samithasanju

samithasanju

Lv3

Bangalore University

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Law1Management1English1Science1Sociology1Algebra2Accounting1Calculus2Biology5Physics1Finance2Economics10Chemistry14
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Consider an insurance policy of full coverage (all expenses covered). When a person is hospitalized, the patient bears no financial cost if her stay is prolonged. This is likely to lead the person to overconsume any medical care that has any benefit if the insurance company incurs the expense. Using the figure below answer questions. The person’s demand for health service is D1 and the marginal cost of health service/care is $10 per unit.

$

D1 D2

P = $10

200 Medical Care

(i). if the person does not have insurance, how much medical care would he consume?

(ii). With the full coverage insurance, how much would he consume?

(iii). How much is the welfare loss or excess burden? Shade the excess burden in the figure.

(iv). The insure person is required to pay 20% of the cost. How much medical care would he consume?

(v). Calculate the excess burden or welfare loss in this case.

Luncheon club dilemma: Public debt under majoritarian democracy and welfarism.

Luncheon club dilemma: A group of diners used to eat and pay separately. Each person has the demand function for lunch given by: p = 20 – 2x. Let’s imagine x denotes number of sushi. The supply condition is given by a constant marginal cost of $10 a piece: mc = 10.

a.. How many pieces of sushi would each diner order?

Now, they form a luncheon club of ten persons. They eat together once a month, each selecting from the menu. The bill is the sum of the total orders and will be divided evenly among the diners.

b. Consider a stand-in diner who orders one more piece than he used order and pay separately. How much is the total bill if he is the only one who orders additional sushi? How much does each person pay?

c. Now, every diner orders one more sushi. How much is the total bill and how much does each person pay?

d. Would diners stop after one more sushi? When would they stop – after how many additional sushi, would they stop?

Answer:
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tandardisation of sodium thiosulphate solution with potassium iodate

Sodium thiosulphate is not of ultra-high purity, and hence does not qualify to be used as a primary standard in titrations. It should therefore be standardised
against a primary standard, potassium iodate (KIO3), in order to determine its accurate concentration. The standardisation involves two redox equations
described below:
2S2O32–+ I2 → S4O62- + 2I-

IO3- + 5I- + 6H+ → 3I2 + 3H2O
In the second equation IO3- plays an oxidative role, where I- ions are oxidisedto I2 under acidic conditions, causing the solution to turn a brownish colour.
The iodine produced is then titrated with Na2S2O3 solution, using starch as an indicator. The starch indicator is not added until the brownish colour, due to
iodine, has changed to pale yellow. When the starch is added to the solution, the yellow colour changes to blue-black. The end point in the titration is reached
when a drop of the thiosulphate causes the solution to become colourless.

The aim of this experiment is to determine the actual concentration of the thiosulfate solution (in mol/L) using potassium iodate as a standard. The molecular mass of KIO3 is 214 g mol-1.


Reagents: KIO3 (A.R.)
20 g Kl (iodate free) (for use in Experiments 3 and 5)
1 M HCI solution
0.1 M Na2S2O3 stock solution
Starch indicator solution

(a) Calculate the mass of A.R. KIO3 needed to prepare a 0.016 M solution in a 250 mL volumetric flask. Ask a demonstrator to check your calculations.
(b) Following the procedure given in Experiment 1, weigh by difference the KIO3, as supplied in the glass vial, accurately to the nearest 0.1 mg. (Use
a 4-place balance.)
(c) Transfer the weighed KIO3 into a 250 mL volumetric flask, dissolve it, and then make to the mark with deionized water. Shake to mix well.
(d) Fill the burette with 0.1 M Na2S2O3 stock solution, ensuring that there is no air pocket in the burette tip.
(e) Pipette a 25 mL aliquot of the KIO3 solution into each of three 250 mL conical flasks.
(f) Treat each aliquot individually from this point. Weigh 2 g Kl into a weighing beaker and add it to the conical flask, followed by 10 mL of 1 M HCI.

(g) Immediately titrate the liberated iodine with the 0.1 M Na2S2O3 stock solution. When the colour of the solution becomes pale yellow, dilute to 100 mL with deionized water and add 3 to 5 drops of starch indicator solution. Continue the titration until the colour changes from blue to colourless.

QUESTIONS:

Calculate the molarity of sodium thiosulfate.

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A perfectly competitive firm faces a market-determined price of $25 for its product, and its total cost for different quantities of output are shown below.  Answer each question (a through g) below.  The correct answer to each is worth five points.  If you get correct answers to each question a through g, you will receive 35 points, which is an extra two points over the basic 33 points for a Roman numeral question.

  1.  The firm’s total costs are given below.  Fill in columns 3 and 4 for average total cost and marginal cost.
  2. Fill in columns 5 and 6 for marginal revenue and profit margin.
  3. How much output should the competitive firm produce?  Explain why.
  4. Draw the marginal cost, average total cost curve, and marginal revenue curve for the firm.
  5. Fill in column (7) on total profit.  Does your answer from column (7) agree with your answer to part c?  If not, explain why.
  6. Identify the profit maximizing level of output on your diagram from part d.
  7. Suppose the demand for the industry product decreases and the price falls to $14.  What quantity should the firm produce now?  How much is profit? 

 

(1)                       (2)             (3)             (4)                   (5)                   (6)                      (7)

Quantity          TC          ATC             MC                  MR      profit per unit     Total profit

000                  1000

100                  2000

200                  3300

300                  4800

400                  7000

500                  8000

             

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You are a new recruit in the finance division of LargeCompany Plc. Your finance director has asked you to review the company’s capital structure when the amount of debt is changed. She has provided you following information from last year annual report in ‘000 Short Term Debt/Current Portion of Long Term Debt £1,700,000 Long Term Debt £9,700,000 Total Equity £18,000,000 Shares Outstanding 1,700,000 Further, you collected following market information from the New Financial Times. Stock Price (per share) £ 27 Current Yield to Maturity on outstanding Bond 0.90% Cost of unlevered equity is 10 %

. You would like to show your understanding of capital structure that you learnt in your corporate finance course In particular, you want to demonstrate

A) in a perfect capital market, a firm’s choice of capital structure is unimportant. (30 Marks)

B) in “real world” market imperfections like taxes can not be ignored. As interest payments create a valuable tax shield, the stock price should increase if firm decides to increase its debt i.e. higher leverage higher firms value (30 Marks)

C) your knowledge of existing literature on capital structure theories (20 Marks)

Please follow the guidelines below while answering

For A: you are suggested to

1. Compute the market Debt to Equity ratio.

2. Compute the cost of levered equity based on market Debt to Equity ratio

. 3. Compute the current weighted average cost of capital (WACC).

4. Repeat steps 2 and 3 for Scenario i) issue £1 billion in debt to repurchase stock, and Scenario ii) issue £1 billion in stock to repurchase debt.

Briefly comment the results.

Note: i. approximate the market value of debt by the book value of debt

ii. debt includes Long-Term Debt and Short-Term Debt/Current Portion of Long-Term Debt.

iii. existing yield on the outstanding bond can be used as cost of debt

iv. assume cost of debt capital remains constant

For B: you are suggested to Examine the impact of

a) issuing £1 billion in new debt (adding a modest level of debt) and

b) issuing £5 billion in new debt (i.e. adding a higher level of debt).

In both the cases, you plan to use the proceeds to repurchase stock.

Note: i. assume a tax rate of 40%

ii. begin by analysing the scenario with £1 billion in new debt. Assuming the company plans to keep this new debt outstanding forever, determine the present value of the tax shield of the new debt.

iii. find out new market value of equity. new market value of equity = existing market value + tax shield amount

iv. find out new market value of equity after repurchase

v. find out the new share price vi. new number of shares outstanding = no of shares outstanding (given) less number of shares repurchased

vii. now find out Debt to Equity ratio based on a) book values and b) market values

viii. repeat ii – vii for £5 billion new debt issuance

For C: you are suggested to Read and review journal articles related to Trade off, Asymmetric of the information hypothesis, Pecking order theory, Signaling theory, Agency cost theory, and Market timing theory.

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