Project

Total Points: 150

Forecasting at Hard Rock Cafe

With the growth of Hard Rock Cafe – from one pub in London in 1971 to more than 110 restaurants in more than 40 countries today – came a corporate wide demand for better forecasting. Hard Rock uses long-range forecasting in setting a capacity plan and intermediate-term forecasting for locking in contracts for leather goods (used in jackets) and for such food items as beef, chicken, and pork. Its short-term sales forecasts are conducted each month, by café, and then aggregated for a headquarters view.

The heart of the sales forecasting system is the point-of-sale system (POS), which, in effect, captures transaction data on nearly every person who walks through a café’s door. The sale of each entrée represents one customer; the entrée sales data are transmitted daily to the Orlando corporate headquarters’ database. There, the financial team, headed by Todd Lindsey, begins the forecast process. Lindsey forecasts monthly guest counts, retail sales, banquet sales, and concert sales (if applicable) at each café. The general managers of individual cafes tap into the same database to prepare a daily forecast for their sites. A café manager pulls up prior years’ sales for that day, adding information from the local Chamber of Commerce or Tourist Board on upcoming events such as a major convention, sporting event, or convert in the city where the café is located. The daily forecast is further broken into hourly sales, which drives employee scheduling. An hourly forecast of $5,500 in sales translates into 19 stations, which are further broken down into a specific number of wait staff, hosts, bartenders, and kitchen staff. Computerized scheduling software plugs in people based on their availability. Variances between forecast and actual sales are then examined to see why errors occurred.

Hard Rock doesn’t limit its use of forecasting tools to sales. To evaluate managers and set bonuses, a 3-year weighted moving average is applied to café sales. If café general managers exceed their targets, a bonus is computed. Todd Lindsey, at corporate headquarters, applies weights of 40% to the most recent year’s sales, 40% to the year before, and 20% to sales 2 years ago in reaching his moving average.

An even more sophisticated application of statistics is found in Hard Rock’s menu planning. Using multiple regression, managers can compute the impact on demand of other menu items if the price of one item is changed. For example, if the price of a cheeseburger increases from $6.99 to $7.99, Hard Rock can predict the effect this will have on sales of chicken sandwiches, pork sandwiches, and salads. Managers do the same analysis on menu placement, with the center section driving higher sales volumes. When an item such as a hamburger is moved off the center to one of the side flaps, the corresponding effect on related items, say french fries, is determined.

Hard Rock’s Moscow Café

Month	1	2	3	4	5	6	7	8	9	10
Guest count (in thousands)	21	24	27	32	29	37	43	43	54	66
Advertising (in $ thousands)	14	17	25	25	35	35	45	50	60	60

Questions:

1. Describe three different forecasting applications at Hard Rock. Also identify the nature (qualitative or quantitative forecasts) of the forecasting techniques at Hard Rock.

• What is the role of the POS system in forecasting at Hard Rock?

• Justify the use of the weighting system used for evaluating managers for annual bonuses.

• Using data for the past 10 months (see the table), what should you do to determine the best method or methods to forecast these date? Explain why if you think a time series model or a regression model is better suited here?

• Develop a least squares regression relationship and then forecast the expected guest count when advertising is $65,000. Please first show the procedure manually on a separate sheet, and then show the procedure using MS Excel.

• Name several variables besides those mentioned in the case that could be used as good predictors of daily sales in each café.

(Note: Please show your answers in a separate Word/Excel sheet)

 

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here is the 25 mcq with 1 written question: 

1)   The study of economics arises due to

a.   greed. b.   scarcity. c.   resources. d.   money.  

2)   Economists assume that individuals

a.   are rational and respond to incentives. b.   prefer to live in a society that values fairness above all else. c.   will never take actions to help others. d.   behave in unpredictable ways. 

3)   Your roommate, Serafina, a psychology major, said, “The problem with economics is      that it assumes that consumers and firms always make the correct decision. But we      know that everyone’s human, and we all make mistakes.”  Is Serafina’s criticism ac      curate?

a.   No. If we cannot assume that decisions are correct, then we will not be able to exam      ine the moral implications of these decisions. b.   Yes. One cannot make predictions about economic behavior because in reality people      make incorrect choices in many situations. c.   No. Economics assumes that economic agents behave rationally, meaning they make      the best decisions given their knowledge of the costs and benefits of these decisions. d.   Yes. Economic theory should allow for irrational behavior so that we can have more      reliable predictions. 

4)   In Austria a woman can get up to 48 months of pension benefits and is guaranteed      a maternity allowance two months before and after she gives birth. Further, the Aus      trian government gives monthly payouts ranging from $132 to $547, depending on      the age of offspring and offers generous tax benefits for families with children. How      will these benefits affect a woman’s decision to have children?

a.   These incentives will encourage women to have children and increase the birth rate. b.   These incentives will encourage only less educated women to have more children.  c.   These incentives will encourage only women with high opportunity costs to have more      children. d.   These incentives will have no effect on having children; the decision to have children      is a social and psychological decision, not an economic decision. 

