Budget general
15 questions answered for a statistics class. The first additional file is to answer questions 1&3 for Part 1 and the second additional file is to answer all of Part 2 questions. I need the answers only.

PART 1
1. The attached Spreadsheet ?SleepScores? contains data on the number of hours of sleep the night before an exam (X) and the number of multiple choice questions answered correctly on the exam (Y) from a sample of undergraduate students.
Calculate the regression line for these data.
Give the slope to at least 2 places past the decimal point.

2. The regression equation for the data in the last question is Y? = 2.28(X) + 1.427. What is the predicted number of questions correct for someone who only got 4 hours of sleep?
Give at least 2 places past the decimal point

3. Calculate a t statistic for testing the significance of the slope in the ?SleepScores? data where the regression line is Y? = 2.28(X) + 1.427
Report a numeric value to at least 2 decimal places.

4. Calculate a 2-tailed p value for the t statistic you found in the previous question for testing the significance of the slope in the ?SleepScores? data where the regression line is Y? = 2.28(X) + 1.427.
Report a numeric value to at least 2 decimal places.

5. Which of the following are required assumptions for calculating inferential statistics of a regression? (Select all that apply)
Homoscedasticity: The variance around the regression line is the same for all values of X
Heteroscedasticity: The variance around the regression line must increase as X increases.
Linearity: The relationship between the two variables is linear.
The errors of prediction are distributed normally.
All the points must be on the regression line.
Homogeneity of variances: the variance of X and Y must be the same.

6. Which of the following assumptions is required to conduct an ANOVA test? (Select all that apply)
The populations have the same variance for the variable of interest
The populations have different variances for the variable of interest
The populations are normally distributed for the variable of interest
The populations have the same mean for the variable of interest
Each value is sampled independently from each other value for the variable of interest
If the null hypothesis is true, F is theoretically expected to be equal to what value?
(Give a numeric answer. Do not include any letters or symbols)

7. Imagine an experiment having three conditions and 20 subjects within each condition. The mean and variances of each condition are listed below. What?s the value of mean squares between groups (MSB)?
Condition Mean Variance
Condition 1 3.2 14.3
Condition 2 4.2 17.2
Condition 3 7.6 16.7
(Remember this number, you’ll need it again)
(Give a numeric answer to at least 1 decimal place. Do not include any letters or labels)

8. Imagine an experiment having three conditions and 20 subjects within each condition. The mean and variances of each condition are listed below. What?s the value of mean square error (MSE)?
Condition Mean Variance
Condition 1 3.2 14.3
Condition 2 4.2 17.2
Condition 3 7.6 16.7

(Remember this number, you’ll need it again)
(Give a numeric answer to at least 3 decimal places. Do not include any letters or labels)

9. Imagine an experiment having three conditions and 20 subjects within each condition. The mean and variances of each condition are listed below. What?s the value of F? (Same data as last 2 questions)
Condition Mean Variance
Condition 1 3.2 14.3
Condition 2 4.2 17.2
Condition 3 7.6 16.7

(Remember this number, you’ll need it again)

(Give a numeric answer to at least 3 decimal places. Do not include any letters or labels)

10. Imagine an experiment having three conditions and 20 subjects within each condition. The mean and variances of each condition are listed below. What?s the probability value of this result? (Same data as last 3 questions)
Condition Mean Variance
Condition 1 3.2 14.3
Condition 2 4.2 17.2
Condition 3 7.6 16.7

(Give a numeric answer to at least 4 decimal places. Do not include any letters or labels)

PART 2

An instructor asked his students to record the number of hours they studied for a particular exam. He then plotted hours of study against the students? exam grades in a scatter plot. Next he computed the correlation between the two variables and found the best-fitting regression line. The attached spreadsheet (in Question 1) shows the results.

1. On average, how many hours did the students study for the exam? What was the average exam grade?

2.What was the correlation between hours of studying and exam grade? What proportion of variance in exam grades could be accounted for by knowing hours of study?

3. What is the equation for the best fitting regression line for predicting exam grades from hours of studying?

4.Using the regression equation, what is the predicted exam score for someone who studied 6 hours for the exam?

5. One of the nice features of a spreadsheet is that you can change the data and see how the graph and statistics change in real time. Go to the exam grade column and begin changing each grade so that its plotted point moves closer to the regression line. What happens to the correlation? What happens to r2?

1.

