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Refer again to the gasoline sales time series data in Table 6.1.
Month 1 2 3 4 5 6 7
Value 24 13 20 12 19 23 15
a. Using a weight of 1/2 for the most recent observation, 1/3 for the second most recent, and 1/6 for third most recent, compute a three-week weighted moving average for the time series.
b. Compute the MSE for the weighted moving average in part (a). Do you prefer this weighted moving average to the unweighted moving average? Remember that the MSE for the unweighted moving average is 10.22.
c. Suppose you are allowed to choose any weights as long as they sum to 1. Could you always find a set of weights that would make the MSE smaller for a weighted moving average than for an unweighted moving average? Why or why not?
Consider a three-year project with the following information: initial fixed asset investment = $870,000; straight-line depreciation to zero over the five-year life; zero salvage value; price = $34.05; variable costs = $22.55; fixed costs = $210,000; ..
Warner associates are forecast to grow by 100% in the first year and 50% in the second year. Afterward, it will grow by a rate that is known only indirectly. Its ROE is .2 and its retention rate is 30%. Furthermore, its unlevered beta is 1, tax rate ..
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Suppose that the annual expected rates of inflation over each of the next five years are 5 percent, 6 percent, 9 percent, 13 percent, and 12 percent, respectively. What is the average expected rate of inflation over the 5-year period? Use the arithme..
Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 15 units per year at $305,000 net cash flow per unit for the next five years.
You work for a pharmaceutical company that has developed a new drug. The patent of the drug will last 17 years. You expect that the drugs profits will $2 million dollars in its first year and that this amount will grow at a rate of 5% per year for th..
An exchange rate is currently 0.8000. The volatility of the exchange rate is quoted as 12% and interest rates in the two countries are the same. Using the lognormal assumption, estimate the probability that the exchange rate in 3 months will be a) Le..
What is the price of a European call option on a non-dividend-paying stock when the stock price is 652, the strike price is $60, the risk-free interest rate is 12% per annum, the volatility is 30% per annum, and the time to maturity is three months?
merger analysis ltbrgt ltbrgttransworld communications inc. a large telecommunications company is evaluating the
You used Dell as a representative company to estimate the cost of capital for GCI. What are some of the potential problems with this approach in this situation? What improvements might you suggest?
What are the NAL and IRR of the lease and interpret each value - Assume now that the salvage value estimate is $300,000, but all other facts remain the same. What is the new NAL? The new IRR?
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