Due to a recession, expected inflation this year is only 3.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.25%. Assume that the expectations theory holds and the real risk-free rate (r*) is 2.5%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 0.5%, what inflation rate is expected after Year 1? Round your answer to two decimal places.

I keep getting the wrong answer! Not sure of what I am doing wrong

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $90 per unit, and variable expenses are $60 per unit. Fixed expenses are $831,600 per year. The present annual sales volume (at the $90 selling price) is 25,600 units.

Required:

1. What is the present yearly net operating income or loss?

2. What is the present break-even point in unit sales and in dollar sales?

3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

Consider a 30-year mortgage for $347,060 at an annual interest rate of 4.7%. What is the remaining balance after 5 years?

The manager of Dukey’s Shoe Station estimates operating costs for the year will include $405,000 in fixed costs. Required: a. Find the break-even point in sales dollars with a contribution margin ratio of 50 percent. b. Find the break-even point in sales dollars with a contribution margin ratio of 30 percent. c. Find the sales dollars required to generate a profit of $250,000 for the year assuming a contribution margin ratio of 50 percent.

A company is considering a 5-year project that opens a new product line and requires an initial outlay of $84,000. The assumed selling price is $99 per unit, and the variable cost is $55 per unit. Fixed costs not including depreciation are $21,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 11% per year, what is the financial break-even point? (Answer to the nearest whole unit.)

Northern Illinois Manufacturing is preparing its budget for the coming year. The first step is to plan for the first quarter of the coming year. Northern Illinois gathered the following information from the managers.

Sales:

Northern Illinois wants to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31 totaled 183,780.

Direct Materials:

The product uses metal, plastic, and rubber. In total, each unit requires 2 pounds of material at an average cost of 0.75 per pound.

Northern Illinois likes to keep 5% of the materials needed for the next month in its ending inventory. Payment for materials is made within 15 days. 50% is paid in the month of purchase and 50% is paid in the month after purchase. Accounts Payable on December 31 totaled $120,595. Raw materials on December 31 totaled 11,295 pounds.

Direct Labor:

Labor requires 12 minutes per unit for completion and is paid at a rate of $18 per hour.

Manufacturing Overhead:

Selling and Administrative Expenses:

Variable selling and administrative cost per unit is $1.60.

Other Information:

The cash balance on December 31 totaled $100,500, but management has decided that it wants to maintain a cash balance of at least $800,000 beginning January 31. Dividends are paid each month at the rate of $2.50 per share for 5,000 shares outstanding. The company has an open line of credit with the First National Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 8% interest. Northern Illinois borrows on the first day of the month and repays on the last day of the month. Reserve repayment, if required, until Northern Illinois can pay the entire amount. A $500,000 equipment purchase is planned for February.

Instructions (Do all parts):

Note: All budgets and schedules should be prepared by month for the first quarter (January, February, and March). Round all figures to the nearest dollar. For labor hours round to whole hours. ALL IN EXCEL

e. Prepare a manufacturing overhead budget.

f. Prepare a selling and administrative budget.

g. Prepare a schedule for expected cash collections from customers.

h. Prepare a schedule for expected payments for materials purchases.

i. Prepare a cash budget.

An insurance company must make payments to a customer of $8 million in one year and $4 million in four years. The yield curve is flat at 9%.

a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase?

b. What must be the face value and market value of that zero-coupon bond?

You are the director of admission office. Your job every year is to decide the number of offer letters to issue to undergraduate degree applicants. For the academic year 2016/2017, the school has a capacity to enroll 7,200 undergraduate students, but the school is so popular that you received more than 20,000 applications. However, you know from past year records many students not only got offer from UBC but also from other good schools in Canada and the US. The yield rate for the school is far less than 100% (the ‘yield rate’ refers to the proportion of students accept the school offers among all the students to whom UBC issue the offer letters). Assume the school has spent large amount of sunk cost in its undergraduate program for a designed capacity to enroll 7,200 students, such as upgrading classrooms, expanding residential houses, hiring additional teaching instructors and administration staff. (a) Will you issue more than 7,200 offer letters for 2016/2017 academic year? (b) What is the trade-off between issuing more than 7,200 offer letters and issuing exactly 7,200 offer letters?(c) How to determine the optimal number of offer letters to issue? What information do you need, and how to get such information?