Corporate Finance

1. Sailboats Etc. is a retail company specializing in sailboats and other sailing-related equipment. The table shown here,
,
contains financial forecasts as well as current (month 0) working capital levels. During which month is the firm’s change in net working capital thegreatest? When does it have surplus cash?
We calculate the changes in net working capital for the firm: (Round to two decimal places.)
(000) 1
Change in accounts receivable $
Change in inventory $
Change in accounts payable $
Change in net working capital $
2
$
$
$
$
3
$
$
$
$
4
$
$
$
$
5
$
$
$
$
6
$
$
$
$
During which month is the firm’s change in net working capital the greatest? (Select from the drop-down menu.)
From the table it can be seen that Sailboat’s change in net working capital is the highest in Month
?

5
3
2
5

because its investments in accounts receivable, inventory and accounts payable increased the most in that month.
To determine when Sailboats has surplus cash, we calculate the changes in cash: (Round to two decimal places.)
(000) 1
Net income $
+ Depreciation $
– Change in net working capital $
Cash flow from operations $
– Capital expenditures $
Change in cash $
2
$
$
$
$
$
$
3
$
$
$
$
$
$
4
$
$
$
$
$
$
5
$
$
$
$
$
$
6
$
$
$
$
$
$
When does it have surplus cash? (Select the best choice below.)

A.
Sailboats, Etc. has a surplus cash position in every month.

B.
Sailboats, Etc. has a surplus cash position in every month except in Month 1.

C.
Sailboats, Etc. has a surplus cash position in every month except in Month 6.

D.
Sailboats, Etc. has a surplus cash position in every month except in Month 3.
Enter any number in the edit fields and then continue to the next question.

2. Discuss the three different arrangements under which a firm may use inventory to secure a loan. (Select from the drop-down menus.)
The three different methods under which inventory is used as collateral for a loan are floating liens, trust receipts, and warehouse arrangements.
With a
?

trust receipt arrangement
warehouse arrangement
floating lien

(also called a “general lien” or a “blanket lien”), all of the borrower’s inventory serves as collateral for a loan. The value of the collateral declines as the firm sells its inventory. In times of financial distress, a firm may decide to sell its inventory without making payments on the loan and may not have enough money to replenish the inventory it has sold. The loan is then under-collateralized. This is the riskiest arrangement from the lender’s standpoint, and the loan will carry a higher interest rate than if one of the other two methods is used. Additionally, the lender will lend a much smaller percentage of the inventory value under this arrangement.
In a
?

trust receipt arrangement
warehouse arrangement
floating lien

(or floor planning arrangement), specific inventory items are identified as collateral for the loan. As the specified inventory is sold, the firm uses the cash received to repay the loan. The lender will send someone to the borrower’s premises periodically to ensure that none of the specified inventory has been sold without a repayment made.
In a
?

trust receipt arrangement
warehouse arrangement
floating lien
,
the inventory serving as collateral is stored in a warehouse. One type of warehouse is a public warehouse, which is a business that exists for the sole purpose of tracking the flow of the inventory. The inventory is delivered to the public warehouse by the borrowing firm, and the lender extends a loan based on the value of that inventory. When the borrowing firm needs the inventory to sell, it must return to the warehouse to retrieve it after receiving permission from the lender to do so. This arrangement is the least risky from the standpoint of the lender since it allows the lender to maintain the tightest control over the inventory, but it is only feasible for some types of inventory. This method would not be usable for inventory that is subject to spoilage or that is bulky and difficult to transport. In this latter case, a field warehouse might be a good alternative. A field warehouse is established on the borrower’s premises, but it is separated from the borrower’s main plant. It is operated by a third party. This type of arrangement is more convenient for the borrower, but it still gives the lender the added security of having the inventory that serves as collateral tracked by a third party.

3. Quarterly working capital levels for your firm for the next year are included in the following table. What are the permanent working capital needs of your company? What are the temporary needs?
Quarter
(000)
1 2 3 4
Cash $100100
$100100
$100100
$100100Accounts Receivable 200200 100100 100100 600600
Inventory 200200 500500 900900 5050
Accounts Payable 100100 100100 100100 100100
What are the permanent working capital needs of your company?
The permanent working capital needs of your company are
$ nothing.
(Round to nearest dollar.)
What are the temporary needs?
The temporary needs for the first quarter are
$ nothing.
(Round to nearest dollar.)
The temporary needs for the second quarter are
$ nothing.
(Round to nearest dollar.)
The temporary needs for the third quarter are
$ nothing.
(Round to nearest dollar.)
The temporary needs for the fourth quarter are
$ nothing.
(Round to nearest dollar.)
Enter your answer in each of the answer boxes.

