On January 1, 20x6, Cell Co. lends some money in exchange for a 10% $100,000 10-year note. The market rate for similar notes is 8%. Interest is received semiannually each July 1 and January 1. The financial year ends December 31. Round to the nearest whole number. (Hint: Prepare a partial amortization schedule to July 1, 20x8)

a.    The note is issued at -                                  (par / premium / discount)

b.    The present value of the note is - $

c.     The cash received at July 1, 20x6 is -$  

d.     The interest revenue to Cell Co. at December 31, 20x7 is -$

e.     The carrying amount of the note at July 1, 20x8 is -$

SET A

1.) What is Market Failure (define). Name the 4 causes of Market Failure and explain each cause of market failure.

2.)What is Opportunity Cost (Define and Explain) ? Give an example of an Opportunity Cost.

3.) What is a Demand Schedule & Demand Curve (Define and Explain)? What does a Demand Schedule and Demand Curve tell (State) in economics?

4.) What is Total Revenue and How is it calculated (formula)?

5.) What is a Production Function (Define and give an example of a production function)?

6.) What is Marginal Cost (definition), How is it Calculated "Formula" (Give an Example of example of how Marginal Cost is calculated).

Set up a table or spreadsheet for CSI, that illustrates the relationship among quantity (Q), price (P), the optimal level of advertising (A), the advertising-sales ratio (A/S), and sales revenue (S). In this spreadsheet, use formula functions to set

Q = 5000 -10p+40A+PA -0.8A² -0.5 P²

A = $25+$0.625P

A/S = (100XA)/S

S = P x Q

Establish a range for P from 0 to $125 in increments of $5 (i.e., $0, 45, $10, ...$125). To test the sensitivity of all other variables to extreme bounds for the price variable, also set price equal to $1,000, $2,500, and $10,000.

The domestic supply and demand curves for hula beans are as follows:

Supply: P = 50 + Q Demand: P = 200 - 2Q

where P is the price in cents per pound and Q is the quantity in millions of pounds. The U.S. is a small producer in the world hula bean market, where the current price (which will not be affected by anything we do) is 60 cents per pound. Congress is considering a tariff of 40 cents per pound. Find the domestic price of hula beans that will result if the tariff is imposed. Also compute the dollar gain or loss to domestic consumers, domestic producers, and government revenue from the tariff.

During March, the business engaged in the following transactions, All figures are GST (GST is 15%)inclusive where applicable:

Journalise each transaction. Key journal entries by transaction letter, using the format below:

General Journal

1 March: Borrowed $45,000 from the bank and signed a bill payable in the name of the business.

2 March: Paid cash of $40,000 to acquire a motor vehicle.

4 March: Performed service for a customer and received cash of $5,000.

10 March: Purchased supplies on credit, $300.

14 March: Performed customer service and earned revenue on credit, $2,600.

You are considering an investment project. The project has a life of three years. Project Information: Initial investment into a new machine, which would cost Rs.4,50,000. Machine is to be depreciated to zero over three years (straight line depreciation) with no salvage value at the end. Operating revenue is expected to be Rs. 6,00,000 per year. Operating costs for raw materials expected to be Rs.3,00,000 per year. Assume tax rate is 30% and the discount rate is 20%.

a. Compute after-tax cash flows every year. 300 Words

b. Evaluate the project NPV. Would you accept the project? 300 Words

Flounder Company, which is subject to a 40% income tax rate, projected its income before taxes for next year as shown here:

1) If Flounder wants $7,650,000 in pretax earning, what is the required level of sales, in dollars?

2) If Flounder’s net assets are $61,200,000, what amount of revenue must be achieved for Flounder to earn a 10% after-tax return on assets?

3) If Flounder wants after-tax earnings of 30% of sales, what is the required level of sales in dollars and in units?

Orange Valley Shipping is considering a project that would last for 2 years. The project would involve an initial investment of 84,000 dollars for new equipment that would be sold for an expected price of 76,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 24,000 dollars over 6 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 73,000 dollars per year and relevant annual costs for the project are expected to be 20,000 dollars per year. The tax rate is 50 percent and the cost of capital for the project is 6.11 percent. What is the net present value of the project?

Pharmaceutical companies spend billions of dollars every year on the research and development of new drugs. Suppose a pharmaceutical company estimates that if they invest $1 billion on the development of a new drug, they can expect to earn $500 million in accounting profit as a result (their stream of future revenue would be $500 million higher than all of their explicit costs, including the R&D costs).   Just based on this information (that this company can expect to earn $500 million in accounting profit from this drug), does this necessarily indicate that this company should develop this drug? What does the decision of whether to invest in this new drug (or another) depend on? Be specific.

1. Market demand and supply for a commodity are given by the following equations:

Demand: X = 30 – (1/3) P Supply: X = -2.5 + (1/2) P where X= quantity (units), and P=price per unit ($)

Suppose that the government is planning to impose a tax on this commodity and considering the following two options:

Option 1: A unit tax of $15

Option 2: An ad valorem tax of 20%

1. a) Find the tax incidence on buyers and producers, and the tax revenue of the government under each the two options (4 marks)

1. b) Compare the two options in terms of their welfare costs (2 marks)