The price elasticity of demand for imported whiskey is estimated to be −0.70 over a wide interval of prices. The federal government decides to raise the import tariff on foreign whiskey, causing its price to rise by 20 percent.

a. Will the quantity demanded on imported whiskey rise or fall, and by what percentage amount?

b. What is the percentage change in the total revenue of imported whisky after the tariff increases?

c. What will be the impact on domestic whisky demand after the tariff increases?

7.EXERCISE 15.2 POSITIVE AND NEGATIVE SHOCKS

Draw a labour market diagram where the economy is at labor market equilibrium with stable prices. Now consider:

• A positive shock to aggregate demand that reduces the unemployment rate by 2 percentage points.

• A negative shock that increases it by 2 percentage points.

1.What happens to the bargaining gap in each case?

2.What would you expect to happen to the price level in each case? Explain your answers.

1. A bond trader purchased each of the following bonds at a yield to maturity of 11%. Immediately after she purchased the bonds, interest rates fell to 9%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table:

Price @ 11%       Price @ 9%         Percentage Change

Application on Android Studio

"Tip Calculator" that calculates tip amount and total bill amount

1. Takes as input a bill amount.

2. Allows user to select a tip percentage between 0-25%

3. Displays tip amount and total amount (total amount = bill amount+ tip amount)

Hint: As tip percentage is a fixed range, you can use a SEEKBAR and as user slides the bar, auto calculate the tip amount and total amount.

Describe how the researcher should apply the five basic steps in a statistical study. ( Assume that all the people in the poll answered truthfully).

The percentage of workers that drink coffee or tea

a. The population is all workers. The researcher wants to estimate the percentage in this population that do not drink coffee or tea.

B. The population is all workers. The researcher wants to estimate the percentage in this population that drink coffee or tea.

C. The population is all workers that do not drink coffee or tea. The researcher wants to estimate the number in this population that drink coffee or tea.

D. The population is all workers that drink coffee or tea. The researcher wants to estimate the number in this population that drink coffee or tea.

Determine how to apply the second basic step in a statistical study in this situation.

A. The researchers should only gather raw data from workers that drink coffee or tea.

B. the researcher should gather data about drinking coffee or tea from the largest sample of workers from which the researcher can gather data.

C. the researcher should only gather raw data from workers that do not drink coffee or tea

D. the researcher should gather raw data from all the workers about whether or not they drink coffee or tea.

Determine how to apply the third step in the statistical study in this situation:

A. the sample statistic of interest is the number of workers in the sample that do not drink coffee or tea.

B. The sample statistic of interest in the percentage of workers in the sample that do not drink coffee or tea

C. the sample statistic of interest is the percentage of workers in the sample that drink coffee or tea

D. the sample statistic of interest is the number of workers in the sample that drink coffee or tea

Determine how to apply the fourth basic step in the statistical study in this situation.

A. If the researcher followed correct procedures, he or she can be confident that the sample statistics is equal to the percentage of workers in the population that drink coffee or tea

B. the researcher should use the sample statistic as an estimate for the population value of the percentage of workers that drink coffee or tea and then use the methods of statistics to determine how good that estimate is.

C. If the percentage of workers that drink coffee or tea is greater than 50% in the sample, the researcher can be confident that all workers drink coffee or tea

D. The sample statistics provides no useful information to the researcher in this situation

Determine how to apply the fifth basic step in the statistical study in this situation.

A. the researcher should use the methods of the statistics to determine the quality of the estimate of the population parameter and draw conclusions based on this estimate accordingly.

B. the researcher knows that the sample static is equal to the population parameter, so he or she may draw conclusion with complete confidence.

C. there is no way to determine how well the sample statistic estimates the population parameter,

D. the researcher cannot draw any conclusion based on the value of the sample statistic.

Problem: Sam has requested that you (1) identify all of the cash flows for this project, (2) calculate the project's NPV and IRR, and (3) provide your recommendation regarding whether the project should be accepted or rejected. The details of your cash-flow projections should be clearly presented. Show all work.

