In short the majority of AJ Davis customers are Urban dwellers. In addition a Pie-Chart below depicts the same data. 2) Income Based on the histogram above which used a sample of 50 customers from AJ Davis store the mean income is about $45.650 and it follow a normal curve or has what we call the bell curve. Descriptive Statistics: household size Variable N N* Mean SE Mean StDev Minimum Q1 Median Q3 household size 51 0 4.431 0.357 2.548 1.000 2.000 4.000 7.000 Variable Maximum household size 8.000 From a sample of 50 customers the average household is 4.4 and also the median household is 4. The maximum household is 8 and the minimum is 1.
The department store of AJ Davis is attempting to find out more information about their credit customers. They have taken a sampling of 50 credit customers using several different variables. The data collected for several of those variables and the relationship between variables have been interpreted with detailed statistical analysis to summarize the pertinent customer information. The first variable interpreted is location, which is categorical. AJ Davis listed customer location in three subcategories: urban, suburban, and rural.
The third individual variable to be reviewed is Income. A histogram chart was created to determine of the fifty customers sampled how much income these individuals have coming in. By looking at the histogram one is able to determine that the majority of customers reported making approximately fifty five thousand a year therefore this would be the mode. The average or mean reported income was approximately forty four thousand a year. The median would be about forty three thousand a year.
In addition, we can estimated that a customer with a $4000 credit balance to have an income in between (41.7665, 46.6130) in $1000 using the 95% CI confidence levels to calculate the income level. At the same time, the average mean income is (41.7665+46.6130)/2= 44.19 or $44,190 rounded up to nearest dollar. We cannot really predict the credit balance of $10,000 as it is out of
Therefore, the cost of fixed rate debt equals 8.95% plus 1.1% risk premium, which totaled to 10.5% Cost of Debt = (0.5 x 0.08) + (0.5 x 0.105) = 0.095 = 9.25% [since floating rate and fixed rate debt both weigh 50%, we use the weighted average approach to calculate the total cost of debt rate] Based on historical data analysis below, we get an average income tax rate of 42%. | 1978 | 1979 | 1980 | 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | Income before income taxes | 83.5 | 105.6 | 103.5 | 121.3 | 133.7 | 185.1 | 236.1 | 295.7 | 360.2 | 398.9 | Income tax | 35.4 | 43.8 | 40.6 | 45.2 | 50.2 | 76.7 | 100.8 | 128.3 | 168.5 | 175.9 | Tax rate | 42% | 41% | 39% | 37% | 38% | 41% | 43% | 43% | 47% | 44% | | | | | | | | | | | | Average tax rate | 42% | | | | | | | | | | After-tax cost of debt = (1 - 0.42) x 0.0925 = 0.05365 = 5.365% Cost of Equity From Table B and Exhibit 5, * Risk free rate (1-year)= 6.9% Premium = 8.47% * Risk free rate (10-year)= 8.95% Premium = 7.43% ** ** Since A rated bond is considered upper medium grade and the company is A rated, we assume long-term
I would make an investment in the company’s 5% convertible bonds. Sepracor’s ROA and ROE is above the average and showing that it is profitable; however, the company’s debt to asset ratio is above 1, which means that most of its assets are financed through debt instead of equity. Sepracor would be in trouble if its creditors were to start demanding repayment. C.) To make valid comparisons between Sepracor and Bayer, you would have to compare the rules for fair value under the U.S GAAP and iGAAP. Under IFRS, convertible bonds are separately recorded as liabilities and stockholder’s equities.
Discuss your first individual variable, using graphical, numerical summary, and interpretation Descriptive Statistics: Credit Balance($) Total Variable Count Mean StDev Variance Minimum Q1 Median Q3 Credit Balance($) 50 4153 932 868430 2047 3292 4273 4931 N for Variable Maximum Range IQR Mode Mode Credit Balance($) 5861 3814 1638 4073 2 The distribution of credit balance of the sample, which consists of 50 credit customers, is approximately skewed to the left, which is in part driven by $2,000 outlier. In addition, peak of the variable occurs at about $4,500 and the spread is from $2,000 to $6,000. The descriptive statistics of credit balance indicate that mean of $4,153 is lower than the median of $4,273, which in turn concurs that graphical interpretation is skewed to the left. Furthermore, mode of $4,073 occurs most often in a set of data. Graphical and descriptive findings indicate that out of the sample of 50 credit customers, purchasers on average have $4,153 credit balance.
Income Descriptive Statistics: Income ($1,000) The data provided for the Income variable on AJ Davis department store credit card customers shows us that the minimum income level is $25,000 with Q1 of 33.00 and the maximum is $74,000 with Q3 of 57.25. The mean is 46.02 and the median is 44.50 the Standard Deviation if 13.88. The data tells us that of the sample credit customers has an average income of $46,020 as shown in the above Histogram. Credit Balance Descriptive Statistics: Credit Balance($) The data provided for the Credit Balance on AJ Davis department store credit card customers shows us that the minimum credit balance for customer is $2047 which in Q1 was $3292 and the maximum credit balance $5861 which in Q3 was $4931. The mean is 4153 and the median is 4273 with a Standard Deviation if 932.
Problem #6, p. 221 in text. (You do not need to “derive” the Cournot equilibrium. Just solve for the values using the appropriate formulas.) Market demand: P = 400 – 2Q Unit cost production = 40 a. Firm’s quantity in equilibrium is : q1 = (a-c)/3b = (400-40)/(3*2)= 60 unit = q2 Firm’s revenue: P= 400 – 2 * (2*60) = $160 Firm’s profit = (60*160) – (60*40) = $7200 b. Monopoly output: MR=400-4q MC=40 MR=MC 400 – 4q = 40 then q=90 unit The reason that producing on half the monopoly output (90*1.5 = 135) a Nash equilibrium outcome is that it will exceed the market demand of Nash equilibrium ($160).
FINANCE CASE STUDY “Wonder Bars” Important information * Interest bearing debt of the company in 1994 ― $ 76,132,000 with a weighted average interest rate of 8.2% 8.25% sinking fund, n=12 years, $133 million * Coupon interest = 9.375%, $100 million WB had two long term bond outstanding Common stock, 75 million shares * Class B stock, $10 million shares The firm has 2 classes of common stocks Both stock have a price of 35$ / share and the beta of the company is 0.95 * Treasury bill = 5% * S&P 500 index = 12% in 10 years * Federal and state income tax = 40% * Sonzoni Food beta = 0.9 SOLUTION Question 1: What is WB’s capital structure? Capital structure is a way to determine