A very large study showed that aspirin reduced the rate of first heart attacks by 35% .A pharmaceutical company thinks it has a drug that will be more effective than aspirin, and plans to do a randomized clinical trial to test the new drug. Complete parts a through d below.
a) What is the null hypothesis the company will use?
A.The new drug is not more effective than aspirin.
B.The new drug is more effective than aspirin.
C.The new drug is as effective as aspirin.
D.The new drug is less effective than aspirin.
b) What is their alternative hypothesis?
A.The new drug is more effective than aspirin.
B.The new drug is less effective than aspirin.
C.The new drug is as effective as aspirin.
D.The new drug is not more effective than aspirin.
c) The company conducted the study and found that the group using the new drug had somewhat fewer heart attacks than those in the aspirin group. The P-value from the hypothesis test was 0.46.
What do you conclude?
A.There is not sufficientis not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so small.
B.There is evidence to conclude that the alternative hypothesis is true because the P-value was so large.
C.There is evidence to conclude that the alternative hypothesis is true because the P-value was so small.
D.There is not sufficientis not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so large.
d) What would you have concluded if the P-value had been 0.004?
A.There is not sufficientis not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so large.
B.There is evidence to conclude that the alternative hypothesis is true because the P-value was so small.
C.There is evidence to conclude that the alternative hypothesis is true because the P-value was so large.
D.There is not sufficientis not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so small.
In: Statistics and Probability
7. Capstone, Inc. (Chapter 12)
Capstone, Inc. puts much emphasis on cash flow when it plans for capital investments. The company chose its discount rate of 8% based on the rate of return it must pay its owners and creditors. Using that rate, Capstone, Inc. then uses different methods to determine the best decisions for making capital outlays.
In 2020 Capstone, Inc. is considering buying five new backhoes to replace the backhoes it now has. The new backhoes are faster, cost less to run, provide for more accurate trench digging, have comfort features for the operators, and have 1-year maintenance agreements to go with them. The old backhoes are working just fine, but they do require considerable maintenance. The backhoe operators are very familiar with the old backhoes and would need to learn some new skills to use the new backhoes.
The following information is available to use in deciding whether to purchase the new backhoes.
Old Backhoes New Backhoes
Purchase cost when new $90,000 $225,000
Salvage value now $42,000
Investment in major overhaul needed in next year $55,000
Salvage value in 8 years $15,000 $65,000
Remaining life 8 years 8 years
Net cash flow generated each year $30,425 $43,900
Instructions
In: Accounting
Philadelphia Fastener Corporation manufactures nails, screws,
bolts, and other fasteners. Management is considering a proposal to
acquire new material-handling equipment. The new equipment has the
same capacity as the current equipment but will provide operating
efficiencies in labor and power usage. The savings in operating
costs are estimated at $150,000 annually.
The new equipment will cost $300,000 and will be purchased at the
beginning of the year when the project is started. The equipment
dealer is certain that the equipment will be operational during the
second quarter of the year it is installed. Therefore, 60 percent
of the estimated annual savings can be obtained in the first year.
The company will incur a one-time expense of $30,000 to transfer
production activities from the old equipment to the new equipment.
No loss of sales will occur, however, because the processing
facility is large enough to install the new equipment without
interfering with the operations of the current equipment. The
equipment is in the MACRS 7-year property class. The firm would
depreciate the machinery in accordance with the MACRS depreciation
schedule.
The current equipment has been fully depreciated. Management has
reviewed its condition and has concluded that it can be used an
additional eight years. The company would receive $10,000, net of
removal costs, if it elected to buy the new equipment and dispose
of its current equipment at this time. The new equipment will have
no salvage value at the end of its life. The company is subject to
a 40 percent income-tax rate and requires an after-tax return of at
least 12 percent on any investment.
Use Appendix A and Exhibit 16-9 for your reference. (Use
appropriate factor(s) from the tables provided.)
Required:
1.Calculate the annual incremental after-tax cash flows for Philadelphia Fastener Corporation’s proposal to acquire the new equipment.
2-a. Calculate the net present value of the proposal to acquire the new equipment using the cash flows calculated in requirement (1), Assume all cash flows take place at the end of the year.
2-b. Should management purchase the new equipment?
