The riskless rate for this period is 3.5%, and the covariance between returns on IBM stock and the S&P500 over this period is 0.02276.

1E. What is the variance of the S&P500 over this period?

1F. What is IBM’s CAPM beta according to this data?

1G. What is IBM’s CAPM cost of equity according to this data?

1H. If IBM’s debt to equity ratio is 0.57, what is their unlevered cost of equity according to this model?

Please show work for each.

The riskless rate for this period is 3.5%, and the covariance between returns on IBM stock and the S&P500 over this period is 0.02276.

1E. What is the variance of the S&P500 over this period? 2 points

1F. What is IBM’s CAPM beta according to this data? 5 points

1G. What is IBM’s CAPM cost of equity according to this data? 5 points

1H. If IBM’s debt to equity ratio is 0.57, what is their unlevered cost of equity according to this model? 5 points

Question 1.

The riskless rate for this period is 3.5%, and the covariance between returns on IBM stock and the S&P500 over this period is 0.02276.

1E. What is the variance of the S&P500 over this period?

1F. What is IBM’s CAPM beta according to this data?

1G. What is IBM’s CAPM cost of equity according to this data?

1H. If IBM’s debt to equity ratio is 0.57, what is their unlevered cost of equity according to this model?

Which insect repellents protect best against mosquitoes? Consumer reports (June 2000) tested 14 products that all claim to be an effective mosquito repellent. Each product was classified as either lotion/cream or aerosol/spray. The cost of the product (in dollars ) was divided by the amount of the repellent needed to cover exposed areas of the skin *about 1/3 ounce) to obtain a cost-oer0use value. Effectiveness was measured as the maximum number of hours of protection (in half-hour increments) provided when human testers exposed their arms to 200 mosquitoes. The data from the report:

Insect Repellent                              Type   Cost/Use Maximum Protection
Away HourGuard 12            Lotion/Cream       $2.08      13.5 hours
Avon Skin-So-Soft       Aerosol/Spray      0.67                   0.5
Avon BugGuard Plus            Lotion/Cream       1.00                   2.0
Ben's Backyard Formula Lotion/Cream 0.75                  7.0
Bite Blocker                       Lotion/Cream         0.46                  3.0
BugOut                      Aerosol/Spray         0.11       6.0
Cutter Skinsations               Aerosol/Spray        0.22    3.0
Cutter UNscented    Aerosol/Spray     0.19               5.5
Musko1l Ultra6Hours            Aerosol/Spray     0.24                  6.5
Natrapel                         Aerosol/Spray      0.27                 1.0
Off! Deep Woods       Aerosol/Spray       1.77                  14.0
Off! Skintastic     Lotion/Cream    0.67              3.0
Sawyer Deet Formula          Lotion/Cream 0.36    7.0
Repel Permanone               Aerosol/Spray      2.75    24.0

a. Suppose you want to use repellent type to model the cost per use (y). Create the appropriate number of dummy variables for repellent type, and write the model.
b. Fit the model you wrote in part a to the data.
c. Give the null hypothesis for testing whether repellent type is a useful predictor of cost per use (y).
d. Conduct the test suggested in part c and give the appropriate conclusion. Use alpha=.10.
e. Repeat parts a-d if the dependent variable is maximum number of hours of protection (y).

2,4% compounded yearly

2000 monthly payment

1 000 000 initial payment

40 years

We are still thinking that the price of the apartment is very expensive, we believe we could convince the bank of making payments only once a year, at the end of the year. The interest rate would still be the same 2.4%, how much money have we saved with this action?

a) In the payments for each year?

b) in the total amount paid for the whole period?

c) what is the present value of the savings?

2. Firm I has variable cost VCi = yi^2/10 and fixed cost FCi = 2000.

(1) Find total cost Ci(yi), average cost ACi, marginal cost Mci and the firm supply function Si(p)

(2) There are n=50 firms identical to firm I, facing a market demand of D(p) = 1000-250p. Find the market supply function S(p), the market equilibrium price p*, the market equilibrium quantity Y*.

(3) Given price p* you found in part b, what is the profit maximising yi* that firm i produces? How much profit does firm i make?

