2. Answer all parts (a), (b), and (c) of this question. (a) [10 marks] Define and explain the concepts of moral hazard and adverse selection. Illustrate each concept with two examples: one in the context of new technology sale, the other in the context of new technology funding. (b) [20 marks] Explain why asymmetric information may cause a market failure in the markets for selling new technology and the market for funding new technological development. (c) [20 marks] Propose and defend a solution to these market failures in each of the two markets (technology sale and new technological development funding). Point out any disadvantages as well as any advantages of your solution.

X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:

Maintenance work will be necessary on the new equipment in Year 3, costing $2,500. The current equipment will last for six more years; the life of the new equipment is also six years. Assuming a discount rate of 4%, what is the net present value of replacing the current equipment?

X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:

Maintenance work will be necessary on the new equipment in Year 3, costing $2,500. The current equipment will last for six more years; the life of the new equipment is also six years. Assuming a discount rate of 6%, what is the net present value of replacing the current equipment?

X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:

Current equipment

Current sales value $5,000

Final sales value 5,000

Operating costs 60,500

New equipment

Purchase cost $45,000

Final sales value 5,000

Operating costs 52,000

Maintenance work will be necessary on the new equipment in Year 4, costing $2,500. The current equipment will last for five more years; the life of the new equipment is also five years. Assuming a discount rate of 7%, what is the net present value of replacing the current equipment

32. Which of these new product characteristics is LEAST likely to increase the adoption rate:

-   product that can be demonstrated to outperform current products.

-   product that costs less than presently used products.

-   product that requires new patterns of use compared to existing products.

-   product that can be tried or sampled in small quantities.

33. Test marketing:

-   attempts to record consumers’ responses under reasonably realistic market conditions.

-   is basically the same as the screening and development stages of the new product development process.

-   is more common for industrial products than for consumer products because industrial markets usually involve fewer customers.

-   should be done slowly so that competitive actions can be observed and categorized.

34. Which is WRONG with regard to new products and product innovation:

-   most “new” products are just slight modifications of existing products.

-   planned obsolescence can cause some consumers to delay their purchases in order to wait for product improvements.

-   the most innovative new product ideas usually originate in research labs rather than in the marketplace.

-   the most successful new product innovation programs are organized just for a particular purpose; they are not ongoing research programs.

36. Meghan was disappointed to be assigned to work on a product in the mature phase of the product life cycle. Once she started working with the product team, she discovered all the following EXCEPT:

-   changes in consumers’ preferences were opening up new market segments.

-   end-of-cycle strategies were the most profitable for companies.

-   she could take the product into a new market segment to stimulate new growth.

-   some simple product redesign could completely reinvigorate the product.

St. Paul Co. does business in the United States and New Zealand. In attempting to assess its economic exposure, it compiled the following information.

      a.   St. Paul’s U.S. sales are somewhat affected by the value of the New Zealand dollar (NZ$), because it faces competition from New Zealand exporters. It forecasts the U.S. sales based on the following three exchange rate scenarios:

                                                                               Revenue from U.S. Business

                         Exchange Rate of NZ$                              (in millions)

                                   NZ$ = $.48                                             $100

                                   NZ$ =   .50                                                105

                                   NZ$ =   .54                                                110

      b.   Its New Zealand dollar revenues on sales to New Zealand invoiced in New Zealand dollars are expected to be NZ$600 million.

      c.   Its anticipated cost of materials is estimated at $200 million from the purchase of U.S. materials and NZ$100 million from the purchase of New Zealand materials.

      d.   Fixed operating expenses are estimated at $30 million.

Variable operating expenses are estimated at 20 percent of total sales (after including New Zealand sales, translated to a dollar amount).

      f.    Interest expense is estimated at $20 million on existing U.S. loans, and the company has no existing New Zealand loans.