In: Accounting
The Allied Group intends to expand the company's operation by making significant investments in several opportunities available to the group. Accordingly, the group has identified a need for additional financing in preferred and new common stock and new bond issues. The (Krf) risk-free rate for the company is 7%, and the appropriate tax rate is 40%. Also, the beta coefficient for the company is 1.3 and the market risk premium (Km) is 12%. New Debt (Kd) The company has been advised that new bonds can be sold on the market at par ($1000) with an annual coupon of 8%, for 30 years. New Common Stock Market analysis has determined that given the positive history of the firm, new common stock can be sold at $29 per share, with the last dividend being paid of $2.25 per share. The growth rate on any new delete the words highlighted in yellow common stock has been estimated at a constant rate of 15% per year for the next 3 years. Preferred Stock New Preferred Stock can be issued with an annual dividend of 10% of par and is paid annually and currently would sell for $90 per share. Tasks: Using the Capital Asset Pricing Model (CAPM), discuss and calculate the cost of new common stock (Ks). What would the dividend yield as a percentage (i.e., per dividend payment divided by the book value of a share of stock) today and a year from now if the dividend growth rate is 12%? What is the after-tax cost as a percentage (e.g., interest rate) of new debt today? What are your recommendations for raising capital based on your answers to the above questions plus considering other factors (e.g., current and potential changes in the economy locally, regionally, nationally and worldwide, changes in the demand and/or supply plus cost of materials, skilled labor, management and/or leadership, changes in interest, tax, inflation and/or supply of investment capital)?
In: Accounting
A very large study showed that aspirin reduced the rate of first heart attacks by 45%. A pharmaceutical company thinks it has a drug that will be more effective than aspirin, and plans to do a randomized clinical trial to test the new drug. Complete parts a through d below.
a) What is the null hypothesis the company will use?
A. The new drug is not more effective than aspirin.
B. The new drug is more effective than aspirin.
C. The new drug is less effective than aspirin.
D. The new drug is as effective as aspirin.
b) What is their alternative hypothesis?
A. The new drug is as effective as aspirin.
B. The new drug is not more effective than aspirin.
C. The new drug is less effective than aspirin.
D. The new drug is more effective than aspirin.
c) The company conducted the study and found that the group using the new drug had somewhat fewer heart attacks than those in the aspirin group. The P-value from the hypothesis test was 0.002. What do you conclude?
A. There is not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so large.
B. There is not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so small.
C.There is evidence to conclude that the alternative hypothesis is true because the P-value was so large.
D. There is evidence to conclude that the alternative hypothesis is true because the P-value was so small.
d) What would you have concluded if the P-value had been 0.42?
A.There is evidence to conclude that the alternative hypothesis is true because the P-value was so small.
B. There is not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so large.
C. There is evidence to conclude that the alternative hypothesis is true because the P-value was so large.
D.There is not sufficient evidence to conclude that the alternative hypothesis is true because the P-value was so
small.
In: Statistics and Probability
On May 1, 2021, Hecala Mining entered into an agreement with the state of New Mexico to obtain the rights to operate a mineral mine in New Mexico for $10 million. Additional costs and purchases included the following:
Development costs in preparing the mine.........................$3,200,000
Mining equipment.............................................................................140,000
Construction of various structures on site....................................68,000
After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $10,000. The structures will be torn down. Geologists estimate that 800,000 tons of ore can be extracted from the mine. After the ore is removed the land will revert back to the state of New Mexico.
The contract with the state requires Hecala to restore the land to its original condition after mining operations are completed in approximately four years. Management has provided the following possible outflows for the restoration costs:
Cash Outflow................Probability
$600,000................................30%
700,000..................................30%
800,000.................................40%
Hecala’s credit-adjusted risk-free interest rate is 8%. During 2021, Hecala extracted 120,000 tons of ore from the mine. The company’s fiscal year ends on December 31.
Required:
1. Determine the amount at which Hecala will record the mine.
2. Calculate the depletion of the mine and the depreciation of the mining facilities and equipment for 2021, assuming that Hecala uses the units-of-production method for both depreciation and depletion. Round depletion and depreciation rates to four decimals.
3. How much accretion expense will the company record in its income statement for the 2021 fiscal year?
4. Are depletion of the mine and depreciation of the mining facilities and equipment reported as separate expenses in the income statement? Discuss the accounting treatment of these items in the income statement and balance sheet.
