Question: Consider the following price data from 2009

> Consider the following portion of data on the variable y. t ………………………………………………………………………………………………………… y 1 …………………………………………………………………………………………………… 29.32 2 ………………………………………………………………………………………………… 30.96 ⋮ ………………………………………………………………………………………………………… ⋮ 24 ………………………

> Consider the following portion of data on the response variable y and the explanatory variable x. a. Estimate yt = β0 + β1xt−1 + εt and yt = β0 + β1xt−1 +

> Refer to the previous exercise for a description of the data set. Fit an appropriate polynomial trend model along with seasonal dummies to make a forecast for November and December of 2010. Previous exercise: The following table lists a portion of the

> The following table lists a portion of the University of Michigan’s Consumer Sentiment Index. This index is normalized to have a value of 100 in 1965 and is used to record changes in consumer morale. Date ……………………………………………………………………………. Consumer Sentimen

> Suppose eight college-bound students take a mock SAT, complete a three-month test-prep course, and then take the real SAT . A portion of the data is shown in the accompanying table. a. Specify the competing hypotheses to determine whether the median sc

> Refer to the previous exercise for a description of the data set. Previous exercise: Blockbuster Inc. faced challenges by the growing online market (CNNMoney.com, March 3, 2009). Its revenue from rental stores sagged as customers increasingly got thei

> Blockbuster Inc. faced challenges by the growing online market (CNNMoney.com, March 3, 2009). Its revenue from rental stores sagged as customers increasingly got their movies through the mail or high-speed Internet connections. The following table contai

> The controller of a small construction company is attempting to forecast expenses for the next year. He collects quarterly data on expenses (in $1,000s) over the past five years, a portion of which is shown in the accompanying table. a. Estimate a line

> Refer to the previous exercise for a description of the data set. Estimate a linear trend model with seasonal dummy variables to make forecasts for the first three months of 2011. FILE Expenses. The controller Previous exercise: Consider a portion of m

> Consider a portion of monthly return data (in %) on 20-year Treasury Bonds from 2006–2010. Date ……………………………………………………………………………………………… Return Jan-06 ……………………………………………………………………………………………… 4.65 Feb-06 ……………………………………………………………………………………………… 4.73 ⋮ …………………………………

> Hybrid cars have gained popularity because of their fuel economy and the uncertainty regarding the price of gasoline. All automakers, including the Ford Motor Co., have planned to significantly expand their hybrid vehicle lineup (CNN.com, November 9, 200

> The accompanying data file contains monthly observations for 5 years. Use it to estimate (a) a linear trend model with seasonal dummies, and (b) an exponential trend model with seasonal dummies. Which of the two models has a lower MSE and MAD? Use the ap

> The accompanying data file contains monthly observations for 5 years. a. Construct the seasonal indices for the data. b. Plot the seasonally adjusted series to recommend the appropriate trend model. c. Use the trend and seasonal estimates to make fore

> The accompanying data file contains quarterly observations for 5 years. a. Plot the series and discuss its trend and seasonal components. b. Use decomposition analysis to make in-sample forecasts with the exponential trend and seasonal indices. Compute

> The accompanying data file contains monthly observations for 5 years. Calculate and interpret the seasonal indices for April and November.

> The following data are provided for two samples drawn from independent populations: W = 545, n1 = 25, and n2 = 25. Suppose the distribution of W is approximately normal. a. Calculate the mean and the standard deviation of the distribution of W. b. Spec

> The accompanying data file contains quarterly observations for 5 years. Calculate and interpret the seasonal indices for quarters 1 and 4.

> Apple Inc. has performed extremely well in the last decade. After its stock price dropping to below 90 in May 2016, it made a tremendous come back to reach about 146 by May 2017 (SeekingAlpha.com, May 1, 2017). An investor seeking to gain from the positi

> With a new chef and a creative menu, Café Venetian has witnessed a huge surge in sales. The following data show a portion of daily sales (in $) at Café Venetian in the first 100 days after the changes. Day ………………………………………………………………………………………………… Sales 1 …

> The number of cars sold in the United States in 2016 reached a record high for the seventh year in a row (CNN Money, January 4, 2017). Consider monthly total miles traveled (in billions) in the United States from January 2010 to December 2016. A portion

> Investors are always reviewing past pricing history and using it to influence their future investment decisions. On May 16, 2014, online car buying system True Car launched its initial public offering (IPO), raising $70 million in the stock offering. An

> Consider the following table, which lists a portion of the seasonally adjusted monthly unemployment rates (in %) in California from 2007–2010. Date ………………………………………………………………………………. Unemployment Rate Jan-07 …………………………………………………………………………………………………… 4.9 Feb-0

> Rapid advances in technology have had a profound impact on the United States recording industry (The New York Times, July 28, 2008). While cassette tapes gave vinyl records strong competition, they were subsequently eclipsed by the introduction of the co

> The following data are provided for two samples drawn from independent populations: W = 700, n1 = 25, and n2 = 20. Suppose the distribution of W is approximately normal. a. Calculate the mean and the standard deviation of the distribution of W. b. Spec

> The potentially deadly 2009 Swine Flu outbreak was due to a new flu strain of subtype H1N1 not previously reported in pigs. When the World Health Organization declared a pandemic, the virus continued to spread in the United States, causing illness along

> Despite the growth in digital entertainment, the nation’s 400 amusement parks have managed to hold on to visitors. A manager collects data on the number of visitors (in millions) to amusement parks in the United States. A portion of the data is shown in

> The accompanying data file contains 20 observations for t and yt. a. Plot the series along with the superimposed linear and exponential trends. Which trend model do you think describes the data well? b. Estimate a linear trend model and an exponential

> The accompanying data file contains 20 observations for t and yt. a. Plot the series along with the superimposed linear and quadratic trends. Which trend model do you think describes the data well? b. Estimate a linear trend model and a quadratic trend

> Consider the following estimated trend models. Use them to make a forecast for t = 21. a. Linear Trend: ŷ = 13.54 + 1.08t b. Quadratic Trend: ŷ = 18.28 + 0.92t – 0.012 = 1.8 + 0.09t; se = 0.01 Inly) %3D c. Exponential Trend:

> The accompanying table shows a portion of monthly data on seasonally adjusted inflation and unemployment rates in the United States from January 2009 to November 2010. a. Use the 3-period moving average and exponential smoothing with α =

> Consider the following table, which shows a portion of the closing prices of the S&P 500 Index for 21 trading days in November 2010. Date …………………………………………………………………………………………… S&P Price 1-Nov …………………………………………………………………………………………… 1184.38 2-Nov …………………………………

> According to the Census Bureau, the number of people below the poverty level has been steadily increasing (CNN, September 16, 2010). This means many families are finding themselves there for the first time. The following table shows a portion of the perc

> Refer to the previous exercise for a description of the data set. Previous exercise: Rock and roll is a form of music that evolved in the United States and quickly spread to the rest of the world. The interest in rock music, like any other genre, has

> Rock and roll is a form of music that evolved in the United States and quickly spread to the rest of the world. The interest in rock music, like any other genre, has gone through ups and downs over the years. The Recording Industry Association of America

> The following data were drawn from two independent populations. a. Specify the competing hypotheses to determine whether the median of Population 1 is greater than the median of Population 2. b. Find the unadjusted sum of ranks, W. c. The p-value for

> The accompanying data file contains 20 observations for t and yt. a. Use the 3-period moving average to make in-sample forecasts and compute the resulting MSE and MAD. b. Use the exponential smoothing method to make in-sample forecasts with α = 0.4. Co

> The accompanying data file contains 20 observations for t and yt. a. Plot the series and discuss the presence of random variations. b. Use the exponential smoothing method to make in-sample forecasts with α = 0.2. c. Compute the resulting MSE and MAD. R

> The accompanying data file contains 20 observations for t and yt. a. Construct the 5-period moving average and plot it along with the actual series. Comment on smoothing. b. Use the 5-period moving average to make in-sample forecasts and compute the re

> The accompanying data file contains 10 observations for t and yt. a. Construct the 3-period moving average and plot it along with the actual series. Comment on smoothing. b. Use the 3-period moving average to make in-sample forecasts and compute the re

> Gary Martin is a research analyst at an investment firm in Chicago. He follows the oil industry and has developed a pretty sophisticated model that forecasts an oil company’s stock price. However, given the recent strife in the Middle E

> Madelyn Davis is a research analyst for a large investment firm. She has been assigned the task of forecasting sales for Walmart Stores, Inc., for fiscal year 2011. She collects quarterly sales for Walmart Stores, Inc. (in $ millions) for the 10-year per

> Fried dough is a popular North American food associated with outdoor food stands at carnivals, amusement parks, fairs, festivals, and so on. Usually dusted with powdered sugar and drenched in oil, it is not particularly good for you but it sure is tasty!

> An investor bought 1,000 shares of Citigroup in January 2009 for $3.55 a share. She sold all of her shares in December 2009 for $3.31 a share. a. What annual rate of return did the investor earn? b. Use the CPI information from Exercise 40 to compute t

> The adjusted closing stock prices of Wendy’s/Arby’s Group, Inc., for the first three months of 2008 are presented in the following table. Assume that these adjusted closing prices are computed at the end of the month.

> Consider the following consumer price index (CPI) and producer price index (PPI) for 2006–2009. a. Use the relevant price index to deflate the data on net revenue of Citigroup, given in the previous exercise. b. Use the relevant pric

> The following data were drawn from two independent populations. a. Specify the competing hypotheses to determine whether the median of Population 1 is less than the median of Population 2. b. Find the unadjusted sum of ranks, W. c. The p-value for th

> Citigroup, Inc., is a major financial services company based in New York. It suffered huge losses during the global financial crisis and was rescued in November 2008 in a massive bailout by the U.S. government. Consider the following table, representing

> Lindsay Kelly bought 100 shares of Google, 300 shares of Microsoft, and 500 shares of Nokia in January 2005. The adjusted closing prices of these stocks over the next three years are shown in the accompanying table. a. Compute and interpret the unweigh

> Let the quantities corresponding to the prices in the previous exercise be given by the following table. a. Compute the Laspeyres price index, using 2009 as the base year. b. Compute the Paasche price index, using 2009 as the base year. c. Comment on

> Consider the following price data from 2002 to 2010. a. Compute the simple price index using 2002 as the base year. b. Update the index numbers with a base year revised from 2002 to 2005. c. Plot the index numbers with a base year of 2002 and a base

> Toyota Motor Corp., once considered a company synonymous with reliability and customer satisfaction, has been engulfed in a perfect storm with millions of cars recalled (BBC News, March 19, 2010). The following table shows the monthly adjusted closing pr

> Kim Baek invested $20,000 for a year in corporate bonds. Each bond sold for $1,000 and earned a coupon payment of $80 each during the year. The price of the bond at the end of the year has dropped to $980. a. Calculate Kim’s investment return. b. Calcu

> According to Fisher College of Business at The Ohio State University, the starting salary of their graduates in the MBA program in 2008 was $89,156. What must be the starting salary of the MBAs in 2009 if the salary increase makes the exact cost of livin

> According to the New Hampshire Department of Education, the average teacher salary in public school districts in New Hampshire was $46,797 in 2006, $48,310 in 2007, and $46,797 in 2008. Comment on the percentage change in the dollar value (nominal) as we

> The total revenue for The Walt Disney Company was $35,510,000 for 2007, $37,843,000 for 2008, and $36,149,000 for 2009. a. Deflate the total revenue with the relevant price index. b. Discuss the revenue trend during the 2007–2009 per

> The following table lists a portion of the data derived from a matched-pairs sample. a. Specify the competing hypotheses that determine whether the population median difference differs from zero. b. Assuming that T is normally distributed, determine t

> Each month the Current Employment Statistics (CES) program surveys numerous businesses and government agencies in order to obtain detailed data on earnings of workers. Consider the following data on the national average of hourly earnings for 2008. Also

> Japan was the first Asian country to challenge the dominance of the United States in the 1980s. However, since then, its economy has been in a slow but relentless decline (The New York Times, October 16, 2010). This country has been trapped in low growth

> Economists often look at retail sales data to gauge the state of the economy. This is especially so in a recession year, when consumer spending has decreased. Consider the following table, which shows U.S. monthly nominal retail sales for 2009. Sales are

> The following table represents the nominal values of an item and the corresponding price index from 2009 to 2011. a. Compare the percentage change in the nominal values with the corresponding real values from 2009 to 2010. b. Compare the percentage ch

> The following table represents the nominal values of an item and the corresponding price index for 2007 and 2008. a. Compute the inflation rate for 2008. b. Compute the annual percentage change of the item in real terms. Year Nominal Value Price I

> Let revenues increase by 10% from $100,000 to $110,000. Calculate the percentage change in real terms if the relevant price index increases by 4% from 100 to 104.

> An item increases in value from 240 to 280 in one year. What is the percentage change in the value of this item? Compute the percentage change in real terms if overall prices have increased by 5% for the same period.

> The nominal values for four years are given by 32, 37, 39, and 42. Convert these values to real terms if the price index values for the corresponding years are given by 100, 102, 103, and 108.

