Well-known financial writer Andrew Tobias argues that he can earn 177 percent per year buying wine by the case. Specifically, he assumes that he will consume one $10 bottle of fine Bordeaux per week for the next 12 weeks. He can either pay $10 per week or buy a case of 12 bottles today. If he buys the case, he receives a 10 percent discount and, by doing so, earns the 177 percent. Assume he buys the wine and consumes the first bottle today. Do you agree with his analysis? Do you see a problem with his numbers?
Q: SureStep is currently getting 160 regular-time hours from each worker per month. This is actually…
A: Productivity and complete output standards are met in an organization where the workers work with…
Q: There are three investments, B1, B2 and B3. All of them have the same expected value and each with…
A: Given data is
Q: We have separated the examples in this chapter into operations, finance, marketing, and sports…
A: In operations, another problem that could be attacked is minimizing the number of defective products…
Q: Michael has decided to invest $40,000 in three types of funds. Fund A has projected an annual return…
A:
Q: How many units of each type should the firm buy in order to maximize total return?
A: The given problem is: Maximize z=400x+800y Subject to x2+y2−4x−6y=67 Using Lagrange multipliers,
Q: he probability that a mobile phone is stolen in an electronic shop is 0.0008. If 8500 mobile phones…
A: Quality refers to the degree of excellence of something. Quality has some standard on the basis of…
Q: Kroeger supermarket sells its own brand of canned peas as well as several national brands. The store…
A: Case 1 - If Kroeger supermarket doesn't offer discount Let Kroeger stocks x cans of the company's…
Q: The company produces two types of valves, each valve of the first type needs twice the time it takes…
A: Let the company (x) value of type-1 and (y) numbers value of the second type.
Q: My current income is $40,000. I believe that I owe$8,000 in taxes. For $500, I can hire a CPA to…
A:
Q: strategy that maximizes the department store chain's expected profit earned by purchasing and…
A: πij= Revenue from regular price +Revenue from closeoutprice-cost of purchase =…
Q: A market analyst working for a small appliance manufacturer finds that if the firm produces and…
A: Answer (a) When given a graph of a profit equation with the number of items produced on the x-axis…
Q: Make a planning model for this question. A bank issues several financial products at the beginning…
A: Note: The model is planned based on several rough estimates. Values proposed are just for…
Q: The Schoch Museum (see Problem 30 in Chapter 11) is embarking on a five-year fundraising campaign.…
A: Donation refers to the instance of act concerning which a contribution, grant or gift is being…
Q: In a nonlinear programming model, for any set of values of the decision variables, whether or not…
A: False
Q: In robust optimization, what is meant by the term "hard constraint"?
A: There are two types of constraints soft constraint and hard constraint. Robust optimization relates…
Q: We must invest all our money in two stocks: x and y.The variance of the annual return on one share…
A:
Q: A buyer for a large department store chain must place orders with an athletic shoe manufacturer six…
A: Given, Cost Price = $65 Selling Price = $85 Closeout sell price = $55 Demand (100s of pairs)…
Q: You own a coffee shop in a metro Toronto shopping mall. It is Friday evening and you are trying to…
A: We have to find the value of payoff for quality baked(Q)+demand(D) by using below formula
Q: A company operates under hard budget constraints and has a WACC of 12%. In the current year it can…
A: Below is the solution:-
Q: Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to…
A: Hello thank you for the question. As per guidelines, we would provide only first three sub-parts at…
Q: Consider a firm in a competitive market with market price p. Which of the following statements are…
A: Different types of market structures can be classified on the basis of number of buyers and sellers…
Q: Two companies are producing widgets. It costs the first company q12 dollars to produce q1 widgets…
A: Given: First company Second company q12 dollars 0.5q22 dollars
Q: 7-37 Bbavika Investments, a group of financial advisors and retirement planners, is providing advice…
A: Decision Variable: Let, S be the dollars invested in the stock market M be the dollars invested in…
Q: An investment of $300,000 is expected to generate the following cash inflows in six years: Year 1:…
