ECO5POE Principles of Economics – custom papers

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ECO5POE Principles of Economics
Yuji Tamura 2015 S2 City
Exercises 3
(These exercises will be discussed on 18/08.)
1. Consider a competitive market for apples. We have the following data about this market:
Price ($ per kg) Demand (Thousand kg) Supply (Thousand kg)
1.00 60 40
1.50 55 45
2.00 50 50
2.50 45 55
3.00 40 60
3.50 35 65
4.00 30 70
a) Draw the market demand and supply in a diagram. What are the equilibrium price and
quantity?
b) The government is considering to introduce a price floor to this market to protect apple
producers. What is the market consequence if the price floor is $1.50 per kg?
c) What is the market consequence if the price floor is $3 per kg instead?
d) If the price floor is $2.50 per kg instead, how many kg of apples the government has to
purchase in order to ensure the equality of demand and supply?
e) What’s the total cost of the purchase?
2. Consider the same apple market above. Now assume that the government has decided to pay
producers a subsidy of $1 per kg (instead of introducing a price floor to support apple producers).
a) Re-draw the initial diagram that you drew in Question 1(a) above, and then superimpose the
post-subsidy supply schedule.
b) What’s the quantity traded in new equilibrium?
c) What’s the market price (the unit price that consumers must pay) in new equilibrium?
d) How much will suppliers receive for each kg of traded apples eventually (i.e. after the
government pays out the subsidy)?
e) What’s the total cost of the subsidy to the government?
3. Suppose that, as new market data have become available, policymakers have discovered that
demand is more elastic than old data indicated. More specifically,
Price ($ per kg) Demand (Thousand kg) Supply (Thousand kg)
1.00 70 40
1.50 60 45
2.00 50 50
2.50 40 55
3.00 30 60
3.50 20 65
4.00 10 70
a) Draw the market demand and supply in a diagram. What are the equilibrium price and
quantity?
b) The government wishes to boost the quantity traded to 60,000kg by giving a subsidy to
apple producers. What’s the size of per-kg subsidy that achieves the target?

 

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Questions Too

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1.The Ramirez company last dividend was $1.75. Its dividend growth rate is expected to be constant at 25% for two years after which dividends are expected to grow 6% forever. It is required return (rs)is 12%. Which is the best estimate of the current stock price?

a. 41.58

b.42.64

c. 43.71

d. 44.80

45.92

2.Consider the information for the following four firms.

Firm

Cash

Debt

Equity

rD

rE

Ï„c

Eenie

0

150

150

5%

10%

40%

Meenie

0

250

750

6%

12%

35%

Minie

25

175

325

6%

11%

35%

Moe

50

350

150

7.50%

15%

30%

Which is the weighted average cost of capital for Meenie closest to?

A) 10.5%

B) 7.4%

C) 10.0%

D) 8.8%

 

 

 

 

 

 

 

 

 

 

 

 

3. Zervos Inc. had the following data for 2008 (in millions). The new CFO believes (a) that an improved inventory management system could lower the average inventory by $4,000, (b) that improvements in the credit department could reduce receivables by $2,000, and (c) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered?

 

Original

Revised

Annual sales: unchanged
Cost of goods sold: unchanged
Average inventory: lowered by $4,000
Average receivables: lowered by $2,000
Average payables: increased by $2,000
Days in year

$110,000
$80,000
$20,000
$16,000
$10,000
365

$110,000
$80,000
$16,000
$14,000
$12,000
365


a. 34.0
b. 37.4
c. 41.2
d. 45.3
e. 49.8 (Points : 30)

 

4. Your firm is planning to invest in a new power generation system. Galt Industries is an all-equity firm that specializes in this business. Suppose Galt’s equity beta is 0.75, the risk-free rate is 3%, and the market risk premium is 6%. If your firm’s project is all equity financed, then which is your estimate of your cost of capital closest to?

A) 5.25%

B) 6.00%

C) 6.75%

D) 7.50%

(Points : 30)

(TCO D)

 

 

 

 

 

 

 

5.Which is the standard deviation of the returns on Stock A from 2000 to 2009 closest to?

  

Year End

Stock A Realized Return

(R – R)

(R – R)2

2000

46.3%

29.85%

0.0891023

2001

26.7%

10.25%

0.0105063

2002

86.9%

70.45%

0.4963203

2003

23.1%

6.65%

0.0044223

2004

0.2%

-16.25%

0.0264063

2005

-3.2%

-19.65%

0.0386123

2006

-27.0%

-43.45%

0.1887903

2007

27.9%

11.45%

0.0131103

2008

-5.1%

-21.55%

0.0464403

2009

-11.3%

-27.75%

0.0770063

A) 33.2%

B) 16.4%

C) 31.5%

D) 11.0%

 

6.

You expect CCM Corporation to generate the following free cash flows over the next 5 years.

Year

1

2

3

4

5

FCF ($ millions)

25

28

32

37

40

Following Year 5, you estimate that CCM’s free cash flows will grow at 5% per year and that CCM’s weighted average cost of capital is 13%.

Which is the enterprise value of CCM Corporation closest to?

A) $396 million

B) $290 million

C) $382 million

D) $350 million

(Points : 35)

 

7. TCO C) Bumpas Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 2/15, net 50. If the firm chooses to pay on time but does not take the discount, what is the effective annual percentage cost of its nonfree trade credit? (Assume a 365-day year.)

a. 20.11%

 b. 21.17%

 c. 22.28%

 d. 23.45%

 e. 24.63%

 

 (Points : 30)

 

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discussion board 349

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Read Chin, Gu & Tubbs, 2001. Describe the levels of global leadership competencies. Identify the level where you feel you are operating and what steps do you think you need to take in order to reach the next level?
requiremnts
500 words
own perspective
 
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critical thinking assignment 26

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The ARC is a ‘tool’ to evaluate critical thinking. The specific 6 elements and tasks of the ARC that

you will be graded on include:

1.

Communication:

Define the problem in your own words.

2.

Analysis:

Compare & contrast the available solutions within the scenario.

3.

Problem Solving:

Select one of the available solutions and defend it as your

chosen solution.

4.

Evaluation:

Identify the weaknesses of your chosen solution.

5.

Synthesis

:

Suggest ways to improve/strengthen your chosen solution.

6.

Reflection:

Reflect on your own thought process after completing the assignment.

a.

“What did you learn from this process?”

b.

“What would you do differently next time to improve?”

Review the scenario described below. Then answer the questions in an APA style format

utilizing your textbook, the internet and the information provided within the scenario to support

your analysis. Make sure that you thoroughly respond to each goal as well as each of the

questions posed within the goal to successfully complete the assignment.

Scenario #1:

The suspect in a robbery was fleeing from police, when he crossed into oncoming traffic

and collided head on with John Doe’s truck, severely injuring Doe, and killing himself. Mr.

Doe was airlifted to the local hospital burn unit.

Police investigating the robbery and the ensuing accident demanded that hospital

personnel draw blood from the victim, John Doe.

The nurse told police that she was not allowed to draw blood from an unconscious patient.

She further stated that police did not have a warrant and could therefore not collect blood

samples from a badly injured patient. Furthermore, she reiterated that the patient was not

conscious, so he could not give consent.

Choose your perspective for this assignment – you may decide to represent the hospital,

nurse, victim, or the police.

 

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