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Insurance calculation: Auto insurance price prediction example

Consider a state in which automobile drivers are divided equally into two types of drivers: careful and reckless. The average annual auto-insurance claim is $400 for a careful driver and $1,200 for a reckless driver. Suppose that the state adopts an insurance system under which all drivers are placed in a common pool and allo

Obama's health care bill

Obama's health care bill is projected to cost over $1 trillion over the next decade. Medicare, Medicaid, and Social Security are bankrupt. The projected federal deficit for next year is $1.3 trillion. Can we afford such programs? Can we keep on borrowing? Should the federal budget be balanced every year? Discuss.

Adjusting journal entries

Prepare adjusting journal entries for the year ended (or date of) December 31, 2005, for each of these separate situations. Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially recorded as liabilities. a. Depreciation on the company's equip

Economic Value Added (EVA) statements

How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success? What are some problems found with EVA?

Finding Optimal Combination of Engineers and Researchers

See the attached file. A manager in charge of the development of new products could hire engineers and market researchers. The annual salary for an engineer is $ 40,000 while a market researcher receives $ 20.000. The marginal contribution of both is given in the table below. Determine what combination of engineers and market R

Rent vs. buying

Can you help me with applying concepts to making this decision between renting or buying a home? I need to address the following topic: "Consider whether renting or buying a home is the best approach to achieving your long-term financial goals. Use various data (housing rental costs, home sale prices, mortgage rates, etc.

Life Insurance and Future Risk

Please help understand the following: "Life insurance can be used as hedge against future risk of financial loss to others (beneficiaries) due to your (policy holder's) death. But, do you need life insurance, and if you do, how much?" It would be helpful if you can include at least one resource.

Cash Budget and External Funds Needed

Of Redbird's sales, 20% is for cash, another 60% is collected in the month following sale, and 20 percent is collected in the second month following sale. November and December sales for 20X1 were $220,000 and $175,000, respectively. Redbird purchases its raw materials two months in advance of its sales equal to 70% of its fi

Calculating NPW and IRR

The Stefinho De Rio company is evaluating two alternatives X and Y to invest for their travel business. Alternative X Alternative Y Initial investment $ 1.2 million $1 million Net annual savings $ 300,000 $250,000 Salvage value $200,000

Calculating IRR by interpolation

Hoboken Ferry is elevating two different ferries. The Weehawken and the Hoboken. The economic data is as follows. Weehawken Hoboken Initial Investment $6 million $8 million Yearly Revenue $4 million $6 million Annual Maintenance Cost

Finance: Capital structure.

This part of the project is to analyze the following capital structure plans. You will use the EBIT-EPS analysis to evaluate the two plans. One plan is all equity and one has debt and equity. Plan 1: All Equity Plan Shares of Equity - 80,000 Debt - 0 Cost of debt - 0 Interest Expense - 0 Tax Rate - 34% P

Value of firm/market value of equity

Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all-equity firm, has 5,000 shares outstanding, currently worth $20 per share. Beta Corporation uses leverage in its capital structure. The market value of Betaâ??s debt is $25,000. The cost of his debt is 1

The Income Statement

Listed below are accounts that may appear on the balance sheet or the income statement. a. equipment b. fees earned c. retained earnings d wage expense e. patent f. cost of goods sold g. common stock h. dividend payable i. accumulated depreciation j. prepaid expense k. gain on sale of short term investment l. rent re

Benefit reduction rate

Consider an income guarantee program with an income guarantee of $6,000 and a benefit reduction rate of 50%. A person can work up to 2,000 hours per year at $8 per hour. A. Draw the person's budget constraint with the income guarantee. B. Suppose that the income guarantee rises to $9,000 but with a 75% reduction rate. Draw th

Budget Lines

The U.S government spends over $15.8 billion in its Food Stamp Program to provide millions of Americans with the means to purchase food. These stamps are redeemable for food at over 160,000 store locations throughout the nation, and they can not be sold for cash or used to purchase nonfood items. a. Draw the family's budget

Accounting: Cash Budget Problem

Evaluate this scenario: The expected sales are 100,000$ during the next three months. It will make monthly purchases of 60,000$ during this time. Wages and salaries are 10,000$ per month plus 5% of the sales. The company expects to make a tax payment of 20,000$ in the first month, a 15,000$ purchase of fixed assets the secon


The Steel Supply Corporation is an importer and distributor of Taiwanese-made, 96 piece hand-tool sets (screw drivers, wrenches, and the like). The U.S. Commerce Department recently informed the company that it will be subject to a new 25% tariff on the import cost of fabricated steel. The company is concerned that the tariff wi

budget constraint, indifference curve

2 questions: 1. Martha's income is $40k/year. She can spend it on health care visits at $80/visit, or on groceries (standing for all other goods), which costs $100/bag of groceries. draw Martha's budget constraint. Using indifference curves show martha's optimum if she buys 300 bags of groceries per year. 2. Suppose M

Efficiency, surplus, price ceiling

4. Assume the market for Type I Preventive Service dental procedures in New York City is perfectly competitive and consumers have no insurance coverage. In NYC, the daily market demand for these procedures is Qd = 20,000 â?" 50P, and the industry supply is Qs = -4,000 + 100P. To help illustrate, you might want to graph these eq

Solow growth: Compute the current US investment rate (I/Y)

After reviewing the latest gures of investment rates for China and US, the US Government is considering a scal policy manoeuver to increase investment rate in US. In this question you are asked to use the Solow model to evaluate the impact of this policy change. For simplicity assume that the US is a closed economy so that

MEI curve and health production function

In his early work on the demand for health, Grossman (1972) found a negative relationship between income level and health. The negative effect of income on health was found only when the wage rate was held constant; thus, it was associated only with the nonwage component of income (i.e. other forms of wealth that increase total

Word Problems

Working Capital Management and Capital Budgeting Objective: Evaluate alternative capital projects. 10. Consider a project with the following cash flows: After-Tax After-Tax Accounting Cash Flow Year Profits from Operations 1 $799

Finance: Capital budgeting NPV

Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $1.8 million. The marketing department predicts that sales related to the project will be $1.1 million per year for the next four years, after which the market will cease to exist. The machine will

Cash Flows

1)Your company, RMU Inc., is considering a new project whose data are shown below. What is the project's Year 1 cash flow? Sales revenues $22,250 Depreciation $ 8,000 Other operating costs $12,000 Tax rate 35.0% a. $10,039 b. $9,463 c. $9,179 d. $9,746 e. $8,903 2)TexMex Food

Cost structure

Recent graduate was given by father a $350,000 tractor trailer. Graduate joked with friends he was making $25,000 per month in jobs while his operating costs such as fuel, insurance, etc run close to $18,000 per month. Tractor trailers similar to new graduate rent for $15,000 per month and if graduate would go to work with c

Undertake both declining balance

Undertake both a declining balance and straight -line depreciation of an item of capital expenditure of $2 million. The declining balance deprecation rate is 30%,effective tax rate is 45%, cost of capital is 10% and straight -line depreciation rate is 20%.