4. What is the difference between direct paper and dealer paper? (Select all of the choices below that apply.)

A.
Direct paper is a method by which a firm sells its commercial paper directly to investors.

B.
Dealer paper refers to the sale of commercial paper through dealers.

C.
The dealers get a fee for their services, thus reducing the proceeds that the issuing firm receives (and increasing the effective cost to the firm).

D.
Direct paper allows a firm to save issuing costs by selling its commercial paper directly to dealers.

E.
Dealer paper is named as such when a firm is acting as the dealer by issuing commercial paper directly to investors.
Click to select your answer(s).

5. Ohio Valley Homecare Suppliers, Incorporated (OVHS) had
$ 17$17
million in sales in 2009. Its cost of goods sold was
$ 6.8$6.8
million, and its average inventory balance was
$ 2.1$2.1
million.
a. Calculate the number of inventory days outstanding for OVHS.
b. The average number of inventory days in the industry is
7373
days. By how much would OVHS reduce its investment in inventory if it could improve its inventory days to meet the industry average?
a. Calculate the number of inventory days outstanding for OVHS.
The number of inventory days is
nothing
days. (Round to the nearest integer.)
b. The average number of inventory days in the industry is
7373
days. By how much would OVHS reduce its investment in inventory if it could improve its inventory days to meet the industry average?
OVHS would reduce its inventory by
$ nothing.
(Round to the nearest dollar.)
Enter your answer in each of the answer boxes.

6. Which of the following one-year
$ 1 comma 000$1,000
bank loans offers the lowest effective annual rate?
a. A loan with an APR of
5.7 %5.7%,
compounded monthly.
b. A loan with an APR of
5.7 %5.7%,
compounded annually, that also has a compensating balance requirement of
10.5 %10.5%
(on which no interest is paid).
c. A loan with an APR of
5.7 %5.7%,
compounded annually, that has a
1.3 %1.3%
loan origination fee.
a. A loan with an APR of
5.7 %5.7%,
compounded monthly. (Select from the drop-down menus.)
Since the APR is
5.7 %5.7%,
the monthly rate is
?

0.275%
0.475%
0.575%
.
This translates to an effective annual rate of
?

5.7%
5.9%
6%
.
b. A loan with an APR of
5.7 %5.7%,
compounded annually, that also has a compensating balance requirement of
10.5 %10.5%
(on which no interest is paid). (Select from the drop-down menus.)
The compensating balance is
?

$85
$115
$105
.
Therefore, the borrower will have use of only
?

$895
$885
$915

of the
$ 1 comma 000$1,000.
The interest is
?

$53
$57
$59
.
The interest rate per period is
?

6.2%
6.4%
6.5%
.
Since this alternative assumes annual compounding, the effective annual rate is
?

6.5%
6.2%
6.4%

as well.
c. A loan with an APR of
5.7 %5.7%,
compounded annually, that has a
1.3 %1.3%
loan origination fee. (Select from the drop-down menus.)
The interest expense is
?

$59
$53
$57
,
and the loan origination fee is
?

$13
$14
$11
.
The loan origination fee reduces the usable proceeds of the loan to
?

$987
$989
$986

because it is paid at the beginning of the loan. The interest rate per period is
?

7.1%
6.9%
7.2%
.
Since the loan is compounded annually in this case,
?

7.2%
7.1%
6.9%

is the effective annual rate.
(Select from the drop-down menu.)
Thus, alternative
?

(c)
(b)
(a)

offers the lowest effective annual cost.

