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As a newly promoted vice president (VP), your chief executive officer

As a newly promoted vice president (VP), your chief executive officer

Question
	
As a newly promoted vice president (VP), your chief executive officer (CEO) has invited you to participate in this year's upcoming strategic planning session. You know that this will be high-level type planning versus the more routine type planning you have done in the past. To prepare for this, you have done some research and noted the generic strategies model (cost leadership, differentiation, and focus) in a lot of the strategic-planning literature.

Using the Generic Strategies model, complete the following requirements:

Identify and describe 3 retail firms.
Note which of the 3 broad strategies that each firm seems to have chosen (low-cost producer, niche supplier, or differentiation strategy).
Identify at least 2 specific tactics that each of the three employ to support your opinion of their method of competing.
Do the tactics you cited seem to be working? On what evidence can you base your answer?

750 words, with intro & summary. APA. No particular firm.

ECO 213 – Module Week 6 – PROBLEM SET 3

ECO 213 – Module Week 6 – PROBLEM SET 3

Question
	
1. Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices.


Price of crackers Quantity Demanded (per month)


$3 80


$2.5 120


$2 160


$1.5 200


$1 240




If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity.


Assume the competitive market shown below faces a short run price of $10. Using the graph below, identify the following:


Profit maximizing output:


Approximate mark up over cost 


In the long run, the price falls to $7.50. Why does this happen?


What is the new profit maximizing output?




1. A local hardware store is trying to decide whether to stay open. They have found that their industry is extremely competitive and profits have shrunk considerably. Knowing that you have taken an economics course the owners have asked for your opinion. Draw a completely labeled graph to help you explain the shutdown decision. You should show two graphs in your answer, one for the market as a whole, and one for this store in particular. Assume that the store is losing money; however, explain why they may want to stay open for a little while longer. (NOTE: Your answer should be a written explanation of your graph.)




2. What combination of the two goods below allows you to maximize your utility with a budget constraint of $14? Show how you arrived at your conclusion in the space provided below. Place your final answers on the lines at the bottom of this page.


PRICE = $0.50 per pint








Bottles of glue



Total Utility (Utils)





1



15





2



23





3



30





4



35










Bottles of glue






Total Utility (Utils)



Marginal Utility (Utils)





1






15








2






23








3






30








4






35








5






38








6






40.5








Bales of hay



Total Utility (Utils)



Marginal Utility (Utils)








1



10











2



22











3



36











4



52











5



70











6



90

















	
,

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Keith Company is a two-division firm

Keith Company is a two-division firm

Question
	

29. Keith Company is a two-division firm and has the following information available for this year:


Common fixed costs $ 800,000
Direct fixed costs of Division A 200,000
Direct fixed costs of Division B 400,000
Sales revenue of Division A 800,000
Sales revenue ofDivision B 1,200,000
Variable costs of Division A 240,000
Variable costs of Division B 360,000


What is Division A's contribution margin?
A) $840,000
B) $440,000
C) $560,000
D) $(240,000)



Exhibit 1: The Testa Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of$100,000, they can be sold for a total of$160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.


I. Refer to Exhibit 1. The sunk cost in this situation is:


2. Refer to Exhibit 1: What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?


3. Refer to Exhibit 1. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?


Exhibit 2: The Wright Company has established standard cost for its single product as follows:


Direct material ................................ 2 gallons at $3 per gallon Direct labor .................................... 0.5 hours at $8 per hour Variable overhead ............................. 0.5 hours at $2 per hour
During May, the company made 4,000 units and incurred the following costs: Direct materials purchased: 8,100 gallons at $3.I 0 per gallon
Direct material used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual Variable overhead cost:$4,175


4. Refer to Exhibit 2. The materials price variance is:


5. Refer to Exhibit 2. The materials quantity variance is:


6. Refer to Exhibit 2. The labor rate variance is:


on, showing your calculation, and overall company's net operating income or loss, before and after eliminating Northern Division.


6. United Corporation manufactures laser printers. United currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums are as follows:


Cost of drum


Total cost


Variable manufacturing cost ............... $23 $736,000
Fixed manufacturing cost .................... $2.080.000
Total cost $88 $2.816.000


Hardware Solutions Inc. has offered to provide United with all of its imaging drum needs for $72 per drum. If United accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, United will be able to use the freed up space to generate $240,000 of income each year in the production of alternative products.


Based on the information presented, would United be better off to make the drums or buy the drums and by bow much?