ABC Company is examining a new capital-investment proposal that would greatly increase the production of diapers. The proposal involves an investment in some machines that would increase the firm's efficiency at producing and preparing for export the top-quality diapers for which the region has become well-known. The purchase price of this machinery is $840,000 and installation costs would total $60,000. The equipment would have a useful life of 5 years and, for tax purposes, depreciation charges would be according to the 7-year-asset MACRS schedule. The machinery cost and the installation costs should be capitalized at t=0 and fully depreciated using the MACRS schedule. Management expects the machinery to be sold for a scrap value of $210,790 at the end of year 5. Ramon Rodriguez, the firm's accountant, pointed out that the portion of the factory that would house this new equipment machinery underwent a major 'renovation' 15 months ago with a total cost of $105,200. Because the project would not have been feasible without the renovation, Ramon suggests that the costs of the renovation should be allocated to the project as one of its initial expenses. Interest charges associated with this investment’s financing have been estimated at approximately $70,000 per year, for each year of the project's estimated useful life. The incremental sales (revenues) projections for this investment are shown near the end of this problem statement. Variable operating costs, excluding depreciation, are projected to be 40% of same-year sales. Incremental fixed costs (for maintenance, etc.) are projected to be $25,000 in the first year. For each of the remaining years of operation, this fixed-cost component is projected to increase by 2% per year. If the new machinery is purchased, some of ABC Company’s Net Working Capital (NWC) accounts will be affected. The schedule near the end of the problem statement shows balances for Accounts Receivable, Inventory, and Accounts Payable across the project’s life. Of course, you’ll need to use this information to build the NWC Tracker, which in turn feeds into the ΔNet Working Capital term in the cash-flow worksheet. The Chief Financial Officer of ABC Company, Sam Sand, requests your assistance in preparing an analysis of the net cash flow projections for the proposed investment. Sam believes that the systematic risk of this project is similar to the average systematic risk of other ABC projects. The firm-level required return (also called “hurdle rate” in business lingo) is 10%/year. Sam also indicates that 30% is the appropriate tax rate for this entire analysis. You also have the following information: Sales projections are these for years 1-5: $300,000, $420,000, $510,000, $600,000, and $480,000. The MACRS depreciation schedule for a 7-year asset is as follows: year 1: 14.29%; year 2: 24.49%; year 3: 17.49%; year 4: 12.49%; year 5: 8.93%; year 6: 8.92%; year 7: 8.93%; and year 8: 4.46%. Next, here is the schedule for the various working-capital accounts that will be affected if the project is undertaken:

Assume that you were recently hired as assistant to Jerry Lehman, financial VP of Coleman Technologies. Your first task is to estimate Coleman’s cost of capital. Lehman has provided you with the following data, which he believes is relevant to your task:

The firm’s marginal tax rate is 40%.

The current price of Coleman’s 12 % coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. New bonds would be privately placed with no flotation cost.

The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $113.10. Coleman would incur flotation costs of $2 per share on a new issue.

Coleman’s common stock is currently selling at $50 per share. Its last dividend (D₀) was $4.19, and dividends are expected to grow at a constant rate of 5% in the foreseeable future. Coleman’s beta is 1.2, the yield on Treasury bonds is 7%, and the market risk premium is estimated to be 6%. For the bond-yield-plus-risk-premium approach, the firm uses a four-percentage point risk premium.

Up to $300,000 of new common stock can be sold at a flotation cost of 15%. Above $300,000, the flotation cost would rise to 25%.

Coleman’s target capital structure is 30 %long-term debt, 10% preferred stock, and 60% common equity.

The firm is forecasting retained earnings of $300,000 for the coming year.

Question: What is Coleman’s cost for up to $300,000 of newly issued common stock, r_e1? What happens to the cost of equity if Coleman sells more than $300,000 of new common stock?

Donovan & Parents produces soccer shorts and jerseys for youth leagues. Most of the production is done by machine. Data on operations and costs for March follow.

Management asks the firm’s cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows.

Required:

a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs. (Round "Machine-related overhead" rate to 2 decimal places and enter "Materials related overhead" rate as a whole percentage)

b. Compute the total costs of production and the cost per unit for each of the two products for March. (Do not round intermediate calculations. Round your "Cost per unit" to 2 decimal places.)

Apply the Concepts

A pediatric ward in a metropolitan hospital has the following information:

• Monitors are used only for the monitoring activity
• The one computer is used 1,200 hours for supervisory work and 800 hours for monitoring work
• The nursing resources (supplies, uniforms, and labor) are assigned to activities using nursing hours. The nursing supervisor spends 100 percent of her time on supervision.

Required: