BUSN 278 Midterm

9. (TCO 2) The Federal Election Commission maintains data showing the voting age population, the number of registered voters, and the turnout for federal elections. The following table shows the national voter turnout as a percentage of the voting age population from

1972

to

1996

(The Wall Street Journal Almanac; 1998):

   

Voter Turnout

 

Year

% Turnout

Year % Turnout 1972

55

1986

36 

1974

38

1988

50 

1976

54

1990

37 

1978

37

1992

55 

1980

53

1994

39 

1982

40

1996 49 

1984

53        

Part (a) Use exponential smoothing to forecast this time series. Consider smoothing constants of a = 0.1 and 0.2. What is the forecast of the percentage of turnout in 1998?

Part (b) Use the mean absolute deviation (MAD) to determine which smoothing constant provides the best forecast of voter turnout. (Points : 30)      

 

11. (TCO 6) Davis Company is considering two capital investment proposals. Estimates regarding each project are provided below:

   

                                           Project A   Project B

 

Initial Investment      

      

$800,000   $650,000

Annual Net Income      $50,000    $45,000

Annual Cash Inflow     $220,000    $200,000

Salvage Value                  $0                 $0

Estimated Useful Life        5 years      4 years

 

The company requires a 10% rate of return on all new investments.

 

Part (a) Calculate the payback period for each project.

Part (b) Calculate the net present value for each project.

Part (c) Which project should Jackson Company accept and why? (Points : 30)      

        

 12. (TCO 6) Top Growth Farms, a farming cooperative, is considering purchasing a tractor for $468,000. The machine has a 10-year life and an estimated salvage value of $32,000. Top Growth uses straight-line depreciation. Top Growth estimates that the annual cash flow will be $78,000. The required rate of return is 9%.

 

Part (a) Calculate the payback period.

Part (b) Calculate the net present value.

Part (c) Calculate the accounting rate of return. (Points : 30)      

      

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