7. Apex Company had the following data for the current fiscal period:


Units in process at the beginning of the month 6,000
Units in process at the end of the month 4,000
Units started during the month 20,000


Materials are added at the beginning of the process. Beginning work-in-process was 40 percent complete as to conversion. Ending work-in-process was 70 percent complete as to conversion.
Calculate the number of units completed and transferred out during the period?


a. Weighted Average method:
b. FIFO method:


8. Speedy Delivery Services has the collected the following information about operating expenditures for its delivery truck
fleet for the past five years:


Year Miles Ooerating Costs
2007 110,000 $390,000
2008 140,000 $420,000
2009 100,000 $360,000
2010 130,000 $410,000
2011 150,000 $440,000


a. Using the high-low method, what is the cost estimate for variable costs for 2012?


b. Using the high-low method, what is the cost estimate forfzxed costs for 2012?


c. What is the best estimate of total operating expenses for 2012 using the high-low method based on total expected miles of 120,000?

fiannce and data bank

fiannce and data bank

Question
	
1)
A portfolio with a correlation of +1 is not a well-diversified
portfolio. What must you as an investor do to structure a portfolio with
negative correlation?



2)
What macroeconomic variable do you believe has the greatest impact on
interest rates? Inflation? Briefly explain.



3)
Compare and contrast the Capital Asset Pricing Model (CAPM) and Arbitrage
Pricing Theory (APT)? Which model is appropriate for calculating a stock's
required rate of return? What is the Securities Market Line and which of the
above models is it a product of? 



.



4)
How would you determine if a public corporation's financial statements
are reliable? 



5)
What is a straddle? Would you use it when buying/writing options? Why?



.



6)
Are the financial markets efficient, and if so, under what form of
the Efficient Market Hypothesis model?



7)
What is the Bid price for a stock? What is the Ask price for a stock? What is a
Stop Loss for a stock?



8)
Briefly compare and contrast the primary market and the secondary markets.
What types of investors participate in each market? Briefly
describe the investment banking process.

general business data bank

general business data bank

Question



31. A
standard that assumes perfect implementation and maximum efficiency is called
a(n):











A.
Currently attainable standard. 



B.
Practical standard. 



C.
Efficiency standard. 



D.
Normal standard. 



E.
Ideal standard. 






32. A
standard that sets the performance criterion at a level that workers with
proper training and experience can attain most of the time without
extraordinary effort is a(n): 






A.
Currently attainable standard. B. Practical standard.






C.
Efficiency standard. D. Ideal standard.






33.
The total variable cost flexible-budget variance for any given period:






A.
Is the difference between actual total variable cost incurred and master
budgeted total variable cost. B. Is decomposable into sales-volume and
sales-mix components.



C.
Is decomposable into production-volume and production-mix components.






D. Can be broken down into
flexible-budget variances for major costs such as materials, labor, variable
overhead, and variable selling expenses.






34.
The flexible-budget variable cost variance includes all of the following except:






A.
Direct materials variances.



B.
Sales price variance.



C.
Variable selling and administrative expenses variances.



D.
Direct labor variances.



E.
Variable overhead variances.






35.
Which one of the
following is the difference in direct material costs between the actual amount
incurred and the total standard cost in the flexible budget for the units
manufactured during the period? 






A.
Direct materials price variance. 



B.
Direct materials mix
variance. 



C.
Direct materials usage
variance. 



D.
Direct materials
flexible-budget variance. 



E.
Direct materials
efficiency variance. 






36. For
a direct material, which one of the following is the difference between the
actual and standard unit price of the direct material multiplied by the actual
quantity of the material purchased? 






A.
Direct materials price variance. 



B.
Direct materials volume
variance. 



C.
Direct materials usage
variance. 



D.
Direct materials
flexible-budget variance. 



E.
Direct materials mix
variance. 






37. Which
one of the following, for each direct material used in production, is the
difference between the actual units of material used and the total standard
units of the direct material that should have been used for the units of the
product manufactured during the period, multiplied by the standard unit price
of the direct materials? 






A.
Direct materials sales-volume variance. 



B.
Direct materials rate
variance. 



C.
Direct materials usage
variance. 



D.
Direct materials
flexible-budget variance. 



E.
Direct materials mix
variance. 






38.
Which one of the
following is the difference between the actual and standard hourly wage rate
multiplied by the actual direct labor hours worked during a period? 






A.
Total direct labor standard cost
variance. 



B.
Direct labor efficiency
variance. 



C.
Direct labor usage
variance. 



D.
Direct labor
flexible-budget variance. 



E.
Direct labor rate
variance. 






39.
Which one of the
following is the difference between the actual and standard direct labor hours
for the units manufactured, multiplied by the standard hourly wage rate per
hour? 






A.
Direct labor price variance. 



B.
Direct labor efficiency
variance. 



C.
Total direct labor
standard cost variance. 



D.
Direct labor
flexible-budget variance. 



E.
Direct labor
operating-income variance. 






40.
The primary purpose of calculating standard cost variances each period
is:






A.
To achieve financial control regarding
operating activities. 



B.
To facilitate the
recording of manufacturing costs during a period. 



C.
To adjust reported
income to flexible-budget income. 



D.
To diagnose the problems
of operating problems as well as what should be done to correct such problems. 











41. A
firm uses a JIT inventory system and has an unfavorable selling price variance
for the period just ended. If the proportion of the total variable
manufacturing costs to total sales in both the flexible budget and the actual
operating results is 70%: 






A.
The firm has an unfavorable total
variable manufacturing cost variance. 



B.
The firm has a favorable
total variable manufacturing cost variance. 



C.
The firm has an
unfavorable total flexible-budget variance. 



D.
The firm has a favorable
contribution margin variance. 



E.
The firm has a favorable
total flexible-budget variance. 






42.
The effect on sales, expenses, or operating income of changes in units sold is
measured by the:






A.
Flexible-budget variance. 



B.
Sales-volume variance. 



C.
Sales price variance. 



D.
Operating income
flexible-budget variance. 



E.
Production-volume
variance. 






43. The
difference between actual and standard cost caused by the difference between
the actual number of resource-units used and the standard number of
resource-units that should have been used for the output of the period is
called the: 






A.
Controllable variance. B. Master budget variance. C. Flexible-budget variance.






D.
Quantity (or efficiency) variance. E. Price variance.






44.
Which of the following is not a plausible cause of a direct labor
efficiency variance?






A.
Poor scheduling of work.



B.
Inadequate supervision of workers.



C.
Materials used are different from those specified.






D.
Failure to update the standard cost to conform to wage provisions in the union
contract. E. Batch sizes during the period were different from standard.






45.
The direct materials usage ratio for a given period is:






A.
Defined as the ratio of quantity purchased to quantity used.






B.
Defined as the inverse of the materials quantity variance for the period. C.
Entered into its own variance account at the end of the period.






D.
A useful indicator of performance by the manufacturing department. E. A useful
indicator of performance of the purchasing department.






46. A
favorable cost variance of significant magnitude:






A. Is
the result of exceptional planning.



B.
May lead to future improvements in production methods if the variance is
investigated to determine its underlying cause(s). C. Is strong evidence of
excellent operating performance.



D.
Is strong evidence of tight financial control.






E.
Does not need to be investigated as to its underlying cause. 47. A flexible
budget contains:






A.
Cost targets based on actual output for the period. B. Cost targets based on
planned output for the period.



C.
Actual costs incurred for the actual output of the period.



D.
Costs and revenues for the difference between planned and actual output.






E.
Costs based on actual output of the period, and revenue based on master
budgeted output. 48. A favorable price variance for direct materials indicates
that:






A.
Lower-quality materials were purchased. B. The materials standard is likely out
of date.



C.
A lower price than expected was paid for the materials.



D.
Less material was used in production this period than should have been used.



E.
There will most likely be an unfavorable materials efficiency (quantity)
variance.






49. A
manufacturer planned to use $82 of materials per unit produced, but in the most
recent period it actually used $80 of material per unit produced. During this
same period, the company planned to produce 1,200 units, but actually produced
only 1,000 units. The flexible-budget variance for materials is: 






A.
$2,000 favorable. 



B.
Impossible to determine
without additional information. 



C.
$14,000 unfavorable. 



D.
$16,400 unfavorable. 



E.
$2,400 unfavorable. 






50.
All of the following are limitations of short-term financial performance
indicators except:






A.
Employees and managers can take actions
that improve short-term financial performance at the expense of long-term
performance. 



B.
Focusing on individual
cost variances can result in optimum local but not global (i.e., firm-wide)
performance. 



C.
Operating personnel may
not readily understand or be able to interpret financial-performance
indicators. 



D.
Senior managers
typically find non-financial performance indicators more useful than summary
financial-performance indicators. 









51.
Flexible budgets and standard costs are useful for assessing:






A.
Strategic performance during the most recent period. B. Operating performance
during the period.






C.
Short-term financial performance. D. Management control.






52.
For operational control, a management accounting system should include:






A.
Performance measures associated with basic business processes. B. Only
financial-control measures, such as standard cost variances.






C.
High-level financial metrics such as return on investment (ROI) or return on
sales (ROS). D. A combination of short-term and strategic financial-performance
metrics.






53.
Which of the following is not considered a basic business process?






A.
Operating processes.






B.
Customer-management processes. C. Innovation processes.






D.
Social/regulatory processes. E. Just-in-time (JIT) processes.






54.
Which of the following is not an anticipated benefit of switching to a
JIT production system?






A.
Reduction in inventory holding costs.






B.
Reduction of monitoring costs associated with the production system. C.
Reduction in customer-response time.



D.
Increased sales due to increases in quality and customer satisfaction.






E.
Reduction in internal failure costs, such as the cost of reworking defective
outputs. 55. Customer-response time (CRT) is defined as:






A.
The time between when a customer places an order and the time when the order is
received by the customer. B. The elapsed time between initial customer contact
and the time a customer places an order.



C.
The time between when a customer places an order and when that order is
manufactured.






D.
The time between when an order is started into production and when that order
is completed. 56. The term "processing cycle efficiency" (PCE):






A.
Like manufacturing cycle time, is a measure of operational efficiency. B. Is
defined as the ratio of manufacturing lead time to delivery time.



C.
Is defined as manufacturing lead time minus delivery time.






D.
Is defined as the ratio of customer-response time to order-delivery time. E. Is
at an optimum level when PCE = 0.






57.
Which of the following
is not indicated as an advantage of using nonfinancial performance
measures, relative to financial performance measures, as part of an operational
control system? 






A.
Nonfinancial performance indicators are readily understandable by operating
personnel.






B.
Nonfinancial performance indicators can be viewed as drivers of future
financial performance. C. Nonfinancial performance indicators direct attention
to precise problem areas that need attention. D. Nonfinancial performance
measures are more reliable than financial performance measures.






58.
Which of the following statements about processing cycle efficiency (PCE) is not
true:






A.
It is defined as the ratio of processing time to non-processing time. B. It is
a measure of operating process efficiency.



C.
It is based on the relationship between actual processing time and total
production time.






D. It incorporates notions of
"value-added" and "non-value-added," as discussed in the
development of activity-based cost (ABC) systems. E. The optimum value of PCE
is 1.






59. A
flexible-budget variance for any fixed cost:






A.
Is defined as the difference between flexible-budget fixed cost and the level
of fixed costs reflected in the master (static) budget. B. Is undefined, except
when actual output equals budgeted output.






C.
Is typically zero, because the volume assumed in the flexible budget and the
master budget for fixed costs is identical. D. Is the difference between
budgeted fixed cost and actual fixed cost.






60.
The total operating-income variance for any period:






A.
Is unaffected by variances between
actual and budgeted sales volume. 



B.
Can be decomposed into a
total flexible-budget variance and a sales-volume variance. 



C.
Can be decomposed into a
total flexible-budget variance and a sales price variance. 



D.
Is equal to the sum of
selling and administrative expense variances plus the total sales-volume
variance for the period. 



E.
Equals the sum of the
total flexible-budget variance plus the sales-mix variance for the period.

general business data bank

general business data bank

Question
	
81. Office supplies are good examples of what are called bottleneck products.




 






82. Strategic products have high value and cost to the customer and also involve high risk. 



 






83. According to the buygrid framework described in the text, a performance review completes the buygrid as a last step. 



 






84. The buying process begins when someone places
an order with a sales representative.



 






85. Product value analysis (PVA) is an approach to
cost reduction in which components
are studied to determine if they can be redesigned or standardized or made by
cheaper methods of production. 



 



86. A buying
alliance attempts to use their combined
leverage to obtain lower prices for raw materials. 



87. In the
business-to-business market on the Internet, the majority of purchases fall
under the category of services (e.g., advertising, financial needs, et cetera).




 



88. With respect to
proposal solicitation in B2B, sellers begin the process by requesting
permission to make a proposal rather than waiting for the buyer to request one.



 



89. In general,
buyers review the product and its price rather than any other considerations
about the seller as a buying decision is made. 



 



90. With respect to assessing customer value, in conjoint analysis customers
are asked to rank their preference for alternative market offerings or
concepts.



 



 



91. The buying center has many responsibilities;
however, it does not negotiate with suppliers in order to avoid a conflict of
interest. 



 






92.“OTIFNE” is the term that
summarizes three desirable outcomes of a B-to-B transaction, stands for: on
time, in full, no error.



 



93. Most
performance reviews are conducted by outside auditing agencies to avoid bias
and internal discrepancies. 



 






94. Corporate credibility depends on: corporate expertise, corporate
trustworthiness, and corporate likeability.



 






95. One of the problems facing B2B on the Web is that many firms often impose more
stringent requirements on their online business partners than they do on
non-online partners.



96.
One of the eight
categories of buyer-seller relationships
is the contractual transaction that generally shows low levels of trust,
cooperation, and interaction; exchange is defined by formal contract. 



 






97.
In the “customer is king”
category of buyer-seller relationship, the category is characterized as being
one that it relatively simple where
routine exchanges with moderately
high levels of cooperation and information exchange occurs. 



 






98. A good
illustration of a member of the institutional market would Boeing because it is
a member of the aviation institution structure. 



 






99. The United States
government is the largest customer
in the world.



 






100. Today, almost all companies
that sell to the U.S.
government use a marketing
orientation because of the special relationship required.



 









Essay 






101. Business markets have
several characteristics that contrast sharply with those of consumer markets.
Name and briefly characterize five of those contrasts. 









102. Illustrate the differences
between a straight rebuy, modified
rebuy, and a new task purchase. 






 



103.
 List and briefly describe the seven
roles played by members of a buying center. 









104.
 In defining target market segments,
four types of business customers can often be identified with corresponding
marketing implications. List and
briefly describe each of these business customers. 






. 



 



105. Explain the concept of solution
selling. Give one example of this
approach. 









106. The upgrading of purchasing means that
business marketers must upgrade their sales personnel to match the higher
caliber of the business buyers. List and briefly describe the three company purchasing orientations that buyers select
from.









107. Peter Kraljic distinguished four product-related purchasing
processes. List and briefly describe each of these four product groups. 






section. 






108. List the stages
(buyphases) of the industrial buying process.



 



   










109. List
and briefly characterize five methods of assessing customer value. 






 



110. Cannon and Perreault found that
buyer-supplier relationships
differed according to four factors: availability of alternatives; importance of supply; complexity
of supply; and supply market dynamism. Based on these four factors, they
classified buyer-supplier relationships
into eight different categories. What are those categories? 












APPLICATION QUESTIONS









Multiple Choice






111. German software company SAP has become a leading seller to the
business market by specializing in software to automate business functions. SAP’s
________ strategy is to focus carefully on what customers want, and shows them
how SAP’s software applications can improve
profits, raise revenue, or reduce costs. 



a.
product



b.
service



c.
leadership



d.
concentrated



e.
simplistic










112.
 The
________ market consists of all the organizations that acquire goods and
services used in the production of other products or services that are sold,
rented, or supplied to others.



a.
non-profit



b.
business



c.
hardware



d.
software



e.
government






113. IBM
counts small to midsize businesses as 20 percent of its business and has
launched ________, a line of hardware, software services, and financing, for
this market. 



a.
Impresario



b.
Express



c.
Datacount



d.
Smallbiz



e.
TaxMan



 






114. More than half of U.S. business
buyers are concentrated in seven states. Which of the following states WOULD
NOT be among those favored by
business buyers? 



a.
Texas



b.
New York



c.
California



d.
Pennsylvania



e.
Ohio






115. Jason Riggs’ company is considered to be an in-supplier for a lawn mower manufacturer. However, recently the lawn mower company
has put out a memo to in- and
out-suppliers indicating that it would like to modify
product specifications and delivery schedules. Which of the following buying
situations is most likely to be in
operation given the data above?



a.
Straight rebuy



b.
Elastic rebuy



c.
Fluctuating rebuy



d.
Flatten rebuy



e.
Modified rebuy



 










116. All of the following
are considered to be guidelines for selling to small businesses EXCEPT ________. 



a.
do not use the Internet



b.
do keep it simple



c.
don’t lump
small and midsize businesses together



d.
don’t forget about direct contact



e.
do provide after the sale support






117. Ford
Motor Co. has forged supplier and manufacturing relationships around the world.
Today, an accurate description of this automotive
giant is one where it is characterized as being mainly a car ________. 