A: Find the Given Details below: Given Details: Total Investment 300000 $ Cash Inflows Year 1…
Q: Ray invested $300 in Stock A and $750 in Stock B. Since then, the value of Stock A has increased by…
A: Ray Invested $300 in stock A and $750 in Stock B. Since then the value of Stock A has increased by…
Q: The owner of a snack food business wants to create two nut mixes for the holiday season. The regular…
A: Decision variable: Suppose-R be the no. of regular nut mixD be the no. of delux nut mix
Q: You have $50,000 to invest in three stocks. Let Ri be the random variable representing the annual…
A: The question can be solved using Excel solver. Objective: To find a minimum variance (minimum risk)…
Q: A trust officer at the Blacksburg National Bank needs to determine how to invest $100,000 in the…
A: Given data: Bond Annual Return Maturity Risk Tax-Free A 9.5% Long High Yes…
Q: A company manufactures two products. If it charges price pi for product i, it can sell qi units of…
A: Non-linear programming (NLP) is used in complex optimization problems where the objectives or…
Q: Given the model in the Multiserver Simulation.xlsmfile, what unit cost parameters should be used if…
A: Simulation is an important tool for addressing the complicated problems of managerial…
Q: Alexis Harrington received an inheritance of $95,000, and she is considering two speculative…
A: A small introduction about investment A venture is a resource or thing procured fully intent on…
Q: :A couple wants to invest up to $20000. They can purchase a type A bond yielding 8% return and a…
A:
Q: Given the soft constraint X, + X2 +d* - d" = 45, which was originally the hard constraint X, + X2 =…
A: Slack and surplus variables are referred to as Deviational Variables (di — and di +) in general…
Q: • Formulate the problem of deciding how much of each product to make in the current week as a linear…
A: The linear programming method is a mathematical method by which the best outcome where profits are…
Q: Dataware is trying to determine whether to give a $10 rebate, cut the price $6, or have no price…
A: Consider creating a $10 rebate for a $45 product. Alternatives to a rebate would be to reduce the…
Q: The Acme Company is developing a product, the fixed costs are estimated to be $6000. and the unit…
A:
Q: 7. Investment Advisors, Inc., is a brokerage firm that manages stock portfolios for a number of…
A: Given, Max 3U+5H s.t 25U+50H <= 80000 0.5U+0.25D <= 700 U <= 1000 U,H >= 0
Q: Investment Advisors, Inc., is a brokerage firm that manages stock portfolios for a number of…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: each company sinks wells of the same size at the same time. If both companies sink wide wells, each…
A: 1. This can be illustrated in a game-theoretic environment in a normal form game with the…
Q: The manager of a bakery knows that the number of chocolate cakes he can sell on any given day is a…
A:
Q: A company operates under hard budget constraints and has a WACC of 12%. In the current year it can…
A: THE ANSWER IS AS BELOW:
Q: ayue Is The company is evaluating three different expansion plans: Minor, moderate, or major. They…
A:
Q: An electronics firm is currently manufacturing an item that has a variable cost of 25Php/unit and a…
A: Given, Fixed cost- 700000 V.C- 50/UNIT
Q: If An investor is considering investing in two securities A and B which promise a return of (10+X)%…
A: SOLUTION:
Q: Home mortgage lenders often charge points on a loan in order to avoid exceeding a legal limit on…
A: Given data, The lender would loan $98 for each $100 borrowed The borrower receives $ 98 Loan…
Q: Alexis Harrington received an inheritance of $95,000, and she is considering two speculative…
A: a) Let L and C be the amount to be invested in Land and Cattle respectively. Max 1.2L+1.3C s.t. L+C…
Q: Stock in Company A sells for $89 a share and has a 3-year average annual return of $24 a share. The…
A: Let; a be the number of shares in company A b be the number of shares in company B
Well-known financial writer Andrew Tobias argues that he can earn
177 percent per year buying wine by the case. Specifically, he assumes that he will
consume one $10 bottle of fine Bordeaux per week for the next 12 weeks. He can
either pay $10 per week or buy a case of 12 bottles today. If he buys the case, he
receives a 10 percent discount and, by doing so, earns the 177 percent. Assume he
buys the wine and consumes the first bottle today. Do you agree with his analysis?
