1. If a seed is planted, it has a 85% chance of growing into a healthy plant.

If 10 seeds are planted, what is the probability that exactly 2 don't grow?

2. A poll is given, showing 40% are in favor of a new building project.

If 6 people are chosen at random, what is the probability that exactly 4 of them favor the new building project?

3. A poll is given, showing 70% are in favor of a new building project.

If 10 people are chosen at random, what is the probability that fewer than 6 of them favor the new building project?

4. A poll is given, showing 30% are in favor of a new building project.

If 7 people are chosen at random, what is the probability that greater than 6 of them favor the new building project?

A researcher is interested in studying whether a new stretching technique affects the time needed to complete a certain running exercise. The times of 4 randomly selected participants were measured before the new stretching technique was used, and then the times for the same participants were measures after the new technique was used. The resulting data is

Is there a significant difference between the mean times with and without the new stretching technique?

1) What are the appropriate competing hypotheses?

2) What is the value of the test statistics?

3) What are the appropriate degrees of freedom?

4) What id the rejection region

5) p-value

6) test decision

MacLoren Automotive manufactures British sports cars, several of which are exported to New Zealand for payment in pounds sterling. The distributor sells the sports cars in New Zealand for New Zealand dollars. The New Zealand distributor is unable to carry all the foreign exchange risk and would not sell MacLoren models unless he could share some of the foreign exchange risk. MacLoren has agreed that sales for a given model year will initially be priced at a base spot rate between the New Zealand dollar and pound sterling set to be the spot mid-rate at the beginning of that model year. As along as the actual exchange rate is within ±5% if that base rate, payment will be made in pounds sterling. That is, the New Zealand distributor assumes all foreign exchange risk. However, if the spot rate at the time of shipment falls outside of this ±5% range, MacLoren will share equally (i.e. 50/50) the difference between the actual spot rate and the base rate. For the current model year, the base rate is NZ$1.64/£.

Source: Mutltination Business Finance by Eiteman, Stonehill, Moffett

a.) If MacLoren ships 10 cars invoiced at £32,000 per car, what would be the total cost to the New Zealand distributor in New Zealand dollars when the cars are shipped at the spot rate of NZ$1.70/£?

b.) If MacLoren ships 10 cars invoiced at £32,000 per car, what would be the total cost to the New Zealand distributor in New Zealand dollars when the cars are shipped at the spot rate of NZ$1.75/£?

c.) If MacLoren ships 10 cars invoiced at £32,000 per car, what would be the total cost to the New Zealand distributor in New Zealand dollars when the cars are shipped at the spot rate of NZ$1.50/£?

Question 1 (10 Marks - Suggested time approx. 23 minutes)
Northern Lights Company is considering the purchase of a new machine. The invoice price
of the machine is $140,000, freight charges are estimated to be $4,000, and installation
costs are expected to be $6,000. Salvage value of the new equipment is expected to be zero
after a useful life of 5 years. Existing equipment could be retained and used for an additional
5 years if the new machine is not purchased. At that time, the salvage value of the
equipment would be zero. If the new machine is purchased now, the existing machine would
have to be scrapped. Northern Lights’ accountant, Lisah Huang, has accumulated the
following data regarding annual sales and expenses with and without the new machine.
? Without the new machine, Northern Lights can sell 12,000 units of product annually at a
per unit selling price of $100. If the new machine is purchased, the number of units
produced and sold would increase by 10%, and the selling price would remain the same.
? The new machine is faster than the old machine, and it is more efficient in its usage of
materials. With the old machine the gross profit rate will be 25% of sales, whereas the
rate will be 30% of sales with the new machine.
? Annual selling expenses are $180,000 with the current equipment. Because the new
equipment would produce a greater number of units to be sold, annual selling expenses
are expected to increase by 10% if it is purchased.
? Annual administrative expenses are expected to be $100,000 with the old machine, and
$113,000 with the new machine.
? The current book value of the existing machine is $36,000. Northern Lights uses straightline
depreciation.
Required
Prepare an incremental analysis (over the 5 years) showing whether Northern Lights should
keep the existing machine or buy the new machine. (Ignore income tax effects.)

