5.3 Julie’s Rent-or-Buy Decision

Julie Brown is in her late 20s. She is renting an apartment in the fashionable part of town for $1,200 a month. After much thought, she’s seriously considering buying a condominium for $175,000. She intends to put 20 percent down and expects that closing costs will amount to another $5,000; a commercial bank has agreed to lend her money at the fixed rate of 6 percent on a 15-year mortgage. Julie would have to pay an annual condominium owner’s insurance premium of $600 and property taxes of $1,200 a year (she’s now paying renter’s insurance of $550 per year). In addition, she estimates that annual maintenance expenses will be about 0.5 percent of the price of the condo (which includes a $30 monthly fee to the property owners’ association). Julie’s income puts her in the 25 percent tax bracket (she itemizes her deductions on her tax returns), and she earns an after-tax rate of return on her investments of around 4 percent.

Critical Thinking Questions

1. Given the information provided, use Worksheet 5.2 to evaluate and compare Julie’s alternatives of remaining in the apartment or purchasing the condo.

2. Working with a friend who is a realtor, Julie has learned that condos like the one that she’s thinking of buying are appreciating in value at the rate of 3.5 percent a year and are expected to continue doing so. Would such information affect the rent-or-buy decision made in Question 1? Explain.

3. Discuss any other factors that should be considered when making a rent-or-buy decision.

4. Which alternative would you recommend for Julie in light of your analysis?

Arts Centre Parking

The following information is required for Questions 5–8:

It is said that "Australia has one of the world's great opera houses; unfortunately, the outside is in Sydney and the inside is in Melbourne."

The opera house in Melbourne is called the Arts Centre, and it has 250 seats. Demand for a typical opera is Q = 400 – 2P, but there is only demand so long as the opera patrons can park for free beneath the Arts Centre. (Opera patrons are lazy, and don't like to walk. They are also selfish, so each patron drives in a car all by himself or herself.)

There are 300 parking places beneath the Arts Centre, and the parking is owned and operated by the Arts Centre. Suppose there are no other uses for the parking places.

What price do you charge for the opera tickets? Answer is $100

For Questions 6–8 assume that the Arts Centre is very conveniently located in the middle of town, so its parking lot is very popular. They can sell as many parking places as they want for $20 per night. However, a Melbourne city ordinance prohibits them from charging more than $20 per night for parking. The system at the Arts Centre is to allow opera patrons to park for free, if they show their ticket, and to allow a certain number of "outside people" (non-opera-attenders) to park at $20 per night.

Q1) How many parking places do they set aside for "outside people", on an opera night?

Q2) Suppose that the very popular opera "Carmen" is showing tonight. Demand for that opera is Q = 600 - 2P.
How many parking places does the Arts Centre allow "outside people" to use, now?

Q3) Now what is the price of an opera ticket?

Shelly is a 4-year-old preschooler who lives with her parents and younger brother. She and her brother attend a local daycare center during the week while their parents are at work. In the evenings she and her brother take a bath and then their parents read to them before bedtime at 8:00 P.M. Shelly's daycare class includes many children her age and she enjoys playing outside with them, Although snack times are planned, Shelly would rather play and does not always finish her beverages,

Shelly's mother calls the pediatric clinic in town and tells the nurse that Shelly has been "running a fever of 101 0 F for the past 2 days' and although her temperature decreases to 37.20 C (990 F) with acetaminophen, it returns to 38.4 C, (1010 F) within 4 hours of each dose. Further, her mother says that Shelly complains that hurts when “I pee-pee." Shelly's mother also has noticed that her daughter seems to be in the bathroom every hour" She makes an appointment to see the pediatrician this afternoon

6.     Shelly's urine culture returns positive for Escherichia coli. 'What is the significance of this finding?

7.     What are the priorities for Shelly's care?

8.     Shelly is prescribed trimethoprim-sulfumethoxazole 60 mg every 12 hours for 10 days. What is this drug and is her prescribed dose safe? Shelly weighs 33 lb.

9.     What are the teaching priorities for Shelly and her mother prior to her discharge from the clinic?

10. Shelly is scheduled for a return visit to the clinic in 2 weeks. What is the purpose of this appointment?

1. In a sample of 350 students selected from a large college of business, 25% are found to be marketing majors. The 25% is a statistic.

True                 False

2. Lily has been keeping track of what she spends to eat out. The last week's expenditures for meals eaten out were $5.69, $5.95, $6.19, $10.91, $7.49, $14.53, and $7.66. What is the mean amount Lily spends on meals?

__________________

3. Monthly rent in dollars for a sample of 10 stores in a small town in South Dakota are as follows: 220, 216, 220, 205, 210, 240, 195, 235, 204, and 250. What is the sample mean?

__________________

4. Suppose that a firm's sales were $2,500,000 four years ago, and sales have grown annually by 25%, 15%, -5%, and 10% since that time. What was the geometric mean growth rate in sales over the past four years?

                                                                                                __________________

5. The data set 10, 20, 30 has the same variance as the data set 100, 200, 300.

True                 False

6. The values for a sample taken from a particular population are listed below. Calculate the standard deviation for the sample values.

9     14     18     21

                                                __________________

7. A basketball player has the following points for seven games: 20, 25, 32, 18, 19, 22, and 30. Compute the coefficient of variation.

__________________

8. According to the Empirical Rule, if the data form a bell shaped normal distribution, approximately ________ % of the observations will be contained within two standard deviations.