5. During 2022, Hecala changed its estimate of the total amount of ore originally in the mine from 800,000 to 1,000,000 tons. Briefly describe the accounting treatment the company will employ to account for the change and calculate the depletion of the mine and depreciation of the mining facilities and equipment for 2022 assuming Hecala extracted 150,000 tons of ore in 2022.
In: Chemistry
| The company
produces seats for auto, vans, trucks, and boats. The company has
several plants, including the New Jersey plant, which makes car covers. Goodman is the plant manager at the New Jersey plant but also serves as the production manager. Goodman has just heard that Rutgers company has received a bid from an outside vendor to offer the same amount of the entire annual output of the New Jersey plant for $21 million. Goodman was surprised at the low outside bid due to that the budget for the New Jersey Plant's operating costs for the coming year was set at $24.3 million. if this bid is accepted by the plant, the New Jersey plant will go out of bankruptcy. The budget for the New Jersy plant's operating costs for the next year is below. Additional information is given as follows. |
||
| 1. Due to
the New Jersey plant prefer high-quality for all products, the
purchasing department prefers to place orders of good materials for the coming year. If these orders are canceled as consequence of the plant closing, termination fees would amount to 25% of the cost of direct materials. |
||
| 2. Around
350 employees will become unemployed if the plant is closed, which
contain all of the direct laborers and supervisors, management and
staff, and the plumbers, electricians, and other skilled workers
classified as indirect plant workers. Some of the workers would have difficulty finding new jobs. Nearly all the production labors would have difficulty matching the New Jersey plant at $12.5 per hour, which is the highest. Rutgers Company should provide some assistance and job training to its former employees for 12 months after closing a plant. The estimated fees for this service would be $0.8 million. |
||
| 3. Some
employees might choose early retirement because Rutgers Company has
a good pension plan. Actually, $0.7 million of the annual pension expense would continue whether the New Jersey plant is open or not |
||
| 4. Goodman and his coworkers would not be affected by the closing of the New Jersey plant, they would still be responsible for three other area plants | ||
| 5. If the New Jersey plant were closed, Rutgers Company would realize about $2 million salvage value for the equipment in the plant. If the plant remains open, there are no plans to make any significant investments in new equipment or buildings. The old equipment is adequate for the job and should last indefinitely. | ||
| New Jersey Plant | ||
| The annual budget for costs | ||
| Materials | $80,000,000.00 | |
| Labor: | ||
| Direct | $6,700,000.00 | |
| Supervison | $400,000.00 | |
| Indirect Plant | $1,900,000.00 | $9,000,000.00 |
| MOH: | ||
| Deprecation for equipments | $1,300,000.00 | |
| Deprecation for buildings | $2,100,000.00 | |
| Pension expense | $1,600,000.00 | |
| Plant manager and staff | $600,000.00 | |
| Corporate expense | $1,700,000.00 | $7,300,000.00 |
| Total | $24,300,000.00 | |
| *Fixed expenses are allocated to plants and other operating units based on total budgeted wage and salary costs. | ||
| Questions: | ||
| 1.Without regard to costs, find the merits to Rutgers Company of continuing to obtain products from the New Jersey plant. | ||
| 2. Company
is about to prepare a financial analysis that will be used in deciding whether or not to close the New Jersey Plant. CEO has asked you to pay attention to items: a.Show the annual budgeted costs to make the decision about the closing of the New Jersey plant. b.Present the annual budgeted costs that are not relevant to the decision regarding the closing of New Jersey the plant and explain why they are not relevant. c.There are nonrecurring costs that would arise due to the closing of the plant and please explain how they would affect the decision. |
||
| 3.Please
refer to the data you have prepared in (2) above, do you think the
New Jersey plant be closed? Show computations and please explain your answer. |
||
| 4.Please find any sales revenues or costs not specifically provided in the information that Rutgers Compnay should consider before making a decision. | ||
| 5.What suggestions do you think about reducing the costs? | ||
In: Accounting
The Merger of Kmart & Sears
As the engineer of the $11.5 billion planned purchase of Sears, Roebuck & Co. by Kmart Holding Corp.,
Edward Lampert is stepping out of the shadows of Wall Street to make a high‐profile bet that the
fortunes of not just one but two retailing giants can be turned around. He keeps his strategy close to the
vest, and his fortune is uncertain, though it was estimated at $2 billion ahead of the acquisition news.
