11 jack works in the hardware section of a department store

Reference no: EM13381016

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

Reference no: EM13381016

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