(4) The government introduces a tax on demand so that D'(p ) = 1000-250(p+t), where t=8. What is the new equilibrium price p? What is the new market equilibrium quantity Y'?

(5) At the new market price p', and assuming that in the short run the number of firms remains n=50, how much will firm I produce and how much will profit be?

(6) Given what you found in part e, will firms enter or exit? What is the long-run equilibrium number of firms n? What is the long run equilibrium price?

1. Firm I has variable cost VCi = yi^2/10 and fixed cost FCi = 2000.

(1) Find total cost Ci(yi), average cost ACi, marginal cost Mci and the firm supply function Si(p)

(2) There are n=50 firms identical to firm I, facing a market demand of D(p) = 1000-250p. Find the market supply function S(p), the market equilibrium price p*, the market equilibrium quantity Y*.

(3) Given price p* you found in part b, what is the profit maximising yi* that firm i produces? How much profit does firm i make?

Consider a freeway with two lanes and capacity of 2000 veh/h/lane, jam density of 60 veh/km/lane and a triangular fundamental diagram. Traffic is moving with the flow of 3000 veh/h and the space mean speed of 100 km/h. At 10:00 a.m., a traffic crash occurs that blocks one lane for half an hour. Using shockwave analysis, answer the following questions. a. Draw the space-time diagram with shockwaves and traffic states (trajectories not needed). [2 marks] b. At time t = 10:30 a.m., Jack enters the freeway via an upstream on-ramp, which is 20 km away from the accident location. Does Jack experience congestion? If yes, what time does Jack start driving at a lower speed? [3 marks]

Emerald Ltd, a manufacturing company, commenced operations on 1 July 2016 by issuing 350 000 $5.00 shares, payable in full on application on a first-come, first-served basis. By 31 July 2016 the shares were fully subscribed and duly allotted. There were share issue costs of $10 000. No additional shares were issued during the year ending 30 June 2017.

For the year ending 30 June 2018, the company recorded the following aggregate transactions:

The following additional information was noted during the preparation of financial statements for the year ended 30 June 2018:

75 000 fully paid ordinary shares have been issued on 1 October 2017 at the price of $4.00.

$135 000 dividends (31.76 cents per share) were declared and paid during the 2018 financial year. A final dividend for 2018 of $51 850 was proposed but not recognised in the financial statements.

There was a gain of $20 000 from the cash flow hedge arrangement during the 2018 financial year. Any gain or loss associated with the cash flow hedge is directly recognised in equity. There was no previously recognised cash flow hedge reserve before the 2018 financial year.

$25 000 of bank loans is repayable within 1 year.

$90 000 of other loans is repayable within 1 year.

The employee benefits of $32 000 are expected to be settled wholly within 12 months.

Emerald Ltd measures inventory at the lower of cost and net realizable value and property, plant and equipment using a cost model.

The summarised balances are provided below:

Required:

For the year ending 30 June, 2018,

Using the pro forma table supplied in appendix B, prepare a preliminary trial balance for Emerald Ltd;   (5 Marks)

APPENDIX B

Liam and Marta live in London. Both are teachers, with Liam in full time and Martart-time paid employment. When they bought a flat together in June 2018 the mortgage broker talked them through repayment and interest-only mortgages. They decided to use their savings as a deposit and chose a repayment mortgage, which by June 2020 was standing at £100,000. The market value of their flat had increased by 10% over this time period on the original purchasing price of £110,000.

Together, in June 2020 the couple earn a net monthly income of £4000 and their expenditure has averaged £4200 a month over the last two years. In June 2020 their car loan is down from £4,000 to £2,500, their current account balance has dropped to zero and they have an overdraft on their current account of £1500. Meanwhile their savings account holds just £300. They also owe £3000 on a credit card. The rest of their balance sheet has not changed since June 2018.  

They are reviewing their finances as they are considering improving their home by installing a new kitchen.

Table 1 shows their balance sheet and financial ratios in June 2018.

Table 1 Liam and Marta’s household balance sheet – June 2018

c. Using the financial ratios and other relevant information, compare the couple’s financial situation in June 2018 and June 2020, and explain whether you lean towards their home improvement idea.