      Forecast net cash flows for St. Paul Co. under each of the three exchange rate scenarios. Explain how St. Paul's projected net cash flows are affected by possible exchange rate movements. Explain how it can restruc­ture its operations to reduce the sensitivity of its net cash flows to exchange rate movements without reducing its volume of business in New Zealand.

1) If the product is yak fat, and price of yak fat increases, what variable is affected, and is it a move along the D curve (Qd), or a new Demand curve?

Select one or more:

a. price

b. tastes and preferences

2) National health food fad sweeps the country, and the product is yogurt, what variable is affected, and is it a move along the D curve (Qd), or a new Demand curve?

Select one or more:

a. price

b. tastes and preferences

c. price of complimentary good

d. along the curve

e. new curve

c. price of complimentary good

d. along the curve

e. new curve

3) If the product is peanut butter, and the price of jelly increases, what variable is affected, and is it a move along the D curve (Qd), or a new Demand curve?

Select one or more:

a. price

b. tastes and preferences

c. price of complimentary good

d. along the curve

e. new curve

4) If the product is gasoline, and world income increases, what variable is affected, and is it a move along the D curve (Qd), or a new Demand curve?

Select one or more:

a. price

b. tastes and preferences

c. price of complimentary good

d. along the curve

e. new curve

f. income

5) If the product is Kid Rock tickets, and the price of concert tickets to see Kid Rock decreases, what variable is affected, and is it a move along the D curve (Qd), or a new Demand curve?

Select one or more:

a. price

b. tastes and preferences

c. price of complimentary good

d. along the curve

e. new curve

f. income

Above data shows 13 values of the variable "distance from hometown to campus" that were provided by the students in a recent statistics class.

A. Find the mean and the median.

_____mean (round to 1 decimal place in your answer)
____median

B. Suppose the family of the student with data value 3000 moves to Tel Aviv, Israel; this changes the data value for this student from 3000 to 6000. Calculate the new mean and new median when 3000 is replaced by 6000.

_____new mean (round to 1 decimal place in your answer)
_____new median

C. Now suppose that the families of the other 5 students whose values are greater than the median also move to new locations so that each student's data value is twice as large as the original data value. (The data values of the students less than the median do not change and the 6000 data value remains at 6000). Calculate the new mean and the new median.

______new mean (round to 1 decimal place in your answer)
_____new median

D. Suppose now that the 6 students whose data values are less than the median also move to new locations so that each student's data value is half as large as the original data value. (Note that half of 0 is 0; all the data values greater than the median keep the same new values from question 3). Calculate the new mean and the new median.

_____ new mean (round to 1 decimal place in your answer)
____new median

Sparrowhawk colonies. One of nature’s patterns connects the percent of adult birds in a

colony that return from the previous year and the number of new adults that join the colony. It

is expected that the percent return of adult birds from the previous year can be used to predict

how many new adult birds will join a colony. The data set sparrowhawk.xlsx contains

information for 13 colonies of sparrowhawks. The variables are the percent of adult birds in a

colony that return from the previous year (Percent return) and the number of new adults that

join the colony (New adults).

(a) Using an appropriate graphical display and the summary statistics, describe the distribution

of the percent of adult birds in a colony that return from the previous year (Percent return).

(b) Using an appropriate graphical format, display AND describe the relationship between the

percent of adult birds in a colony that return from the previous year (Percent return) and

the number of new adults that join the colony (New adults).

(c) Find the sample correlation coefficient between the percent of adult birds in a colony that

return from the previous year (Percent return) and the number of new adults that join the

colony (New adults). Comment.

(d) Fit a least-squares line to the data. Write down the equation of the fitted line (model) and

interpret all parameters in the model

(e) Predict how many new adult birds will join the colony, when 30% and 70% of the adults

from the previous year return respectively

how does Goodwill Impairment report on the following:

1- The main provisions of the new pronouncements

2- How the accounting treatment of the new pronouncement differs from before

3- he effective date(s) of the new pronouncement

4- How the accounting treatment compares with IFRS