Time Series Analysis

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Exercises, # 1 and # 2 Managerial Economics
Economics for managers BOOK: ECO 550 STRAYER UNIVERSITY 2008 CUSTOM EDITION; ECONOMICS for MANAGERS: ISBN- 13: 978-0-558-03749-9 

Questions are in the attached JPEG

Capital budgeting analysis - Gibson Company invests in Brazil

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The Gibson Company is a United States (US) firm that is considering a joint venture with Brasilia, DF, a Brazilian firm that grows and processes coffee beans. Gibson has a patent for a new coffee processing method. This intellectual property is motivating Gibson to expand beyond importing coffee to engaging in a joint venture to process the coffee. Gibson will invest $8 million in the proposed joint venture project, which will help to finance Brasilia 's production using the newly patented process.
 

The Brazilian government has guaranteed that the after-tax profits (denominated in Reals, the Brazilian currency) can be converted to US dollars at the current exchange rate and sent to the Gibson Company each year. Current exchange rates can be found at http://www.oanda.com.

For each of the first five years, 60 percent of the total profits will be distributed to Brasilia, while the remaining 40 percent will be converted to dollars to be sent to Gibson. The income tax rate for the joint venture will be 10%. However, the Brazilian government is considering raising the income tax rate to 30%. At the present time, the Brazilian government doe not impose a separate income tax on profits sent out of the country.

Compute liquidity, solvency, and profitability ratios for Coca-Cola & Pepsi

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Instructions
(a) Compute the following liquidity ratios for 2004 for Coca-Cola and for PepsiCo and
comment on the relative liquidity of the two competitors.
(1) Current ratio. (4) Inventory turnover.
(2) Receivables turnover. (5) Days in inventory.
(3) Average collection period. (6) Current cash debt coverage.

Weighted Cost of Capital - Harley Davidson

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stimate Harley Davidson’s cost of capital.  Can you show your work for the solution with the answer underlined in word (not Excel)? Below is the data, which is relevant to the task:

The firm’s tax rate is 40%.

The current price of Harley Davidson’s 12% coupon, semi-annual payment, non-callable bonds with 15 years remaining to maturity is $1,153.72. Harley Davidson does not use short-term interest bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.

The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $116.95. Harley Davidson would incur flotation costs equal to 5% of the proceeds on a new issue.

Harley Davidson common stock is currently selling at $50 per share. Its last dividend (D0) was $4.19, and dividends are expected to grow at a constant rate of 5% in the foreseeable future. Harley Davidson beta is 1.2, the yield on T-bonds is 7%, and the market risk premium is estimated to be 6%. For the bond-yield-plus-risk-premium approach, the firm uses a 4 percentage point risk premium. 

Consolidated Financial statements/non-controlling interest consolidation of income

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In computing the non-controlling interest's share of consolidated net income, how should the subsidiary's income be adjusted from intercompany transfers? 

a) the subsidiary's reported income is adjusted for the impact of upstream transfers prior to computing the noncontrolling interest's allocation. 
b) the subsidiary's reported income is adjusted for the impact of all transfers prior to computing the noncontrolling interest's allocation. 

Production and Cost Analysis in the Short Run. (Microeconomic Analysis)

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1). The following table shows data for a simple production function.

a). from the information in the table, calculate marginal and average products.

Capital (K)	Labor (L)	Total product(TP)	Average product(AP)	Marginal product(MP)
10	0	0
10	1	5
10	2	15
10	3	30
10	4	50
10	5	75
10	6	85
10	7	90
10	8	92
10	9	92
10	10	90

Divisional Weighted Average Cost of Capital - Anheuser-Busch Companies, Inc.

