Mr. Smith recently faced a choice between being (a) an economics professor, which pays $60,000/yr, or (b) a safari leader, which pays$50,000/yr. After careful deliberation, Smith took the safari job, but it was a close call. “For a dollar more,” he said, “I’d have gone the other way.” Now Smith’s brother-in-law approaches him with a business proposition. The terms are as follows:

• Smith must resign his safari job to work full-time in his brother-in-law’s business.

• Smith must give his brother-in-law an interest-free loan of $100,000, which will be repaid in full if and when Smith leaves the business. (Smith currently has much more than$100,000 in the bank.)

• The business will pay Smith a salary of $70,000/yr. He will receive no other payment from the business.

The interest rate is 10 percent per year. Apart from salary considerations, Smith feels that working in the business would be just as enjoyable as being an economics professor. For simplicity, assume there is no uncertainty regarding either Smith’s salary in the proposed business or the security of his monetary investment in it. Should Smith join his brother-in-law and, if so, how small would Smith’s salary from the business have to be to make it not worthwhile for him to join? If not, how large would Smith’s salary from the business have to be to make it worthwhile for him to join?

The following data represent the arrival status of American Airlines Flight 0715 from Washington DC's Ronald Reagan Airport to Chicago's O'Hare International Airport for 15 consecutive flights. L O O O O O O L L L O L O O O. Status is indicated as on time (O) or late (L), defined as more than 10 minutes after the scheduled arrival. What can you conclude about the randomness of the arrival status at the $\alpha$=0.05 level of significance?

In studying business law, Professor Smith's students also study ethics in a business context. Ethics is primarily the study of what constitutes

a. Financially rewarding behavior

b. Legal behavior

c. Religious behavior

d. Morally right or wrong behavior.

Suppose that random access memory (RAM) can be added to your computer at a cost of $8 per gigabyte. Suppose also that the value to you, measured in terms of your willingness to pay, of an additional gigabyte of memory is$32 for the first gigabyte, and then falls by one-half for each additional gigabyte. Draw a graph of marginal cost and marginal benefit. How many gigabytes of memory should you purchase?

Two types of radar weather-detection devices are available for commercial passenger aircraft: the “state-of-the-art” machine and another that is significantly less costly, but also less effective. The Federal Aviation Administration (FAA) has hired you for advice on whether all passenger planes should be required to use the state-of-the-art machine. After careful study, your recommendation is to require the more expensive machine only in passenger aircraft with more than 200 seats. How would you justify such a recommendation to an FAA member who complains that all passengers have a right to the best weatherdetecting radar currently available?

The table shows the memory capacities (in gigabytes) and prices (in dollars) of tablet computers. (a) Make a scatter plot of the data. Then describe the relationship between the data. (b) Identify any outliers, gaps, or clusters. Explain why they might exist.

$$\begin{matrix} \text{Memory (GB), x} & \text{128} & \text{16} & \text{64} & \text{32} & \text{64} & \text{16} & \text{64} & \text{32} & \text{16} & \text{128} & \text{16} & \text{128}\\ \text{Price (dollars), y} & \text{320} & \text{50} & \text{250} & \text{230} & \text{260} & \text{200} & \text{270} & \text{250} & \text{180} & \text{300} & \text{210} & \text{280}\\ \end{matrix}$$

You are planning a 1000-mile trip to Florida. Except for cost, you are indifferent between driving and taking the bus. Bus fare is $260. The costs of operating your car during a typical 10,000-mile driving year are as follows:

Insurance -$1000

Interest - 2000

Fuel & oil - 1200

Tires - 200

License & registration - 50

Maintenance - 1100

Total - $5550

Look again at the financial forecasts for Growth-Tech given in Table 4.5. This time assume you know that the opportunity cost of capital is r = .12 (discard the .099 figure calculated in the text). Assume you do not know Growth-Tech’s stock value. Otherwise follow the assumptions given in the text.
c. What part of P3 reflects the present value of growth opportunities (PVGO) after year 3?

Compost science, Inc. (CSI), is in the business of converting Boston's sewage sludge into fertilizer. The business is not in itself very profitable. However, to induce CSI to remain in business, the Metropolitan District Commission (MDC) has agreed to pay whatever amount is necessary to yield CSI a 10% return on investment. At the end of the year, CSI is expected to pay $4 dividend. It has been reinvesting 40% of earnings and growing at 4% a year.

a. Suppose CSI continues on this growth trend. What is the expected rate of return for an investor who purchases the stock at the market price of$100? b. What part of the $100 price is attributable to the present value of growth opportunities? c. Now the MDC announces a plan for CSI to also treat Cambridge sewage. CSI's plant will therefore be expanded gradually over 5 years. This means that CSI will have to reinvest 80% of its earnings for 5 years. Starting in year 6, however, it will again be able to pay out 60% of earnings. What will be CSI's stock price once this announcement is made and its consequences for CSI are known?

Yesterday you were unexpectedly given a free ticket to a Dave Matthews concert scheduled for April 1. The market price of this ticket is $75, but the most you could sell it for is only$50. Today you discover that Ani DiFranco will be giving a concert that same evening. Tickets for the Ani DiFranco concert are still available at $75. Had you known before receiving your Dave Matthews ticket yesterday that Ani DiFranco would be coming, you definitely would have bought a ticket to see her, not Dave Matthews. True or false: From what we are told of your preferences, it follows that if you are a rational utility maximizer, you should attend the Ani DiFranco concert. Explain.

Consider the function $f$ given by $f(x, y)=y^3+x y$. Draw graphs of cross-sections with:

(b) $y$ fixed at $y=-1, y=0$, and $y=1$.

Dana has purchased a $40 ticket to a rock concert. On the day of the concert she is invited to a welcome-home party for a friend returning from abroad. She cannot attend both the concert and the party. If she had known about the party before buying the ticket, she would have chosen the party over the concert. True or false: It follows that if she is rational, she will go to the party anyway. Explain.

Colin is in the hospital to have a coronary angiography so that a possible coronary stenosis can be detected. A catheter is inserted through the right radial artery. What route must the catheter travel to reach the coronary arteries?

What is the CPT code for the irrigation and debridement of a wound?