Mr. Lampert’s hedge‐fund firm, ESL Investments inc., which owns 43 million shares of Kmart, and 31
million shares of Sears, recorded paper gains of nearly $600 million in the wake of the takeover news.
He knew that was a spectacular one‐day return given that market interest rates were 6%.
Short‐sellers have been wary of Kmart ever since it emerged from bankruptcy in early May 2003. After
Mr. Lampert bought up some $1 billion of Kmart’s distressed debt in 2002, he kicked off an aggressive
restructuring campaign that included closing stores and selling off real estate to competitors. Investors
were so enamored of his results that they helped to double Kmart’s stock price in the past 18 months
from $58 per share to the current value of $120 per share.
The SEC filing also included a new employment contract for Sears chief executive Alan Lacy, who is
slated to be CEO and vice chairman of the combined company, Sears Holdings Corp. Under the
employment pact, which runs for 5 years after the merger’s effective date, Lacy is entitled to a minimum
base salary of $1.5 million a year and a target annual bonus of 150% of the base salary.
An acquirer’s brand typically is the one that goes forward, but companies have been known to flout the
rule based on whose brand is stronger in the marketplace. When Nations Bank bought Bank of America,
the merged company took the Bank of America name and re‐branded all the Nations Bank branches.
Asked to comment on the Kmart / Sears deal, an analyst said “I don’t think the combined company will
be a much more significant challenge to Wal‐Mart. Consumers think that when they want price they go
to Wal‐Mart. When they want value – a little fashion – they go to Target.” After hearing this, Mr.
Lampert began to wonder if he had made the correct decision. “I wonder,” he thought to himself,
“would I have been better off buying Target instead?” Although it was too late, he began to look at the
financials for Target to see if he would have been better off buying Target.
| Income Statements – January 31, 2004 | ||||
| Wal-Mart | Kmart | Sears | Target | |
| Sales | 258,681,000 | 23,253,000 | 41,124,000 | 48,163,000 |
| Cost of Sales | 198,747,000 | 17,846,000 | 26,231,000 | 31,790,000 |
| Gross_Profit | 59,934,000 | 5,407,000 | 14,893,000 | 16,373,000 |
| Administrative_Expenses | 44,909,000 | 4,998,000 | 9,111,000 | 11,534,000 |
| EBIT | 15,025,000 | 409,000 | 5,782,000 | 4,839,000 |
| Interest | 996,000 | 162,000 | 1,025,000 | 559,000 |
| Taxes (@ 35 %) | 4,910,150 | 86,450 | 1,664,950 | 1,498,000 |
| Net Income | 9,118,850 | 160,550 | 3,092,050 | 2,782,000 |
| Balance Sheets as at January 31, 2004 | ||||
| Wal-Mart | Kmart | Sears | Target | |
| Cash_and_cash_equivalents | 5,199,000 | 2,088,000 | 9,057,000 | 816,000 |
| Receivables | 1,254,000 | 301,000 | 3,397,000 | 5,776,000 |
| Inventory | 26,612,000 | 3,238,000 | 5,335,000 | 5,373,000 |
| Total_Current_Assets | 33,065,000 | 5,627,000 | 17,789,000 | 11,965,000 |
| Property,_Plant_&_Equip. | 58,530,000 | 153,000 | 6,788,000 | 16,969,000 |
| Other_Assets | 6,079,000 | 120,000 | 908,000 | 1,495,000 |
| Total_Assets | 97,674,000 | 5,900,000 | 25,485,000 | 30,429,000 |
| Accounts_Payable | 31,051,000 | 1,772,000 | 7,582,000 | 7,448,000 |
| Other_current_Liabilities | 6,367,000 | 1,050,000 | 5,194,000 | 866,000 |
| Total_current_liabilities | 37,418,000 | 2,822,000 | 12,776,000 | 8,314,000 |
| Long_term_Debt | 20,099,000 | 2,297,000 | 4,718,000 | 10,217,000 |
| Common_stock | 431,000 | 208,000 | 823,000 | 96,000 |
| Retained_Earnings | 39,726,000 | 573,000 | 7,168,000 | 11,802,000 |
| Total_Liabilities_&_Equity | 97,674,000 | 5,900,000 | 25,485,000 | 30,429,000 |
Questions you should consider in reviewing the case:
1. How could we find the greatest underperforming area for any of the firms?
In: Finance
Is the national crime rate really going down? Some sociologists say yes! They say that the reason for the decline in crime rates in the 1980s and 1990s is demographics. It seems that the population is aging, and older people commit fewer crimes. According to the FBI and the Justice Department, 70% of all arrests are of males aged 15 to 34 years†. Suppose you are a sociologist in Rock Springs, Wyoming, and a random sample of police files showed that of 38 arrests last month, 24 were of males aged 15 to 34 years. Use a 10% level of significance to test the claim that the population proportion of such arrests in Rock Springs is different from 70%.
