A clinical trial is run to look at the efficacy of a new blood pressure drug. Patients with a diagnosis of hypertension (high blood pressure) are recruited to participate in the trial and randomized to receive either the new drug or placebo. Participants take the assigned drug for 12 weeks and their blood pressure status is recorded. At the end of the trial, participants are classified as still having hypertension or not. The data are shown here:

1.What was the prevalence of hypertension at the start of the trial?

2.What was the prevalence of hypertension at the end of the trial?

3.What was the incidence of recovery over the course of the trial?

4.Compute the relative risk of hypertension, comparing the new drug and the placebo.

5.Based on the results above, what can you conclude about the efficacy of the new drug?

The following table gives the total area in square miles​ (land and​ water) of seven states. Complete parts​ (a) through​ (c).

The management of Ballard MicroBrew is considering the purchase of an automated bottling machine for $71,000. The machine would replace an old piece of equipment that costs $18,000 per year to operate. The new machine would cost $8,000 per year to operate. The old machine currently in use is fully depreciated and could be sold now for a salvage value of $26,000. The new machine would have a useful life of 10 years with no salvage value.

Required:

1. What is the annual depreciation expense associated with the new bottling machine?

2. What is the annual incremental net operating income provided by the new bottling machine?

3. What is the amount of the initial investment associated with this project that should be used for calculating the simple rate of return?

4. What is the simple rate of return on the new bottling machine? (Round your answer to 1 decimal place i.e. 0.123 should be considered as 12.3%.)

True or False

1. People with diabetes are at higher risk for certain cancers than those without diabetes suggests a new study based on a telephone survey of nearly 400,000 adults. This is an example of an observational study.

2. In New York City, there are 3250 walk buttons that pedestrians can press at traffic intersections, and 2500 of them do not work. This is an example of a statistic.

3. In New York City, there are 3250 walk buttons that pedestrians can press at traffic intersections, and 2500 of them do not work. This is an example of discrete data.

4. A group of students is divided into two groups. One group is given a new chewable vitamin and the other group is given a placebo. After six months they are asked to fill out a questionnaire and given a health exam to see if the new vitamin has health benefits that are better than a placebo. This is an experimental study.

2. You work in the Finance Department for Flynn, Inc. Your firm needs to raise $6,500,000,000 ($6.50B) to finance new capital investments. Your boss is considering raising this capital using a rights offering. He has asked you to analyze the effect of such an offering on the firm’s shareholders. The firm has 750,000,000 shares outstanding. These are currently selling on the stock exchange for $32.52. Calculate the current market value of firm equity. To raise the needed $6,500,000,000 in new capital, your boss is considering issuing new shares at a subscription price of $25 in the rights offering. How many new shares will the firm need to issue to raise the $6,500,000,000? Calculate the number of rights that will be needed to purchase a new share. During the subscription period, what will be the market value of a right? After the rights offering, what will be the firm value? The number of outstanding shares? The share price?

1. Suppose utility for a consumer of movies (x) and golf (z) is U = 20x^0.6z^0.4. The consumer has set aside $1000 to consumer movies and golf for a year.
   1. If the price of movies is $20 and the price of golf is $30, what is the utility-maximizing consumption of movies and golf? (Use demand functions formula to solve).
   2. Show the optimal consumption bundle on a graph, showing a budget line (with intercepts), an indifference curve, and the optimal choice.
   3. Now suppose the price of golf falls to $25. What is the new utility-maximizing consumption of movies and golf?
   4. Show the new situation on your graph, including the new BL (with intercepts), new indifference curve, and new optimal choice. Also, show the price-consumption line.
   5. What is the price elasticity of demand for golf? To calculate, use the midpoint method, where percentage change for a variable x is (change in x)/(average x).

You work in the Finance Department for Flynn, Inc. Your firm needs to raise $7,250,000,000 ($7.25B) to finance new capital investments. Your boss is considering raising this capital using a rights offering. He has asked you to analyze the effect of such an offering on the firm’s shareholders.

The firm has 1,100,000,000 shares outstanding. These are currently selling on the stock exchange for $24.52.

Calculate the current market value of firm equity.

To raise the needed $7,250,000,000 in new capital, your boss is considering issuing new shares at a subscription price of $20 in the rights offering.

How many new shares will the firm need to issue to raise the $7,250,000,000? Calculate the number of rights that will be needed to purchase a new share.

During the subscription period, what will be the market value of a right?

After the rights offering, what will be the firm value? The number of outstanding shares? The share price?

X Company is trying to decide whether to continue using old equipment to make Product A or replace it with new equipment that will have lower operating costs. The following information is available:

• The new equipment will cost $53,000. Disposal value at the end of its 6-year useful life will be $6,000.
• The old equipment was purchased 3 years ago for $20,000. It can be sold immediately for $5,000 but will have zero disposal value in 6 years.
• Maintenance work, costing $4,000, will be necessary on the new equipment in Year 4.
• The new equipment will result in $9,000 of operating cost savings each year.

Assuming a discount rate of 8%, what is the net present value of replacing the old equipment with the new equipment? [Note: Use the Present Value tables in the Coursepack.]

Crazy Cliff’s Car Coral crushes competition causing college customers considerable consternation. Crazy Cliff’s has no debt and considering opening a new dealership – Crazier Cliff’s. Crazy Cliff requires that all new projects have a return on equity of 18%. The new dealership is expected to increase net income by $200,000 per year over the projects 10-year life. The new dealership will be placed on land Crazy Cliff purchased for $400,000 2 years ago; the land could be sold today for $450,000. Crazy Cliff plans on operating the dealership out of a brand-new double-wide that can be purchased for $80,000 and will be depreciated to zero over 10 years. The double-wide has no salvage value and the land is expected to be sold for $500,000. Assume a tax rate of 25%. What are the IRR and payback period of the project? Should the project be accepted?