Do you see a problem with his numbers?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
- A European put option allows an investor to sell a share of stock at the exercise price on the exercise data. For example, if the exercise price is 48, and the stock price is 45 on the exercise date, the investor can sell the stock for 48 and then immediately buy it back (that is, cover his position) for 45, making 3 profit. But if the stock price on the exercise date is greater than the exercise price, the option is worthless at that date. So for a put, the investor is hoping that the price of the stock decreases. Using the same parameters as in Example 11.7, find a fair price for a European put option. (Note: As discussed in the text, an actual put option is usually for 100 shares.)Suppose you begin year 1 with 5000. At the beginning of each year, you put half of your money under a mattress and invest the other half in Whitewater stock. During each year, there is a 40% chance that the Whitewater stock will double, and there is a 60% chance that you will lose half of your investment. To illustrate, if the stock doubles during the first year, you will have 3750 under the mattress and 3750 invested in Whitewater during year 2. You want to estimate your annual return over a 30-year period. If you end with F dollars, your annual return is (F/5000)1/30 1. For example, if you end with 100,000, your annual return is 201/30 1 = 0.105, or 10.5%. Run 1000 replications of an appropriate simulation. Based on the results, you can be 95% certain that your annual return will be between which two values?Suppose you currently have a portfolio of three stocks, A, B, and C. You own 500 shares of A, 300 of B, and 1000 of C. The current share prices are 42.76, 81.33, and, 58.22, respectively. You plan to hold this portfolio for at least a year. During the coming year, economists have predicted that the national economy will be awful, stable, or great with probabilities 0.2, 0.5, and 0.3. Given the state of the economy, the returns (one-year percentage changes) of the three stocks are independent and normally distributed. However, the means and standard deviations of these returns depend on the state of the economy, as indicated in the file P11_23.xlsx. a. Use @RISK to simulate the value of the portfolio and the portfolio return in the next year. How likely is it that you will have a negative return? How likely is it that you will have a return of at least 25%? b. Suppose you had a crystal ball where you could predict the state of the economy with certainty. The stock returns would still be uncertain, but you would know whether your means and standard deviations come from row 6, 7, or 8 of the P11_23.xlsx file. If you learn, with certainty, that the economy is going to be great in the next year, run the appropriate simulation to answer the same questions as in part a. Repeat this if you learn that the economy is going to be awful. How do these results compare with those in part a?