(a) What is the level of significance?
State the null and alternate hypotheses.
H0: p = 0 .7; H1: p < 0.7H0: p = 0.7; H1: p > 0.7 H0: p < 0 .7; H1: p = 0.7H0: p = 0.7; H1: p ≠ 0.7H0: p ≠ 0.7; H1: p = 0.7
(b) What sampling distribution will you use?
The standard normal, since np > 5 and nq > 5.The Student's t, since np < 5 and nq < 5. The Student's t, since np > 5 and nq > 5.The standard normal, since np < 5 and nq < 5.
What is the value of the sample test statistic? (Round your answer
to two decimal places.)
(c) Find the P-value of the test statistic. (Round your
answer to four decimal places.)
Sketch the sampling distribution and show the area corresponding to
the P-value.
(d) Based on your answers in parts (a) to (c), will you reject or
fail to reject the null hypothesis? Are the data statistically
significant at level α?
At the α = 0.10 level, we reject the null hypothesis and conclude the data are statistically significant.At the α = 0.10 level, we reject the null hypothesis and conclude the data are not statistically significant. At the α = 0.10 level, we fail to reject the null hypothesis and conclude the data are statistically significant.At the α = 0.10 level, we fail to reject the null hypothesis and conclude the data are not statistically significant.
(e) Interpret your conclusion in the context of the
application.
There is sufficient evidence at the 0.10 level to conclude that the true proportion of arrests of males aged 15 to 34 in Rock Springs differs from 70%.There is insufficient evidence at the 0.10 level to conclude that the true proportion of arrests of males aged 15 to 34 in Rock Springs differs from 70%.
In: Statistics and Probability
Is the national crime rate really going down? Some sociologists say yes! They say that the reason for the decline in crime rates in the 1980s and 1990s is demographics. It seems that the population is aging, and older people commit fewer crimes. According to the FBI and the Justice Department, 70% of all arrests are of males aged 15 to 34 years†. Suppose you are a sociologist in Rock Springs, Wyoming, and a random sample of police files showed that of 36 arrests last month, 25 were of males aged 15 to 34 years. Use a 10% level of significance to test the claim that the population proportion of such arrests in Rock Springs is different from 70%.
(a) What is the level of significance?
State the null and alternate hypotheses.
H0: p = 0.7; H1: p ≠ 0.7H0: p < 0 .7; H1: p = 0.7 H0: p = 0 .7; H1: p < 0.7H0: p = 0.7; H1: p > 0.7H0: p ≠ 0.7; H1: p = 0.7
(b) What sampling distribution will you use?
The Student's t, since np > 5 and nq > 5.The standard normal, since np < 5 and nq < 5. The standard normal, since np > 5 and nq > 5.The Student's t, since np < 5 and nq < 5.
What is the value of the sample test statistic? (Round your answer
to two decimal places.)
(c) Find the P-value of the test statistic. (Round your
answer to four decimal places.)
Sketch the sampling distribution and show the area corresponding to
the P-value.
(d) Based on your answers in parts (a) to (c), will you reject or
fail to reject the null hypothesis? Are the data statistically
significant at level α?
At the α = 0.10 level, we reject the null hypothesis and conclude the data are statistically significant.At the α = 0.10 level, we reject the null hypothesis and conclude the data are not statistically significant. At the α = 0.10 level, we fail to reject the null hypothesis and conclude the data are statistically significant.At the α = 0.10 level, we fail to reject the null hypothesis and conclude the data are not statistically significant.
(e) Interpret your conclusion in the context of the
application.
There is sufficient evidence at the 0.10 level to conclude that the true proportion of arrests of males aged 15 to 34 in Rock Springs differs from 70%.There is insufficient evidence at the 0.10 level to conclude that the true proportion of arrests of males aged 15 to 34 in Rock Springs differs from 70%.
In: Statistics and Probability