Your company's new portable phone/music player/PDA/bottle washer, the RunMan, will compete against the established market leader, the iNod, in a saturated market. (Thus, for each device you sell, one fewer iNod is sold.) You are planning to launch the RunMan with a traveling road show, concentrating on two cities, New York and Boston. The makers of the iNod will do the same to try to maintain their sales. If, on a given day, you both go to New York, you will lose 900 units in sales to the iNod. If you both go to Boston, you will lose 650 units in sales. On the other hand, if you go to New York and your competitor to Boston, you will gain 1,600 units in sales from them. If you go to Boston and they to New York, you will gain 600 units in sales. What fraction of time should you spend in New York and what fraction in Boston?

You should spend  of your time in New York and  in Boston.

How do you expect your sales to be affected?

ACME manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates with less labour than the existing line. The new line would cost $1 million, have a 5-year life, and would be depreciated using the straight-line depreciation method over 5 years. At the end of 5 years, the new line could be sold as scrap for $200 000 (in year 5 dollars). Because the new line is more automated, it would require fewer operators, resulting in a saving of $40 000 per year before tax and unadjusted for inflation (in today’s dollars). Additional sales with the new machine are expected to result in additional net cash inflows, before tax, of $60 000 per year (in today’s dollars). If ACME invests in the new line, a one-time investment of $10 000 in additional working capital will be required. The tax rate is 30 per cent, the opportunity cost of capital is 10 per cent, and the annual rate of inflation is 3 per cent. What is the NPV of the new production line?

Pooh Industries is contemplating purchasing a new machine that will significantly improve the efficiency of their operations. To date the company has spent $15,000 evaluating the machine to better determine annual operating savings from using the machine.

The new machine would cost $800,000 and would be depreciated over an expected life of 8 years to a $40,000 salvage value using the straight-line method. Pooh forecasts that the new machine would reduce operating expenses by $200,000 per year. The firm's marginal tax rate is 40% and its WACC (which is the appropriate rate to use for evaluating this machine) is 15%. Pooh estimates that the new machine could be sold at the end of its life (i.e., in 8 years) for salvage value (i.e., $40,000).

The new machine would require additional net working capital of $90,000 which will be recovered at the end of the project. The company will hire a new mechanic for maintenance of the machine as well as for other duties related to this project. This new employee will cost the company $75,000 per year (this amount is not included in the operating cost change listed above).

What is this project’s NPV?

Use Worksheet 9.2. Ben West, a 35-year-old computer programmer, earns $57,000 a year. His monthly take-home pay is $3,000. His wife, Ashley, works part-time at their children's elementary school but receives no benefits. Under state law, Ashley's employer contributes to a workers' compensation insurance fund that would provide $2,050 per month for six months if Ben were disabled and unable to work.

1. Use Worksheet 9.2 to calculate Ben's disability insurance needs assuming that he won't qualify for Medicare under his Social Security benefits. Round your answer to the nearest whole.
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2. Based on your answer in part a, what would you advise Ben about his need for additional disability income insurance? Discuss the type and size of disability income insurance coverage he should consider, including possible provisions he might want to include. What other factors should he take into account if he decides to purchase a policy?
   

Describe a research effort where you could use a Multiple Regression analysis. It could be something related to work productivity, or perhaps a student’s performance in school.

List three variables (X1, X2, X3) you’d include in a Multiple Regression Model in order to better predict an outcome (Y) variable. For example, you might list three variables that could be related to how long a person will live (Y). Or you might list three variables that contribute to a successful restaurant. Your Regression Model should have three variables that will act as “predictors” (X1, X2, X3) of a “criterion” (Y’). Note that the outcome or criterion variable (e.g. how long a person would live, or the success/profit made by a restaurant measured) in must be a “Measurement” variable, that is something that is measured on a scale like inches, pounds, IQ, lifespan, stock value, etc. But that the predictors (X variables) can be either a measurement variable OR a categorical variable such as gender, political party, location, etc.

4. A teacher believes that whatever he says in class has no effect on his students. Just as he's about to quit his profession, a statistician enters the room and suggests that the teacher design a study to test his assumption. The study will look at whether providing in-class feedback on homework assignments enhances classroom performance. The teacher wants to know whether providing feedback before or after returning the assignments is most useful. He's also interested in the most effective means of presenting the feedback: verbal presentation, written handout, or a summary on overheads. Ultimately, he'd like to identify the best approach for increasing test scores of the students. There are 12 classes available in the school for the experiment. Design an experiment that helps answer these questions. Be sure to identify the factors, the levels of the factors, the treatment groups, and the response variable. Comment on how the students will be assigned to the different treatment groups. Is it possible to use simple random assignment of all students? As much as possible, use diagrams instead of words to summarize your experimental design.

The Yale program of affairs is interested in understanding student perspectives of their educational experience and has tasked you with taking a look at the problem.  You have obtained data from your school as well as several other schools that offer a Program of Affairs that includes the type of curriculum (traditional on-campus versus non-traditional online), and the student’s evaluation of the course(low versus high).  You also have data for a third variable, which includes the emphasis of the course of study(quantitative (i.e., a lot of math) versus non-quantitative).  You are interested in explaining evaluations of the program made by students.  Based on the data below, what can you report?

Combined Data

Quantitative Emphasis

Non-Quantitative Emphasis

Mark is a 35 year-old who has gained some weight since college. He participated in team sports in high school and college, but has had trouble staying active since graduation from college. He is 5' 10" and weighs 180 lb. His weight has stabilized, so he has been monitoring his food intake recently and found that he is consuming around 2800 Calories/day. His goal is to lose the 10 pounds he gained over the past year, but wants to gain muscle while losing fat. Since he knows that he needs help accomplishing his goals, he goes to a personal trainer to get advice on a diet and exercise program.

4. People often limit their intake of carbohydrate when trying to lose weight. Would you suggest Mark limit his intake of carbohydrate while engaging in a regular exercise program? Why or why not? What role does carbohydrate play in an exercise program?