7. Etemadi Amalgamated, a U.S. manufacturing firm, is considering a new project in the euro area. You are in Etemadi’s corporate finance department and are responsible for deciding whether to undertake the project. The free cash flows, in euros, are forecast to be thefollowing:
Year Free Cash Flow (millions of
euro?)0 negative 15-15
1 99
2 1010
3 1111
4 1212
You know that the spot exchange rate is
Upper S equals $ 1.1500 divided by euroS=$1.1500/?.
In addition, the risk-free interest rate on dollars is
4.0 %4.0%,
and the risk-free interest rate on euros is
6.0 %6.0%
(and the yield curve is flat in both currencies).
Assume that these markets are internationally integrated and the uncertainty in the FCFs is not correlated with uncertainty in the exchange rate. You determine that the dollar WACC for these cash flows is
8.5 %8.5%.
a. What is the dollar present value of the project? Should Etemadi Amalgamated undertake the project?
b. Assume that the spot rate is now
8. Upper S equals $ 0.8500 divided by euroS=$0.8500/?,
about
26 %26%
lower. What is the new present value of the project in dollars? What is the new present value of the project in dollars? Should Etemadi Amalgamated undertake the project?
Hint: Make sure to round all intermediate calculations to at least four decimal places.
a. What is the dollar present value of the project?
First, calculate the forward rates.
The forward exchange rates for year 1 is
$ nothing/euro?.
(Round to four decimal places.)
The forward exchange rates for year 2 is
$ nothing/euro?.
(Round to four decimal places.)
The forward exchange rates for year 3 is
$ nothing/euro?.
(Round to four decimal places.)
The forward exchange rates for year 4 is
$ nothing/euro?.
(Round to four decimal places.)
Next, you need to find the expected cash flow of the project.
The expected dollar cash flow of for year 0 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 1 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 2 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 3 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 4 is
$ nothing
million. (Round to four decimal places.)
Finally, calculate the net present value.
The dollar present value of the project is
$ nothing
million. (Round to four decimal places.)
Should Etemadi Amalgamated undertake the project?
?

Yes
No
.
(Select from the drop-down menu.)
b. Assume that the spot rate is now
Upper S equals $ 0.8500 divided by euroS=$0.8500/?,
about
26 %26%
lower. What is the new present value of the project in dollars?
First, calculate the forward rates.
The forward exchange rates for year 1 is
$ nothing/euro?.
(Round to four decimal places.)
The forward exchange rates for year 2 is
$ nothing/euro?.
(Round to four decimal places.)
The forward exchange rates for year 3 is
$ nothing/euro?.
(Round to four decimal places.)
The forward exchange rates for year 4 is
$ nothing/euro?.
(Round to four decimal places.)
Next, you need to find the expected cash flow of the project.
The expected dollar cash flow of for year 0 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 1 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 2 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 3 is
$ nothing
million. (Round to four decimal places.)
The expected dollar cash flow of for year 4 is
$ nothing
million. (Round to four decimal places.)
Finally, calculate the net present value.
The dollar present value of the project is
$ nothing
million. (Round to four decimal places.)
Should Etemadi Amalgamated undertake the project? (Select from the drop-down menus.)
Etemadi Amalgamated should
?

still
not

undertake the project because the net present value is
?

positive
negative
.
Enter your answer in each of the answer boxes.

9. What are the three steps involved in establishing a credit policy? (Select all of the choices below that apply.)
The three steps involved in establishing a credit policy are:

A.
Establish credit standards. In this step, the firm must decide how much credit risk it is willing to accept.

B.
Establish credit terms. Here, the firm decides on the length of time before payment must be made and whether or not it will offer a discount. If a discount is to be offered, the amount of the discount and the length of the discount period must also be established.

C.
Establish a collection policy. In this step, the firm must decide how it will collect from all of its credit customers.

D.
Establish a collection policy. In this step, the firm must decide how it will handle late payers.
Click to select your answer(s).

10. Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will require an initial investment of
$ 1.97$1.97
million in net working capital today. The plant will last
88
years, at which point the full investment in net working capital will be recovered. Given an annual discount rate of
5.8 %5.8%,
what is the net present value of this working capital investment?
The NPV is
$ nothing.
(Round to the nearest dollar.)

11. Simple Simon’s Bakery purchases supplies on terms of
1.0 divided by 10 comma net 251.0/10, net 25.
If Simple Simon’s chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. A local bank has quoted Simple Simon’s owner an interest rate of
12.0 %12.0%
on borrowed funds. Should Simple Simon’s enter the loan agreement with the bank and begin taking the discount? (Use 365 days for a year.)
Simple Simon’s can earn an effective rate of
nothing%.
(Round to one decimal place.)
Should Simple Simon’s enter the loan agreement with the bank and begin taking the discount? (Select the best choice below.)

A.
Simple Simon’s will earn
27.7 %27.7%
on its purchases by paying within the discount period and should enter into the loan agreement.

B.
Simple Simon’s will earn
15.8 %15.8%
on its purchases by paying within the discount period and should enter into the loan agreement.

C.
The discount rate of
1.0 %1.0%
is considerably lower than the
12.0 %12.0%
interest rate, so Simple Simon’s should not enter into the loan agreement.

D.
Need more information to answer the question.

Your supplier offers terms of
1.41.4/1010,
Net
4545.
What is the effective annual cost of trade credit if you choose to forgo the discount and pay on day
4545?
The effective annual cost of the trade credit is
nothing%.
(Round to two decimal places.)