1.1. Jack works in the hardware section of a department store. A customer comes in and buys 3 gallons of paint and 7 brushes, and pays $69.96, including 6% sales tax. Another customer buys 2 gallons of paint and 3 brushes and pays $42.40, including sales tax. Find the price of a gallon of paint and that of a brush.
Paint $16.40 per gallon, brushes $2.40 each
1.2. The cash flows from two projects under different states of the economy are as follows:
|
State of the economy
|
Probability
|
Project A
|
Project B
|
|
Poor
|
10%
|
$13,000
|
$0
|
|
Average
|
20%
|
$14,000
|
$7000
|
|
Good
|
70%
|
$16,000
|
$16,000
|
Find the coefficient of correlation between the two projects.
1.3. Stewart Company has cost of capital 14%. The following function represents the shortage cost for its net working capital
S = 3/x-9 for x > 9
Here S is the shortage cost in thousands of dollars, and x is the level of the net working capital, also in thousands of dollars. Find the following:
(A) The optimum level of net working capital.
(B) The financing cost, shortage cost, and total cost at the optimal point.
(A) $13,629, (B) $1908, $533, $2441 per year
1.4. Granger Company's cost of capital is 13%. It has invested x (million dollars) in current assets. The following function represents the shortage cost of current assets
S = 9 e-x/5
Find the following:
(A) The optimal level of current assets.
(B) The shortage, financing, and total annual cost of these assets.
(A) $13.140 million, (B) $650,000, $1.708 million, $2.358 million