed by debt and the remaining 100 Million by issuing equity. The benchmark 3-year Brazilian Treasury note is at 4.24% and the current corporate tax rate is 34%. The Brazilian Bovespa stock market index is up 31.58 % for the year, the firm decides to use this data.

The firm can borrow (pre-tax) in the Brazilian markets at 76 basis points (bps) over the 3-year Treasury rate. They compute a beta coefficient for their Brazilian market at 1.5.

1. Based on the above assumptions, compute the weights for debt and equity for the project. Each weight is the percentage of the capital devoted to each financing method.
   1. Debt: 0.75
   2. Equity: 0.25
2. Based on the above statistics, compute the after-tax cost of debt for the project.
   1. Cost of Debt = 5% (4.24 + .76)
   2. After Tax Cost of Debt = 0.033 (0.05 * ( 1 - .34))
   3. Interest Expense = 9.9 million (0.033 * 300mil)
   4. After Tax Cost of Debt = 6.534 million (9.9 * (1-0.34))
3. Using the CAPM, compute the cost of equity for the project.
4. Based on your answers in a, b and c, compute the WACC for the Brazilian project. (Round to 4 places).
5. The firm does an internal study and computes the internal rate of return on the project at 15%. Based on your answer in d, should the firm proceed with the project based on IRR and WACC? Explain your decision.
6. The current exchange rate is 4.24 Brazilian Real/USD 1. If he firm translated the cost of the project into home currency (USD) at this rate, what dollar cost would they book it at?

Annenbaum Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 400 units. The costs and percentage completion of these units in beginning inventory were:

A total of 6,500 units were started and 5,900 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs.

The cost per equivalent unit for conversion costs for the first department for the month is closest to:

Multiple Choice

$30.99

$35.92

$33.12

$34.21

2.

Sumter Corporation uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month:

What was the cost per equivalent unit for conversion during the month?

Multiple Choice

$5.45

$6.95

$4.00

$3.05