Q5/ A large wood products company is negotiating a contract to sell plywood overseas. The fixed cost that can be allocated to the production of plywood is Sso0000 per month. The variable cost per thousand board feet is $121. The price charged will be determined by p=$700 – (0.05) D per 1,000 board feet. a. For this situation, determine the optimal monthly sales volume for this product and calculate the profit (or loss) at the optimal volume. b. What is the domain of profitable demand during a month?
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- - Consider demand: x(p₁) = 400 — 2p1 At a market price of p₁ = $125 per unit: • Determine the social loss due to moral hazard when assuming: 1. Full insurance compared to uninsured 2. A co-payment of $50 compared to uninsured 3. A 75% coinsurance rate compared to uninsuredB-1. Which is more desirable assuming data are COST Decenaine the cousen dagram. 60 90 60 1/3 (45) 45 99 40 50 50 30 20 /2 40 50 B-2. A firm must decide whether to construct a small, medium or large stamping plant. A consultant's report indicates a 0.20 probability that demand will be low and 0.80 that demand will be high. If the firm builds a small facility and demand turns out to be low, the Net Present Value (NPV) will be $42M. If demand turns out to be high, the firm can either subcontract and realize the NPV of $42M or expand greatly for a Net Present Value of $48M. The firm could build a medium size facility as a hedge: if demand turns out to be low, its NPV is estimated at $22M; if demand turns out to be high, the firm could do nothing and realize a NPV of $46M, or could expand and realize a NPV of $50M. If the firm builds a large facility and demand is low, the NPV will be ($20M), whereas high demand will result in a NPV of $72M. a) Analyze and solve this problem using a…D&R A3 3 - 2 Question 3. FRA Pricing, Valuation, Payoff, and Hedging Today is June 1. Sustainable Corporation has an obligation of $25 million coming due on August 1. The company is planning to borrow this amount on August 1 to fulfill its obligation, and plans to pay back the loan on December 1. The company’s borrowing rate is LIBOR + 125 basis points. The company’s bank presents it with the following LIBOR term structure: # days LIBOR 30 0.90% 60 1.00% 90 1.05% 120 1.10% 150 1.15% 180 1.18% 210 1.20% 240 1.21% For the calculation of interest, the bank assumes 30 days in a month, and 360 days in a year. Ms. Devro, the VP Finance of Sustainable, is worried that LIBOR will increase between June and August, thus increasing the company’s borrowing cost. She advises that the company enters into a forward rate agreement (FRA) with its bank to hedge its interest rate risk. She has asked you, the treasurer of the company, to…
- 6) Nicole has decided to go to school which costs her a total of P19,500 and give upi on a job that paid her P24,900 for the year. But instead, she can hope to earn P29,900 after she graduates. Nicole's opportunity cost amount to?a. P19,500 b. P24,900c. P29,900d. P5,000 7. Villanueva Enterprises reported the ff. information. What is the cost of goods manufactured in February?I. Jan. 2017 -job accumulated cost of P3,000ii. Feb. 2017 -the following costs were added to production: Job 1-P10,000 Job 2-P8,000Job 3-P7,000 III. Feb. 2017 Job 1 was completed and sold for P18,000 Job 2 was completed but not sold Job 3 remains in production b. P8,000c. P10,000 d. P13,000e. P21,000 8. Julie borrowed a certain amount from Diane on June 2016. Two years later, Julle i again borrowed P5,000. Julie decided to pay P1,000 on June 2019 and dischargei her balance by paying P7,500 on June 2021. What was the amount borrowed oni June 2016 if the interest rate is 8% compounded annually?a. P1,389.50 b.…The owner of a boat has estimated the following distribution of demand for a particular kind of boat. No. demanded o 1 2 3 Probability 0.10 0.20 0.30 0.40 Each boat costs him (c + d) rials and he sells them for (2 • c + 2 • d) rials each. Prices are given in hundreds rial units. Boats that are left unsold at the end of the season must be disposed off for (c + d – 2) rials each. How many should be stocked so as to maximize his expected profit?The Company has the oppotunity to introduce a new product. The sales manager believes that the firm could sell 5,000 units per year at 14 per unit for 5 years. The production manager has determined that machinery costing 60,000 and having a 5 year life and no salvage value could be required. The machinery will have an annual fixed cash operating costs of 4,000. Variable cost per unit will be 8. Straight-line depreciation is to be used for both book and tax purposes. The tax rate is 40% and the firm's cost of capital is 14%. What is the Net Present Value of the Investment?
- Refer to the payoff table below of profits in ($000). Which decision alternative results from using the Conservative (Pessimestic) Decision Rule? PAYOFF TABLE High Demand Small Medium Large 35 300 550 -10 Moderate Demand 35 150 75 -10 Low Demand Do Nothing O A. Large O B. Do nothing OC. Medium O D. Small O E. Cannot be determined since relative frequencies are missing. 35 50 -45 -10Power O Exponential Logarithmic O Polynomial QUESTION 9 If you try different startinng values for the changing cells and obtain different solutions: you can be confident there is no solution you can keep the best solution you have found and hope that it is indeed optimal O there must be a mistake in your objective function O there must be a mistake in one of your constraints QUESTION 10 In pricing models (i.e., Example 7.1), elasticity of demand is an input with specifies the: sensitivity of price to changes in demand O sensitivity of demand to changes in price range of demand lovolQ: A hardware company stocks nuts and bolts and orders them from a local supplier once every 2 weeks (10 working days). Lead time is 2 days. The company has determined that the average demand for 1⁄2 inch bolts is 150 per week (5 working days), and it wants to keep a safety stock of 3 days’ supply on hand. An order is to be placed this week, and the stock on hand is 130 bolts.a. What is the target level?b. How many 1⁄2 inch bolts should be ordered this time?
- Camille forecasts to sell 575 units of the perfume she is selling by the first week of December. At the end of the 1st week of December, she was able to disposed 500 perfumes at Php150 each. Of these 500 units, she gave a total of 20 giveaways. The total cost for each perfume is Php120. Determine Camille’s net sales volume. *4802075500 Let’s say that last November you have sold 10,000 pieces of chrysanthemum at 25 pesos each. For every piece sold, you will be given a commission of 10%. How much was your total commission? *225,00025,00010,0002.50250,000c) (i) A company manufactures a component which it sells for £100. The variable cost associated with its manufacture is £52 per component. Fixed costs allocated total £384,000. Determine how many components the company needs to sell to break even (i.e. to cover the sum of fixed and variable costs). (ii) Plot a graph which shows the break-even point in terms of the number of components produced.1. You are starting a business selling ferrets. • You need a pen and supplies which will cost you $100. Also, each ferret costs $10 each. Fill the table for cost. You will sell the ferrets for $15 each. Fill the table for Money. Plot and graph both lines for Cost and Money Use the provided paper (looks like this), take a picture and submit. 400 Money ($) Cost 0. 10 10 200 20 20 30 30 40 40 50 50 10 20 30 40 50 Edit View Insert Format Tools Table 12pt v Paragraph v BIUA v 8888- Ferrets Bought 888- Ferrets sold Money ($)