> Consider the following table, which reports the sale of homes (in 1,000s) by region for 2007, 2008, and 2009. Use this information, along with the price data provided in the previous exercise, to a. Compute and interpret the Laspeyres aggregate home p

> With the collapse of house prices that occurred during the Great Recession, the American Dream became a nightmare for many of the 75 million Americans who owned a home (CBS Evening News, February 2, 2010). However, the drop in house prices was not unifor

> The following table lists a portion of the data containing information on a matched-pairs sample. a. Specify the competing hypotheses that determine whether the median difference between Population 1 and Population 2 is less than zero. b. At the 5% si

> Consider the following sample data. Assume the normal approximation for T. a. Specify the competing hypotheses to determine whether the median differs from 100. b. Calculate the value of the test statistic and the p-value. c. At the 10% significance

> What is the ROE indifference point of these two financing strategies of Arctic Inc.: Strategy 1: debt-equity ratio = 0.6. Strategy 2: debt-equity ratio = 1.5? Arctic Inc.’s tax rate is 25 percent and its pre-tax cost of debt is 8 percent.  

> What is the intercept and slope of the financial leverage (ROE‐ROI) line in Practice Problem 17? Explain the meaning of the slope.

> Calculate ROE if R OI 15%, R D 10%, B $300,000, S E $500,000, and T 30%. Identify the business risk and financial risk.

> What are the practical difficulties associated with the implications of M&M’s corporate tax model?

> How do taxes affect the M&M argument?

> In this ideal M&M world, what will affect firm value?

> What is the basic argument that M&M use to arrive at the irrelevancy result?

> Explain the importance of this theory.

> State the assumptions underlying the M&M irrelevance theory.

> Kumar expected his firm to earn $1,000 per year forever, with no growth. Given a cost of capital of 10 percent, the value of the firm is $10,000. Kumar identified a new project, which costs $1,000 but would earn 11 percent per year forever. To invest in

> State the principle of the optimal cash balance.

> The current stock price of Abacus is $50. For the past 20 years, the firm has paid an annual dividend of $5. On July 26, it announced a dividend of $6 payable on September 10 to shareholders of record at the close of business on September 1. a. What do y

> A dividend‐paying company has a current dividend yield of 8 percent and a stock price of $100. The company has paid the same dividend for the past 15 years and it is not expected to change. Alice believes that the company is an excellent investment oppor

> MCC Corporation currently has cash flow from operations of $10 million, capital expenditures of $8 million, and pays a dividend of $2 million (all are perpetuities). The firm has no growth prospects or debt, and shareholders expect an annual return of 5

> A firm’s next‐period market value of equity is $3 million and there are 100,000 shares outstanding, with K = 12%. a. What is the current stock price if the firm pays $600,000 in cash dividends? b. What is the number of shares outstanding if a firm spends

> Assume that the shareholders of a firm pay a net tax of 30 percent on cash dividends received. After‐tax earnings have been constant at $10 per share. The firm pays out all earnings in dividends at the end of each year. The market requires a 15 percent r

> A firm has one million shares outstanding. After‐tax earnings have been constant at $8 per share. The firm pays out all earnings in dividends at the end of each year. The shareholders’ required rate of return is 15 percent. a. Calculate the current share

> CGC Company is considering its dividend policy. Currently CGC pays no dividends, has cash flows from operations of $10 million per year (perpetual), and needs $8 million for capital expenditures. The firm has no debt and there is no tax. The firm has 2 m

> Describe the implication of releasing the assumptions of no transactions costs.

> How do personal taxes affect preference for high versus low dividend yields?

> According to John Lintner, what is the adjustment factor ß? Interpret the calculated adjustment factor.

> Explain the transactions motive.

> Discuss the “bird in the hand” argument in support of dividend payments.

> Explain the implications of M&M’s homemade dividend argument.

> Describe the difference between a stock dividend and a cash dividend plus a DRIP.

> What does real-world evidence imply about how firms manage their dividend payments?

> Explain the similarities and differences of DRIPs, stock dividends, and stock splits.

> Define four important dates that arise with respect to dividend payments.

> What obvious question arises when we examine cross-sectional patterns in the dividend payouts of individual companies?

> What obvious question arises when we examine historical patterns in aggregate dividend payouts?

> List the main reasons why firms repurchase shares.

> A company has announced an increase in its quarterly dividend from $0.30 to $0.42 per share. If an investor who owns 1,500 shares is in the 25 percent tax bracket, calculate the amount by which the investor ’ s tax would increase annually due to the divi