5)   Making “marginal” decisions involves

a.   calculating the total benefits of an activity and determining if you are satisfied with      that amount.

Principles of Economics

b.   calculating the total costs of an activity and determining if you can afford to incur      that expenditure. c.   comparing the additional benefits and the additional costs of an activity. d.   calculating the average benefit and the average cost of an activity to determine if it is      worthwhile to undertake that activity. 

Scenario 1-1

Suppose a cell-phone manufacturer currently sells 20,000 cell-phones per week and makes a profit of $5,000 per week. A manager at the plant observes, “Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we’re on the right track. We are producing the optimal number of cell phones.”

6)   Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic      term for the incremental revenue received from the sale of the last 3,000 cell      phones? 

a.   gross profit b.   marginal revenue c.   gross earnings d.   sales revenue 

7)   Automobile manufacturers produce a range of automobiles such as sports utility      vehicles, luxury sedans, pickup trucks and compact cars. What fundamental econom      ic question are they addressing by making this range of products?

a.   How to produce goods that consumers want? b.   What goods and services will be produced? c.   Who to produce automobiles for? d.   Why produce a variety of automobiles? 

8)   Which of the following contributes to the efficiency of markets?

a.   Markets promote equal standards of living. b.   Markets promote competition and voluntary exchange. c.   Governments play an active role in the day-to-day operations of markets. d.   Markets are able to bring about an equitable distribution of goods and services. 

Figure 1-4

 9)   Refer to Figure 1-4.  Which of the following statements is true?

a.   The slope of the tangent at E is positive and the slope of the tangent at F is negative. b.   The slope of the tangent at E and the slope of the tangent at F are negative. c.   The slope of the tangent at E is negative and the slope of the tangent at F is positive. d.   The slope of the tangent at E and the slope of the tangent at F are positive.

 10) The production possibilities frontier model assumes all of the following except

a.   the economy produces only two products.  b.   the level of technology is fixed and unchanging. c.   labor, capital, land and natural resources are fixed in quantity. d.   production of goods requires full employment of all resources. 

Figure 2-2



Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. 

11) Refer to Figure 2-2.  The linear production possibilities frontier in the figure indicates      that

a.   the tradeoff between meat and vegetables is constant. b.   Mendonca has a comparative advantage in the production of vegetables. c.   it is progressively more expensive to produce meat. d.   Mendonca has a comparative disadvantage in the production of meat.  

Table 2-3

Table 2-3 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.

12) Refer to Table 2-3.  What is South Korea’s opportunity cost of producing one pound of      wheat?

a.   20 digital cameras b.   0.05 units of a digital camera c.   60 digital cameras d.   5 digital cameras

13) Which of the following are flows in the circular flow model?

a.   the flow of income earned by factors of production and the flow of expenditures on      goods and services  b.   the flow of goods and the flow of services c.   the flow of costs and the flow of revenue d.   the flow of income received by households and the flow of tax revenues paid by house      holds 

14. Which of the following statements about a simple circular flow model is true? 

a.   Producers are neither buyers nor sellers in the product market. b.   Households are sellers in the product market. c.   Producers are buyers in the factor market. d.   Households are neither buyers nor sellers in the factor market. 

One Digital Camera Wheat (per pound)

China 100 hours 4 hours South Korea 60 hours 3 hours

15) The term “property rights” refers to 

a.   the ability to exercise control over one’s own resources within the confines of the law. b.   the government’s right to appropriate land from wealthy individuals to redistribute to      low income families.  c.   the physical possession of a house or any other property which the owner legally pur      chased. d.   the right of a business not to have its assets confiscated by the government in the       event that the business is accused of committing fraud.  

Table 3-1

16) Refer to Table 3-1.  The table above shows the demand schedules for loose-leaf tee of two individuals (Sunil and Mia) and the rest of the market.  If the price of loose-leaf tea rises from $3 to $4 the market quantity demanded would  

a.   decrease by 32 pounds. b.   decrease by 64 pounds.  c.   increase by 64 pounds.  d.   increase by 32 pounds. 

17) If a firm expects that the price of its product to be higher in the future than it is today

a.   the firm has an incentive to decrease supply now and increase supply in the future.  b.   the firm has an incentive to decrease quantity supplied now and increase quantity      supplied in the future.  c.   the firm will go out of business.  d.   the firm has an incentive to increase supply now and decrease supply in the future.

Loose leaf Tea Price per lb. (dollars)

Sunil’s Quantity Demanded (lbs)

Mia’s Quantity Demanded (lbs)

Rest of Market Quantity Demanded (lbs)

Market Quantity demanded (lbs)

$8 4 0 30 6 7 2 40 5 9 3 51 4 12 5 64 3 15 8 90

18) Which of the following is the correct way to describe equilibrium in a market?

a.   At equilibrium, demand equals supply. b.   At equilibrium, quantity demanded equals quantity supplied. c.   At equilibrium, scarcity is eliminated.  d.   At equilibrium, market forces no longer apply. 

Figure 3-4

19) Refer to Figure 3-4.  The figure represents the market for canvas tote bags.  Assume      that the price of tote bags is $15.  At this price:

a.   the quantity demanded exceeds the quantity supplied of tote bags by 75.  The price      will eventually rise to $25 where quantity demanded will equal quantity supplied.  b.   there is a shortage, equal to 55 tote bags; the price of tote bags will rise until demand      is equal to supply.  c.   the demand exceeds the supply of tote bags by 55. Some consumers will have an      incentive to offer to buy tote bags at a higher price.   d.   there is a shortage, equal to 55 tote bags, that will be eliminated when the price rises      to $25.  

20) Which of the following would cause the equilibrium price of white bread to decrease      and the equilibrium quantity of white bread to increase?

a.   a decrease in the price of flour b.   an increase in the price of butter, a complement for white bread c.   an increase in the price of rye bread, a substitute for white bread d.   an increase in the price of flour 



Figure 4-6

Figure 4-6 shows the market for apartments in Bay City.  Recently, the government imposed a rent ceiling at R0. 

21) Refer to Figure 4-6.  What is the area that represents the producer surplus after the      imposition of the ceiling?

a.   F + G b.   F c.   A + B + D + F + G d.   D + F + G

22) Which term refers to a legally determined minimum price that sellers may receive?

a.   A subsidy. b.   A tariff. c.   A price floor. d.   A price ceiling.  

23) A positive externality causes 

a.   the marginal social benefit to be equal to the marginal private cost of the last unit      produced. b.   the marginal social benefit to exceed the marginal private cost of the last unit pro      duced. c.   the marginal social benefit to be less than the marginal private cost of the last unit      produced. d.   the marginal private benefit to exceed the marginal social cost of the last unit pro      duced. 



Figure 4-15

Companies producing toilet paper bleach the paper to make it white.  The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 4-15 illustrates this situation in the toilet paper market. 

24) Refer to Figure 4-15.  An efficient way to get the firm to produce the socially optimal      output level is

a.   to assign property rights to the firms in the industry. b.   to impose a tax to make the industry bear the external costs it creates. c.   to grant a subsidy to enable the industry to internalize the external costs of produc      tion. d.   for government to set a quota on the quantity of toilet paper that the toilet paper      industry can produce. 

25) What is the rationale behind a tradable emissions allowance scheme?

a.   to create a market for externalities: the scheme brings together buyers and sellers of      marketable permits b.   to raise revenue for the government through the sale of emission permits and at the      same time set an emissions target c.   to provide firms with the incentive to consider less costly alternatives to pollution      reduction by making firms pay for the right to pollute beyond their specified allowance d.   to discipline polluting firms by specifying the maximum amount of emissions allowed      and giving them permits to pollute up to their allowance  



Written Assignment for Unit One

• Include your name, student number, course number, course title and unit number on each page of your written assignment (this is for your protection in case your materials become separated). • Begin each written assignment by identifying the question number you are answering followed by the actual question itself (in bold type). • Use a standard essay format for responses to all questions (i.e. an introduction, middle paragraphs and conclusion). • Responses must be submitted as a MS Word Document only, typed double-spaced, using a standard font (i.e. Times New Roman) and 12 point type size.

Word count is NOT one of the criteria that is used in assigning points to written assignments. However, students who are successful in earning the maximum number of points tend to submit written assignments that fall in the following ranges:

Undergraduate courses: 350 – 500 words or 1 – 2 pages.

Plagiarism All work must be free of any form of plagiarism. Put written answers into your own words. Do not simply cut and paste your answers from the Internet and do not copy your answers from the textbook. Be sure to refer to the course Syllabus for more details on plagiarism and proper citation styles.

Please answer ONE of the following:

1)   Define productive efficiency. Does productive efficiency imply allocative efficiency.      Explain.

2)   Define allocative efficiency. Explain the significance of this concept in economics?

3)   How does the study of microeconomics differ from that of macroeconomics? Give one       example each of an issue studied in microeconomics and in macroeconomics.

 

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Assignment 1: Discussion—Finance Organization and Long-Term Planning 

Considering Genesis’s aggressive growth plan, Sensible Essentials suggested that its client should broaden the scope of financing beyond short-term loans and consider long-term financing options. These options would greatly enhance the ability of the operations management team to fund the capital investments and growth in operating expenses.  