a.
designer



b.
manufacturer



c.
assembler



d.
distributor



e.
promoter



 






118. If
you decided to go into the systems
contractingbusiness, which of the following categories would constitute
your main area of expertise in that this area would be what service you provide
for customers. 



a.
Computer
applications



b.
Database management



c.
Manufacturing



d.
Promotion
management



e.
MRO (maintenance, repair, operating) supplies



 






119. Think
about what you have learned about a buying center. If you performed the role of
the ________, you would be the person that has the power to prevent sellers or
information from them in reaching other members of the buying center. 



a. initiator



b. influencer



c. decider



d. gatekeeper



e. approver



 










120. According
to Webster, with respect to buying center influences, senior managers should
remember that people are ________. 



a.
not buying products—they are buying solutions to
problems



b.
buying products that they personally will not use



c.
buying surrogates that must appreciate that role



d.
are human shopping bots



e.
limited in their scope of overall business
operations


1

MGT 325 Module 6 Spreadsheet Exam Part A, B & C

MGT 325 Module 6 Spreadsheet Exam Part A, B & C

Question
	
COMPREHENSIVE CHAPTER 12 & 13 PROBLEMS 
MONARCH CORPORATION IS GOING TO START A NEW PRODUCT LINE OF PRODUCTS IN A WHOLE NEW MARKET. 
THE DATA FOR ANALYSIS IS PRESENTED BELOW: 

COST OF THE EQUIPMENT NEEDED $194,000 FIVE YEAR PROPERTY FOR TAX DEPRECIATION 
NEW WORKING CAPITAL NEEDS $50,000 WILL BE RECOVERED AT THE END OF THE THIRD YEAR 
PROJECTED NEW REVENUES: 
SALES PROBABILITY 
$200,000 30% 
$250,000 50% 
$300,000 20% 
COST OF GOOD SOLD 30% OF SALES 
VARIABLE CASH COSTS 10% OF SALES 
ANNUAL FIXED CASH COSTS: 
RENT $50,000 
CLEANING $20,000 
MAINTENANCE & OTHER $10,000 
TOTAL FIXED COSTS $80,000 
EQUIPMENT DISPOSAL PROCEEDS $19,400 SALVAGE VALUE AT THE END OF YEAR 6 
FIRM'S COST OF CAPITAL 12.00% 
TAX RATE 35% 
NOTE - WHEN COMPUTING TAX, A NET LOSS FOR THE YEAR MEANS A POSITIVE TAX SAVINGS IS CREATED 
SINCE THERE IS OTHER INCOME TAX ON OTHER INCOME TO OFFSET. 
DEPRECIATION RATES FOR TAX PURPOSES: 
YEAR ONE 20.00% 
YEAR TWO 32.00% 
YEAR THREE 19.20% 
YEAR FOUR 11.50% 
YEAR FIVE 11.50% 
YEAR SIX 5.80% 
ASSUMPTIONS: 
ALL CASH FLOWS IN YEARS 1-6 OCCUR AT THE END OF THE YEAR. ALL INITIAL CASH INFLOWS OR 
OUTFLOWS OCCUR TODAY. 

REQUIRED: 
A. ASSUMING SALES ARE $200,000 COMPUTE THE PAYBACK, IRR AND NPV. FOR THE NPV, COMPUTE 
AT BOTH THE FIRM'S DISCOUNT RATE AND 16%, WHICH IS A 4% PREMIUM ADDED TO THE RATE. 
B. COPY THE WHOLE WORKSHEET AND SOLUTIONS FOR PART A TO THE WORKSHEET NAMED PART B, 
AND REDO THE COMPUTATIONS BY CHANGING THE ANNUAL SALES TO $250,000. 
C. COPY THE WHOLE WORKSHEET AND SOLUTIONS FOR PART A TO THE WORKSHEET NAMED PART C, 
AND REDO THE COMPUTATIONS BY CHANGING THE ANNUAL SALES TO $300,000.

An antique collector believes that the price received for a particular

An antique collector believes that the price received for a particular

Question
	
An antique collector believes that the price received for a particular item increases with its age and with the number of bidders. The file P14_14.xlsx contains data on these three variables for 32 recently auctioned comparable items. Estimate a multiple regression equation using the given data. Interpret each of the estimated regression coefficients. Is the antique collector correct in believing that the price received for the item increases with its age and with the number of bidders? Interpret the standard error of estimate and the R-square value for these data.