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Minimum sales Requirments:

Tami is considering leaving her $30,000 a year job and buying a cookie company. According to the Financial records of the firm, the relationship between pounds of cookies sold and profit is like this table:

Pounds of Cookies(in Hundreds),x Profit,P
0 -20,000
50 -5990
75 412
120 10,932
200 26,583
270 36,948
340 44,381
420 49,638
525 49,225
610 44,381
700 34,220

a) draw a scatter diagram of the date above with the pounds of cookies sold as the independent variable.

b) Use a graphing utility to find the quadratics fuction of best fit.

c) Use the function found in part (b) to determine the number of pounds of cookies that Tami should sell in order for the profits to exceed $30,000 a year and therefor make it worthwhile for her to quit her job.

d) Using the function found in part (b), determine the number of pounds of cookies that Tami should sell in order to maximize profits.

e) Using the function found in part (b), determine the maximum profit that Tami can expect to earn.

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Linear regression, CAPM

The file returns.xls contains for some period the returns of a company,the world stock, which will be the bench market for the returns of the two companies and the risk free
interest rate.

a) Determine the excesses of the company and the world stock.

c) Execute a simple linear regression between the excesses of the company and world stock.

d) What is the meaning of the slope of the regression line?

e) What can you tell about reliability of the slope? Can it be zero? Support your comments using a 95 % con.dence interval.

f) How many percent of the variability of the returns of the company is explained by the linear regression model?

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Mary invests $2000 into two accounts earning 5% and 7%. After one year she earns $114 in interest. How much of the $2000 did she invest in each account?

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1) Deposits of $800 are made twice a year over a 10 year period into an account offering 6% APR (deposits are made at the end of each half-year) .
(a) Assuming that the account had no money prior to the first $800 deposit, how much money is in the account after ten/years?
The money, is then taken out of the 6% account and put into an account offering 8% A.P.R. Deposits of $800 are made twice a year over another ten year period into this new account (deposits are made at the end of each half year, as before)
(b) How much money is there after this second 10 year period?
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(2) A loan of $5000 is taken out at an interest rate of 18% A.P.R. The loan is to be paid off in two years by payments made at the end of each month.
(a) What is the amount of the monthly payment?
(b) How much interest is paid over a two year period?
(3) Shopping for a 30 year loan, Ferdinand realizes he can afford a montly payment of at most $1200. Assuming a 7% A.P.R. (compounded monthly) and payments made at the end of each month, what is the largest amount of money - Ferdinand can fake out on a loan?

(4) A loan of $200,000 is made, to be paid offin monthly payments over a 20 year period. Assume that the interest rate is 7% A.P.R., and that the payments are made at the end of each month.

(a) Calculate the monthly payment
(b) What will be the total amount of interest paid over 20 years?
(c) How much is owed after half the payments have been made?
(d) At what time will only $100,000 be owed?
(e) After 10 years of this loan, the owners refinance and payoff the balance of the loan with a new 10-year loan offering an interest rate of 5% A.P.R. Calculate the monthly payments on this loan. (Assume that there are no refinance fees!)

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Please remember to show all of your work and include explanations for full/partial credit.
3. Financial advisors at Fidelity Investments, Boston, use the accompanying table as a
measure of whether a client is on the road to a comfortable retirement.

Age Years of Salary Saved
35 0.5
40 1.0
45 1.5
50 2.0

a) Write an equation in slope-intercept form for the years of salary saved and age. Be sure and clearly define your variables and explain how you obtained the equation.

b) Make a graph of the equation obtained in part a).

c) What is the slope of your graph in part b)? What does the slope tell us about the percentage of your salary you should be increasing every year?

d) By age 60 how many years of salary should you have saved?

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remember you must show all of your work and include explanations


PROBLEM ATTACHED!

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A sports drink company has two popular flavors, citrus and orange. Besides water, each contains two important ingredients, potassium and sodium. Orange contains 5 grams of potassium per gallon and 2 grams of sodium per gallon. Citrus contain 3 grams of potassium per gallon and 6 grams of sodium per gallon. The company has 360 grams of potassium and 480 grams of sodium available for production per hour. each gallon of orange produces a profit of $2 and each gallon of citrus produces a profit of $2.50. Write an objective function and constraints. Find the number of each to produce maximum profit.

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There are nine problems as follows. I would like to compare your answers to mine, which i am unsure of.

1. Uncle Fred's Popcorn keeps its books on a cash accounting basis and it
spends $200,000 to buy corn kernals and imitation butter flavoring in
April. It produces its popcorn in May and sells it to distributors in May
for $300,000, but it does not get paid until June. For each month: April,
May and June, show Sales, Net Income and Net Cash Flow

2. Suppose that starting 4 years from now you will recieve annual payments
of $20,000 for a period of 10 years. If the interest rate is 6%, what is
the Present Value of this stream of payments.

At a time when interest rates are at 8% an insurance company makes you
the following offer: "Pay us $1000 a year for 10 years, and after that we
will pay you (or your heirs) $1000 a year forever.

a. Is this a good deal for you?
b. Why/Why Not?

3. The common stock of International Coffee will pay a dividend of $3.20
per share this year. Its dividend yield is 7%. At what price is the stock
selling. If the company had after tax earnings of $5.20 per
share, what would its dividend payout ratio be.

4. In a slow year Felix's Franks will produce one million franks at a
total cost of $2,250,000. In a good year, it can produce two million
franks at a total cost of $3,500,000..

a. What are its Fixed Costs of Production?
b. What are its Variable Costs of Production per frank?

5. If a project operates at a cash-flow breakeven for its entire life,
what must be true of the projects NPV?

6. Investors expect the market rate of return this year to be 16%. A
stock with a Beta of 0.8 has an expected rate of return of 12%. If the
market return this year turns out to be 10%, what is the approximate the
rate of return of this stock. The market value of the firm International Coffee is $600 million.

7. The firm issues an additional $100 million of stock, but as a result the
stock price falls by 2%. What is the total cost of the price drop to the
existing shareholders as a result of the funds raised?

8. A firm uses $1,000,000 in Cash to purchase Inventories. What will
happen to:
a. Its Current Ratio
b. Its Quick Ratio

9. Turkey Lurkey has average accounts receivable of $12,666,000. Sales
for the year were $19,600,000. What is its Average Collection Period?

What would the Average Collection Period be if accounts receivable
were reduced to $7,500,000?

(a) True Sports Publishers has Total Receivable of $6,000, which
represents 20 day's of Sales. Average Total Assets are $125,000. The
firm's Profit Margin is 7.5%. Find the firm's ROA and Asset
Turnover Ratio.

(b) Suppose that True Sports Publishers has a debt-equity ratio
that is less than its industry's average, but its cash coverage ratio is
also lower than the industry average. What might explain this seeming
contradiction?