- Based on Grossman and Hart (1983). A salesperson for Fuller Brush has three options: (1) quit, (2) put forth a low level of effort, or (3) put forth a high level of effort. Suppose for simplicity that each salesperson will sell 0, 5000, or 50,000 worth of brushes. The probability of each sales amount depends on the effort level as described in the file P07_71.xlsx. If a salesperson is paid w dollars, he or she regards this as a benefit of w1/2 units. In addition, low effort costs the salesperson 0 benefit units, whereas high effort costs 50 benefit units. If a salesperson were to quit Fuller and work elsewhere, he or she could earn a benefit of 20 units. Fuller wants all salespeople to put forth a high level of effort. The question is how to minimize the cost of encouraging them to do so. The company cannot observe the level of effort put forth by a salesperson, but it can observe the size of his or her sales. Thus, the wage paid to the salesperson is completely determined by the size of the sale. This means that Fuller must determine w0, the wage paid for sales of 0; w5000, the wage paid for sales of 5000; and w50,000, the wage paid for sales of 50,000. These wages must be set so that the salespeople value the expected benefit from high effort more than quitting and more than low effort. Determine how to minimize the expected cost of ensuring that all salespeople put forth high effort. (This problem is an example of agency theory.)If a monopolist produces q units, she can charge 400 4q dollars per unit. The variable cost is 60 per unit. a. How can the monopolist maximize her profit? b. If the monopolist must pay a sales tax of 5% of the selling price per unit, will she increase or decrease production (relative to the situation with no sales tax)? c. Continuing part b, use SolverTable to see how a change in the sales tax affects the optimal solution. Let the sales tax vary from 0% to 8% in increments of 0.5%.In Problem 11 from the previous section, we stated that the damage amount is normally distributed. Suppose instead that the damage amount is triangularly distributed with parameters 500, 1500, and 7000. That is, the damage in an accident can be as low as 500 or as high as 7000, the most likely value is 1500, and there is definite skewness to the right. (It turns out, as you can verify in @RISK, that the mean of this distribution is 3000, the same as in Problem 11.) Use @RISK to simulate the amount you pay for damage. Run 5000 iterations. Then answer the following questions. In each case, explain how the indicated event would occur. a. What is the probability that you pay a positive amount but less than 750? b. What is the probability that you pay more than 600? c. What is the probability that you pay exactly 1000 (the deductible)?
- You are considering a 10-year investment project. At present, the expected cash flow each year is 10,000. Suppose, however, that each years cash flow is normally distributed with mean equal to last years actual cash flow and standard deviation 1000. For example, suppose that the actual cash flow in year 1 is 12,000. Then year 2 cash flow is normal with mean 12,000 and standard deviation 1000. Also, at the end of year 1, your best guess is that each later years expected cash flow will be 12,000. a. Estimate the mean and standard deviation of the NPV of this project. Assume that cash flows are discounted at a rate of 10% per year. b. Now assume that the project has an abandonment option. At the end of each year you can abandon the project for the value given in the file P11_60.xlsx. For example, suppose that year 1 cash flow is 4000. Then at the end of year 1, you expect cash flow for each remaining year to be 4000. This has an NPV of less than 62,000, so you should abandon the project and collect 62,000 at the end of year 1. Estimate the mean and standard deviation of the project with the abandonment option. How much would you pay for the abandonment option? (Hint: You can abandon a project at most once. So in year 5, for example, you abandon only if the sum of future expected NPVs is less than the year 5 abandonment value and the project has not yet been abandoned. Also, once you abandon the project, the actual cash flows for future years are zero. So in this case the future cash flows after abandonment should be zero in your model.)Amanda has 30 years to save for her retirement. At the beginning of each year, she puts 5000 into her retirement account. At any point in time, all of Amandas retirement funds are tied up in the stock market. Suppose the annual return on stocks follows a normal distribution with mean 12% and standard deviation 25%. What is the probability that at the end of 30 years, Amanda will have reached her goal of having 1,000,000 for retirement? Assume that if Amanda reaches her goal before 30 years, she will stop investing. (Hint: Each year you should keep track of Amandas beginning cash positionfor year 1, this is 5000and Amandas ending cash position. Of course, Amandas ending cash position for a given year is a function of her beginning cash position and the return on stocks for that year. To estimate the probability that Amanda meets her goal, use an IF statement that returns 1 if she meets her goal and 0 otherwise.)In August of the current year, a car dealer is trying to determine how many cars of the next model year to order. Each car ordered in August costs 20,000. The demand for the dealers next year models has the probability distribution shown in the file P10_12.xlsx. Each car sells for 25,000. If demand for next years cars exceeds the number of cars ordered in August, the dealer must reorder at a cost of 22,000 per car. Excess cars can be disposed of at 17,000 per car. Use simulation to determine how many cars to order in August. For your optimal order quantity, find a 95% confidence interval for the expected profit.