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In 2006 Anheuser-Busch Companies, Inc (BUD) engaged in the production and distribution of beer worldwide, operating through four business segments: Domestic Beer, International Beer, Packaging, and Entertainment. The Domestic Beer segment offers beer under Budweiser, Michelob, Busch, and Natural brands in the United States in addition to a number of specialty beers including non-alcohol brews, malt liquors, and specialty mail beverages, as well as energy drinks. The International Beer segment markets and sells Budweiser and other brands outside the United States and operates breweries in the United Kingdom and China. In addition, the International Beer segment also negotiates and administers license and contract brewing agreements with various foreign brewers. The Packaging segment manufactures beverage cans and can lids for drink customers, buys and sells used aluminum beverage containers, and recycles aluminum containers. Finally, the Entertainment segment owns and operates theme parks.

Bond Issuance

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The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the firm is in the 40 percent tax bracket, and the bond has a $1,000 par value. 

Bond     Proceeds per bond     Size of issue     Initial maturity of bond     Years remaining to maturity 
A     $ 985     10,000 Bonds     20 years     15 years 
B     1,0325     20,000     25     16 
C     1,000     22,500     12     9 
D        960      5,000     25     15 
E     1,035     10,000     30     16 


a. Indicate whether each bond was sold at a discount, at a premium, or at its par value. 

Variable interest entities - stock transaction: Ames, Inc. and Nestlum, Inc.

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Ames owns 100% of Nestlum, Inc.  Although the Investment in Nestlum account has a balance of $596,000, the subsidiary's 12,000 shares have an underlying book value of only $40 per share.    On Jan 1, 2009, Nestlum issues 3,000 new shares to the public for $50 per share.  How does this transaction affect the Investment in Nestlum account? 

Operations management - Queuing Problem

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A manager wants to investigate the possibility of enlarging the docking facility so that two boats can stop for gas and servicing simultaneously. assume that the arrival rate is 5 boats per hour and that the service rate for each channel is 10 boats per hour.

a. what is the probability that the boat dock will be idle?
b. what is the average number of boats that will be waiting for service?

Operations management - Kolkmeyer Manufacturing Company

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Kolkmeyer manufacturing company is considering adding two machines to its manufacturing operation. this addition will bring the number of machines to eight. the president of kolkmeyer asked for a study of the need to add a second employee to the repair operation. the arrival rate is 0.05 machine per hour for each machine,and the service rate for each individual assigned to the repair operation is 0.50 machine per hour.

Financial statement analysis: Better Yet

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Analyze financial data to determine a company's financial position, operating results, and resource flows.

The income statement, similar to a video, measures the firm's profitability over a period of time: one month, one quarter, or one year. The statement focuses on the operations of the firm and explains what was produced and sold. In essence, it summarizes revenues generated and the results.

Mark understands that managing profitability involves overseeing three interrelated factors: volume, cost, and price. He has given you the job of conducting an in-depth analysis of Better Yet's operating performance.

Break-even charting and cost-plus formula

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The level of fixed costs (salaries, rent, and utilities) necessary to run my coffee shop on a monthly basis is $9,000. In addition, a cup of coffee sells for $1.25 costs $0.25 for the bulk coffee, filters, and water.
The contribution margin of a cup of coffee is, therefore, $1.00. I can now calculate how many cups of coffee I have to sell to cover my fixed costs:

Break-Even = (Fixed Costs) / (Contribution Margin)
= $9,000/$1.00 = 9,000 cups of coffee per month

Auditing Multiple Choice

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25. The financing cycle interfaces with the:
A) investing cycle.
B) expenditure cycle.
C) revenue cycle.
D) production cycle.
E) personnel services cycle.


26. The audit significance of the financial ratio, times interest earned, is:
A) this financial ratio provides a reasonableness test of the entity's proportion of equity that may be compared with prior years' experience or industry data.

Stock Options - Backmatter A: Landry's Restaurants, Inc., 2003 Annual Report

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This exercise is based on Landry's Restaurants, Inc. 2003 Annual report which can be accessed at the company's website.


Were any stock options exercised? Which financial statement did you find this information? What are the components of this financial statement?