One option is selling more equity in the company. A public stock offering might be a possibility; however, a company as young and small as Genesis might be hard to value. Sensible Essentials believes that another private investor might require preferred stock dividends in order to mitigate some of the financial risk. Another option is a long-term bank loan. 

Acting as the finance expert for Sensible Essentials, respond to the following: 

Determine the cost of debt and equity for Genesis and its weighted average cost of capital. Go to www.yahoofinance.com and look under SEC filings. Use a US publicly traded company, such as Apple, Google, DuPont, etc.

Identify the sources of long-term financing for Genesis.

Analyze the potential costs and benefits of each option.

Explain how relative risk (from the investor’s perspective) impacts the cost of capital for Genesis.

Determine the cost of debt and equity for Genesis and its weighted average cost of capital.

Calculate the required rate of return for Genesis using the capital asset pricing model (CAPM). What is the required return for Genesis shareholders?

Write your initial response in 5–7 paragraphs. Apply APA standards to citation of sources. 

Then, review and comment on at least two peers’ responses. In your response, do the following: 

Respond with substantial comments to enrich discussion and the learning experience.

Contribute new, relevant information or quotes from course readings, Web sites, or other sources. Build on the remarks or questions of others, or share practical examples of key concepts from your experience, professional or personal.

Assignment 1 Grading Criteria

Maximum Points

Initial response:

Was insightful, original, accurate, and timely.

Was substantive and demonstrated advanced understanding of concepts.

Compiled/synthesized theories and concepts drawn from a variety of sources to support statements and conclusions. 

16

Discussion response and participation:

Responded to a minimum of two peers in a timely manner.

Offered points of view supported by research.

Asked challenging questions that promoted the discussion.

Drew relationships between one or more points in the discussion. 

16

Writing:

Wrote in a clear, concise, formal, and organized manner.

Responses were error free.

Information from sources, where applicable, was paraphrased appropriately and accurately cited. 

8

Total:

40

SOLUTION

With the implementation of Basel III, the ability of banks to provide balance sheet funding is being reduced and becoming more expensive. As a result, capital light products in areas like debt capital markets and securitisation are becoming increasingly important.

Infrastructure development and improvement projects are a priority across Africa. In infrastructure project finance transactions, after initial bridge financing or retained cash flow, long-term funding solutions need to be in place. Capital markets are expected to drive most of those projects, with debt capital market or securitisation funding generally best placed to serve this need.

With an extensive presence across Africa and experience in the sectors most relevant to its growth and development, Standard Bank provides versatile solutions to our clients. The debt primary markets team focuses on solutions across:

• Debt capital markets – through issuing bonds or derivatives, investments in the bond market tend to diversify risk and enhance fixed income returns. Debt markets provide more direct access to capital with better long-term efficiency.
• Securitisation – by converting illiquid assets with fairly predictable cash flows into tradable securities, securitisation offers an attractive option for investors seeking diversification and securities with a high credit quality. For clients needing to optimise their funding and/or capital structures, it is an alternative source of finance at a lower rate than traditional term funding.

 

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You are evaluating your company’s financing requirements for the next year in the Japanese market, as opposed to domestic financing in the United States.

The current borrowing rate in Japan is 8% for firms of your risk level. You are looking to borrow ¥1,000,000, and considering sources in Japan. You have identified the possible rate changes in that market for the Yen as follows:

Possible Rate Changes	Probability
No Change	0.2
1%	0.4
3%	0.3
5%	0.1

Your company would like to commit to borrowing in this market, but would like to know the effective rate of interest for borrowing ¥1,000,000.

Required:

What is the effective rate of interest your company would have to pay in Japanese Yen to finance the project in Japan?

Part TwoAcc: Foreign Investment

Your U.S. company has the opportunity for an investment in a Canadian oil project that will generate $1,200,000 CAD each year for the next three years.

Your company must invest $2,000,000 USD in order to obtain the project. The cost of capital for your company is 12% and the spot rate for the CAD is expected to be $0.80, $0.82, and $0.79 for the next three years, respectively.

Required:

1. What is the NPV of this project and should your company make the investment?
2. What is the IRR of this project?
3. Should your company make the investment? Why or why not?

 

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G180 Module 09 Assignment

Use the following graph for questions 1-3.

1.  Find 3 different Hamilton circuits in the graph above. (Hint: use the same reference point)

2.  Find a Hamilton path that starts at G and ends at C in the graph above.

3. Does this graph above contain an Euler circuit or path? If so give the Euler circuit or path. (Hint: review Module 08 notes)

Even vertices

Odd Vertices

4.  How many distinct Hamilton circuits does the graph above have?

5.  How many edges are in K₁₆, the complete graph with 16 vertices?

6.  Explain why the graph below has no Hamilton circuit but does have a Hamilton path. Make sure you provide an example of a Hamilton path for proof as well.

 

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