Your firm imports manufactured goods from China. You are worried that U.S.-China trade negotiations could break down next year, leading to a moratorium on imports. In the event of a moratorium, your firm expects its operating profits to decline substantially and its marginal tax rate to fall from its current level of 35% to 15%. An insurance fim has agreed to write a trade insurance policy that will pay $550,000 in the event of an import moratorium. The chance of a moratorium is estimated to be 10%, with a beta of - 0.8. Suppose the risk-free interest rate is 4.5% and the expected return of the market is 10.5%. a. What is the actuarially fair premium for this insurance? b. What is the NPV of purchasing this insurance for your firm? What is the source of this gain?
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- You are an assistant to a senator who chairs an ad hoc committee on reforming taxes on telecommunication services. Based on your research, AT&T has spent over $15 million on related paperwork and compliance costs. Moreover, depending on the locale, telecom taxes can amount to as much as 25 percent of a consumer’s phone bill. These high tax rates on telecom services have become quite controversial, due to the fact that the deregulation of the telecom industry has led to a highly competitive market. Your best estimates indicate that, based on current tax rates, the monthly market demand for telecommunication services is given by Qd = 300 − 4P and the market supply (including taxes) is Qs = 3P − 120 (both in millions), where P is the monthly price of telecommunication services. The senator is considering tax reform that would dramatically cut tax rates, leading to a supply function under the new tax policy of Qs = 3.2P − 120. How much money per unit would a typical consumer save each…You are an assistant to a senator who chairs an ad hoc committee on reforming taxes on telecommunication services. Based on your research, AT&T has spent over $15 million on related paperwork and compliance costs. Moreover, depending on the locale, telecom taxes can amount to as much as 25 percent of a consumer’s phone bill. These high tax rates on telecom services have become quite controversial, due to the fact that the deregulation of the telecom industry has led to a highly competitive market. Your best estimates indicate that, based on current tax rates, the monthly market demand for telecommunication services is given by Qd = 300 - 4P and the market supply (including taxes) is QS = 3P - 120 (both in millions), where P is the monthly price of the telecommunication services.The senator is considering tax reform that would dramatically cut tax rates, leading to a supply function under the new tax policy of QS = 3.3P - 120. How much money per unit would a typical consumer save…. As the owner of Barney’s Broilers—a fast-food chain—you see an increase in the demand for broiled chicken as consumers become more health conscious and reduce their consumption of beef and fried foods. As a result, you believe it is necessary to purchase another oven to meet the increased demand. To finance the oven you go to the bank seeking a loan. The loan officer tells you that your revenues of $750,000 are insufficient to support additional debt. To qualify for the loan, Barney’s Broilers’s revenue would need to be $50,000 higher. In developing a strategy to generate the additional revenue, you collect data on the price (in cents) per pound you charge customers and the related quantity of chicken consumed per year in pounds. This information is contained in the file called Q18.xls available online at www.mhhe.com/baye8e It is also available in the ‘Assignments’ section of the class Blackboard page in ‘MBA 6150 HW 3 Q18 data set’ file. Use that data and a log-linear demand…
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- Within its first three years, the 2012 Chevy Volt fell in value 62 percent to $12,997 in 2015. And a 2012 Nissan Leaf fell in value 66 percent to $10,220. That’s −22 percent a year, whereas the typical gasoline car depreciates −24, −15, and −12 percent its first three years (51 percent) for a −17 percent average per year. Indeed, at the extreme, a Honda Accord is worth fully 64 percent after three years (−12 percent average per year). Clearly, the steep decline in gasoline prices in 2014 contributed to electric-powered vehicles depreciating recently much faster than gasoline powered vehicles. But hybrid-electric vehicles such as the Nissan Leaf and Chevy Volt and all-electric vehicles such as the Chevy Bolt face another problem as well? 1.) What life cycle cost concept begins raising concerns by year 5 with any electric vehicle (EV)? If that issue affected resale value at year 5, would that affect perceived value-in-use? How exactly?Royal Dutch Shell has been doing business in Nigeria since the 1920s, and has announced new plans to develop oil and gas projects there. However, over the years Shell has confronted a series of episodes involving country risk. Shell’s operations are centred in Nigeria’s Ogoni region, where the local citizens have protested Shell’s drilling and refining activities, which are said to spoil the natural environment and reduce the amount of available farmland. Protestors also accuse Shell of extracting wealth from the region without adequately compensating local residents. Ogonis sabotaged Shell’s operations to such an extent that the firm suspended parts of its Nigerian operations. Shell also came under pressure to divest its Nigerian operations and to pay reparations to the locals. What proactive steps can Shell take to anticipate future country risk? What should Shell do to deal more effectively with country risk?Treasury bans Bain and Co. from public sector contracts for a decadeNational Treasury has banned consultancy Bain & Co. from tendering for public sector contracts for a period of 10 years for engaging in "corrupt and fraudulent practices" related to its contract at the SA Revenue Service (SARS).The ban will run from 5 September 2022 until 4 September 2032."This restriction has been published on the National Treasury website and database for restricted suppliers. The restriction will apply to any other contract for services awarded to Bain & Co in the public sector."Treasury said it was, in collaboration with SARS, "in the process of restricting Bain & Co, South African Directors through a phased approach".The decision to ban the company comes seven weeks after the UK government banned it from competing for state contracts for three years. Using the information in the article, and additional research, conduct a macro/remote environmental analysis of Bain and Company using…