ABC Company is considering the acquisition of a new piece of equipment to
replace an old, outdated machine currently used in its business operations.
The new equipment would cost $135,000 and is expected to last 9 years. The
new equipment would require a repair of $25,000 in year four and another
repair costing $80,000 in year eight. Purchasing this new equipment would
require an immediate investment of $30,000 in working capital which would
be released for investment elsewhere at the end of the 9 years. The new
equipment is expected to have a $10,000 salvage value at the end of nine
years. The new equipment is expected to generate a cost savings of $60,000
per year. ABC Company has a cost of capital of 16% and an income tax rate
of 40%.

Calculate the net present value (NPV) of the new equipment. If your answer
is negative, place a minus sign in front of your answer with no spaces in
between (e.g., -1234).

Which one of the following would NOT result in incremental cash flows and thus should NOT be included in the capital budgeting analysis for a new product?

A. Using some of the firm's high-quality factory floor space that is currently unused to produce the proposed new product. This space could be used for other products if it is not used for the project under consideration.

B. Revenues from an existing product would be lost as a result of customers switching to the new product.

C. Shipping and installation costs associated with a machine that would be used to produce the new product.

D. The cost of a study relating to the market for the new product that was completed last year. The results of this research were positive, and they led to the tentative decision to go ahead with the new product. The cost of the research was incurred and expensed for tax purposes last year.

E. It is learned that land the company owns and would use for the new project, if it is accepted, could be sold to another firm.

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt–equity ratio of .69. It’s considering building a new $65.9 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $7.84 million in perpetuity. There are three financing options:

1) A new issue of common stock: The required return on the company’s new equity is 15.1 percent.

2) A new issue of 20-year bonds: If the company issues these new bonds at an annual coupon rate of 7.4 percent, they will sell at par.

3) Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .12. (Assume there is no difference between the pretax and aftertax accounts payable cost.)

If the tax rate is 40 percent, what is the NPV of the new plant?

1. (20 pts) In the following code inside a try block, what kind of object is passed to the Scanner constructor?

Scanner file = new Scanner ( new File (“test.txt”));

2. (20 pts) What is the output of this code sequence?

Scanner parse = new Scanner (“A 1 B 2 C 3 D”);

while (parse.hasNext())

    System.out.print(parse.next());

3. (20 pts) What is wrong with following code?

try

{

Scanner file = new Scanner(new File(“c:\docs\data.txt”));

int n = 0;

while (file.hasNext())

{

String s = file.nextLine();

if (s.equals(“A”))

      n++;

}

System.out.println(“The value of n is “ +n);

file.close();

}

catch(IOException ioe)

{

ioe.printStackTrace();

}

4. (40 pts) You coded the following class:

try

{

   Scanner file = new Scanner( new File(“test.txt”));

   String s = file.nextLine();

}
catch (FileNotFoundException fnf)

{

System.out.println(fnf.getMessage());

}

Will this code work correctly? If not how do you fix it.

Pompeii's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to be replaced and there are several other repairs that need to be done. The car is nearing the end of its life, so the options are to either overhaul the car or replace it with a new car. Pompeii's has put together the following budgetary items:

If Pompeii’s replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle for another 5 years. If they sell the old vehicle and purchase a new vehicle, they will use that vehicle for 5 years and then trade it in for another new pizza delivery vehicle. If they trade for the new delivery vehicle, their operating expenses will decrease because the new vehicle is more gas efficient and the maintenance on a new car is less. This project is analyzed using a discount rate of 10%.

A. Calculate the NPV on both Cars. Round your present value factor to three decimal places and the rest to nearest dollar.

B. What should Pompeii’s do?

Pompeii’s should .