Assignment Week 1 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 Probabilit y 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. .9952 1.3. Stewart Company has cost of capital 14%. The following function represents the shortage cost for its net working capital S = 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 $648 $2556 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
