The coronavirus is hitting businesses and their employees. Some businesses are still open and millions of employees are working to serve customers. Some of the employees work in their workplaces while some others work from home. Almost all employees worry whether they will lose their jobs or if they will have a pay cut. It is obvious that unemployment will rise because millions of employees will lose their jobs and the remaining employees may have a pay cut (10, 20, 30, 50%) depending on the position in his/her workplace.

Because of the coronavirus, the business environment has started to change. It is becoming a challenging fast-changing environment. Currently, many managers are faced with difficulties. In the near future and in the long run, they will need to deal with important issues.

Lastly, you have to remember that one can easily manage firms during prosperous times but effective managers flourish during difficult times.

Below is a sample list of terms that you can use when answering the question

Job security and protection; Employee morale; Employee stress; Anxiety; Employee wellness; Effective decision making; Work performance; Key competencies; Productive employees; Quality of work produced; Work-life balance; Mental health; Employees in a high-risk health category; Illness; Government sector; Health sector; Security forces.

1-What should managers do to manage employees and minimize the negative effects of the coronavirus on employees? Discuss the major OB issues faced by managers when dealing with employees who are currently working and the major OB issues that managers need to handle in the near future.

Homework 3

Managerial Economics – ECON 301

Instructions: Read each question carefully. If work is required, show your work to receive full or partial credit. Label all illustrations as necessary.

5 Points:    Your classmate argues that, all else being equal, if the price of ramen noodles increases the demand for ramen noodles decreases. Explain whether your classmate is correct or not?

5 Points:    Assume that ramen noodles are an inferior good. If the recently passed tax cut increase personal income, what impact might this have (all else being equal) on the demand for ramen noodles?

5 Points:    You are doing an analysis of a firm. When the firm’s production was 200 units, it generated 2000 in Total Benefits at a Total Cost of $500. When the firm ramped up production to 210 units, Total Benefits increased to 2200 and Total Cost to $600. What is the marginal benefit and marginal cost of producing 210 units?

5 Points:    Assume that you want to save so that you have $3000 in savings at the end of 5 years. The interest rate is 3%. How much do you have to save today to reach $5000 in savings at the end of 5 years?

5 Points:    Assume that you have won a prize that pays out $30,000 at the end of 5 years. Your classmate offers you $23,000 today for the prize. The opportunity cost of funds is 5%. Should you take your classmate’s offer? Why or why not?

5 Points:    Provide a brief example of the law of diminishing returns.

10 Points: Assume that your business has $15,000 today and wants to invest it to have $25,000 in 5 years. What is the interest rate necessary to make this happen?

10 Points: You receive $200 annually for a perpetual bond. Your classmate says the bond is worth $10,000. What is the assumed interest rate for the classmate>

20 Points: Assume that you are trying to value a firm that has current profits of $5 million. Assume that the opportunity cost of funds is 6% and the constant profit growth rate is 3%.

What is the present value of the firm if the firm does not issue a dividend?

What is the present value of the firm if it does issue a dividend?

30 Points: Given the table below, determine:

Net Benefits

Marginal Benefit

Marginal Cost

Marginal Net Benefits

What is the level of production that maximizes net benefits?

What is the level of marginal net benefits at this level of production?

What is the value of Marginal Benefit and Marginal Cost at this level of production?

What is the general principle (rule) with regards to Marginal Benefits, Marginal Costs, and the level of production that maximizes net benefits?

Question 1

The flow-to-equity approach has been used by the firm to value their capital budgeting projects. The total investment cost at time 0 is $640,000. The company uses the flow-to-equity approach because they maintain a target debt to value ratio over project lives. The company has a debt to equity ratio of 0.5. The present value of the project including debt financing is $810,994. What is the relevant initial investment cost to use in determining the value of the project?

Question 2

The Gold Paving Co. has an equity cost of capital of 16.97%. The debt to value ratio is .6, the tax rate is 34%, and the cost of debt is 11%. What is the cost of equity if Tip-Top was unlevered?

Question 3

The Company is in the 36% tax bracket, has riskless debt which makes up 40% of the total capital structure, and equity is the other 60%. The beta of the assets for this business is .8 and the equity beta is: _____________

Question 4

The Azzam Oil Company is considering a project that will cost $50 million and have a year-end after-tax cost savings of $7 million in perpetuity. Azzam's before tax cost of debt is 10% and its cost of equity is 16%. The project has risk similar to that of the operation of the firm, and the target debt-equity ratio is 1.5. What is the NPV for the project if the tax rate is 34%?

1. Cleveland Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department - Cutting - for a recent month.

Instructions:

Using the weighted-average method:
a. Determine the cost per equivalent unit for materials and conversion costs.
b. Determine the cost of units:

1. Transferred out of the department during the month.
2. Determine the cost of ending work-in-process inventory in the department.

Answer:

1. Compute the cost per equivalent unit. Note: the EUP’s are already computed and inserted below.

2. Compute the costs of goods transferred out and the ending work-in-process inventory. FIFO method.

A firm can sell pills in two countries; the pills cost fifty cents each to produce and sell.  Demand in country A is Q = 10 – P.  Demand in country B is Q = 10 – 2P.  The firm must sell an integer amount of pills. Determine the following: (a) Total quantity sold and total profits of the firm if it employs third degree price discrimination.  (b) Total quantity sold and total profits of the firm if it does NOT employ price discrimination.  (You must show or explain your calculations to get any credit for your answers.)