You are considering buying a new​ car, because you think it will save you money. Your think your old car will cost​ $2,200 in gas and maintenance next year​ (Year 1), and you expect that to increase by​ 6% every year until the end of Year 10. A new car will cost you​ $16,500 now​ (Year 0). You think it will cost​ $500 in gas and maintenance next year​ (Year 1), and you expect that to increase by​ 4% every year until the end of Year 10. You need to decide if the new car is worth the investment. Assume an annual interest rate of​ 5% a. What is the equivalent present value of the maintenance costs of the old​ car? b. What is the equivalent present value of the maintenance costs of the new​ car? c. Is the new car worth the​ investment?

A systems analyst tests a new algorithm designed to work faster than the currently-used algorithm. Each algorithm is applied to a group of 51 51 sample problems. The new algorithm completes the sample problems with a mean time of 24.43 24.43 hours. The current algorithm completes the sample problems with a mean time of 24.68 24.68 hours. The standard deviation is found to be 3.481 3.481 hours for the new algorithm, and 3.420 3.420 hours for the current algorithm. Conduct a hypothesis test at the 0.05 0.05 level of significance of the claim that the new algorithm has a lower mean completion time than the current algorithm. Let μ1 μ 1 be the true mean completion time for the new algorithm and μ2 μ 2 be the true mean completion time for the current algorithm. Step 2 of 4: Compute the value the test statistic. Round to two decimal places.

SOS Ltd is currently an all-equity firm and has a market value of $800,000. SOS is evaluating whether a levered capital structure would maximize the wealth of shareholders. The cost of equity is currently 15%. The new capital structure under consideration is an issue of $400,000 new perpetual debt with an 8% interest rate. There are currently 32,000 shares outstanding and a tax rate of 35% applies to this firm. If SOS finally changes to the new levered capital structure,

(a) Calculate the WACC under the levered capital structure. (Show your calculations).

(b) What are the stock prices of SOS before and after announcement of the new capital structure? Explain the price change briefly. (Show your calculations).

(c) Suppose the actual stock price of SOS after announcement of the new capital structure is lower than your answer in part (d) above, what could be the possible reasons for this?

Part III: Process Selection

Merrimac Manufacturing Company has always produced a certain component part at 50AED per part with an annual fixed investment of 10,000AED. Although the business is making a modest profit now, Merrimac suspects that if it invests in new equipment, it could recognize a substantial increase in profits. The new equipment costs 25,000AED to purchase and install. Merrimac estimates that with the new equipment, it will costs 40AED to produce the component part.

1. If the estimated demand is less than 1000 parts, Merrimac should or not purchase the new equipment?
2. Would your decision change if Merrimac’s annual demand increased to 2000 parts? Increased to 5000 parts?
3. Knowing that customers will be charged 65AED per part and considering the new equipment, how many component parts will Merrimac has to produce to break even? You have to calculate the break-even point.

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).

The manufacturer of a new racecar engine claims that the proportion of engine failures due to overheating for this new engine, (p1)(p1), will be no higher than the proportion of engine failures due to overheating of the old engines, (p2)(p2). To test this statement, NASCAR took a random sample of 215215 of the new racecar engines and 200200 of the old engines. They found that 1818 of the new racecar engines and 88 of the old engines failed due to overheating during the test. Does NASCAR have enough evidence to reject the manufacturer's claim about the new racecar engine? Use a significance level of α=0.1α=0.1 for the test.

Step 4 of 6 :  

Compute the value of the test statistic. Round your answer to two decimal places.

Step 5 of 6 :

Find the P-value for the hypothesis test. Round your answer to four decimal places.

Step 6 of 6 :

Conclusion.

1. 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?

Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $190,000 if credit were extended to these new customers. Of the new accounts receivable generated, 7 percent will prove to be uncollectible. Additional collection costs will be 5 percent of sales, and production and selling costs will be 78 percent of sales. The firm is in the 30 percent tax bracket.

a. Compute the incremental income after taxes.

b. What will Johnson’s incremental return on sales be if these new credit customers are accepted? (Input your answer as a percent rounded to 2 decimal places.)

c. If the accounts receivable turnover ratio is 5 to 1, and no other asset buildup is needed to serve the new customers, what will Johnson’s incremental return on new average investment be? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,700,000; the new one will cost, $2,053,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $465,000 after five years. The old computer is being depreciated at a rate of $368,000 per year. It will be completely written off in three years. If we don’t replace it now, we will have to replace it in two years. We can sell it now for $567,000; in two years, it will probably be worth $165,000. The new machine will save us $383,000 per year in operating costs. The tax rate is 22 percent, and the discount rate is 11 percent.

a-1. Calculate the EAC for the the old computer and the new computer.

a-2. What is the NPV of the decision to replace the computer now?

QUESTION

The table below shows data collected over a two-hundred-year time span in a woodland area. Each year, the number of new invasive species that appeared for the very first time in that woodland was recorded. Do new invasive species appear in random years, or non-random years? If they appear randomly, the data should follow a Poisson distribution.

1. Calculate the mean number of new invasive species per year
2. Test whether the data fit a Poisson distribution, making sure the data meet the assumptions of a Chi-square goodness-of-fit test.