9. In a bell-shaped distribution, there is no difference in the values of the mean, median, and mode.

True                 False

10. A data sample has a mean of 107, a median of 122, and a mode of 134. The distribution of the data is positively skewed.

True                 False

2. Enter the following record into the Inventory table using data listed below:

3. The Chevrolet Lumina was sold on 5/20/08 by Bauer for $9,300. Update the INVENTORY table and modify date sold, selling price, and repnumber.
4. Write SQL statements to query the following information
   1. All vehicles available for sale with a selling price less than $6,000, sorted by cost in descending order.
   2. All vehicles sold, grouped by Sales Rep.
   3. All vehicles made by Ford and Toyota.

You have three tickets to a Celtics game on a night that you are going to be out of town (so the value of unsold tickets is zero to you). There are only four possible buyers of a Celtics ticket. The table below lists the respective reservation prices of these four possible buyers: Customer Reservation Price 1 $25 2 $35 3 $50 4 $60 How much revenue can you generate if you charge a single price of $25 for the three tickets?

a) How much revenue can you generate if you charge a single price of $35 for the three tickets?

b). How much revenue can you generate if you charge a single price of $50 for the three tickets?

c) How much revenue can you generate if you charge a single price of $60 for the three tickets?

d) Which of the prices fetches you the highest revenue?

e) Next, you think about inviting bids using an English auction to sell your tickets. How much revenue can you generate using the English auction mechanism from the sale of the first ticket?

f) How much revenue can you generate using the English auction mechanism from the sale of the second ticket?

g) How much revenue can you generate using the English auction mechanism from the sale of the third ticket?

h) How much total revenue can you generate using the English auction mechanism?

i) Which pricing strategy gives you higher revenue - English Auction or charging a single price?

A survey is taken among customers of a fast-food restaurant to determine preference for hamburger or chicken. Of 200 respondents selected, 75 were children and 125 were adults. 120 preferred hamburger and 80 preferred chickens. 55 of the children preferred hamburger and 20 preferred chickens. Set up a 2x2 contingency table using this information and answer the following questions:

What is the probability that a randomly selected individual is an adult?

What is the probability that a randomly selected individual is a child and prefers chicken?

Given the person is a child, what is the probability that this child prefers a

hamburger?

Assume we know that a person has ordered chicken, what is the probability that this individual is an adult?

Are food preference and age statistically independent?

2) Three messenger services deliver to a small town in Oregon. Service A has 60% of all the scheduled deliveries, service B has 30%, and service C has the remaining 10%. Their on-time rates are 80%, 60%, and 40% respectively. Define event O as a service delivers a package on time.

Calculate P(A and O)

Calculate P(B and O)

Calculate P(C and O)

Calculate the probability that a package was delivered on time.

If a package was delivered on time, what is the probability that it was service A?

If a package was delivered 40 minutes late, what is the probability that it was service A?

3) The number of power outages at a nuclear power plant has a Poisson distribution with a mean of 6 outages per year.

What is the probability that there will be exactly 3 power outages in a year?

What is the probability that there will be at least 1 power outage in a year?

What is the variance for this distribution?

What is the mean power outage for this nuclear power plant in a decade?

WEEK 1 HOMEWORK (based on your week 1 assignment)

Please answer the following questions in complete sentences.

Identify and define at least 5 fallacies about racism.

What areas of life does racism affect?

Define the two types of racism (institutional and interpersonal).

What is symbolic violence when it comes to race?

At one time Jews dominated basketball; now it is a game almost exclusively for African Americans. The text authors identify at least two reasons why both of these groups came to dominate the game? What are those reasons?

Which group of people erected the original section of the U.S. Capitol building in Washington, D.C.?

List at least 5 examples of how whiteness surrounds us though it often goes unnamed.

Define the phrase “white privilege.” Give at least 3 examples.

Who wrote, “Color is not a human or personal reality; it is a political reality.”

Why do the authors argue that race is a symbolic category?

What is the difference between race and ethnicity?

Briefly describe the case of Abdullah Dolla.

Has race always remained a fixed category in the U.S. or is it more fluid?

Who is Tim Wise?

He argues that before 1600 there was no such thing as the white race. What happened to change this?

What were indentured servants? Where did they come from?

According to Wise, what was the U.S. Civil War fought over?

Name a few of the “carrots” slave owners threw out to poor whites.

How did slavery undermine white working class job?

What did Chalmette, Louisiana do after Hurricane Katrina to keep the town white?

MSI is considering eliminating a product from its ToddleTown Tours collection. This collection is aimed at children one to three years of age and includes “tours” of a hypothetical town. Two products, The Pet Store Parade and The Grocery Getaway, have impressive sales. However, sales for the third CD in the collection, The Post Office Polka, have lagged the others. Several other CDs are planned for this collection, but none is ready for production.

MSI’s information related to the ToddleTown Tours collection follows:

      
*Allocated based on total sales dollars.

MSI has determined that elimination of the Post Office Polka (POP) program would not impact sales of the other two items. The remaining fixed overhead currently allocated to the POP product would be redistributed to the remaining two products.

Required:
1. Calculate the incremental effect on profit if the POP product is eliminated.



2. Should MSI drop the POP product?

3-a. Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $4,000 of the common fixed costs could be avoided if the POP product line were eliminated.



3-b. Should MSI drop the POP product?