Dot miller owns a small chain of dive shops. she is interested in knowing how many potential customers she will need to sample in several large cities within a three- to four-hour drive of her shops located on the california coast. she wants to estimate the mean response to a 10-point scale measuring the likelihood that they will subscribe to a dive package which, if they take advantage of all the dives, represents a savings of 50 percent over taking the dives individually. in estimating the standard deviation in the population for the formula for calculating the sample size for estimating a mean, dot can: rely on the knowledge of other owners in the dive industry to share their knowledge of surveying scuba divers. use some prior knowledge about the population, undertake a pilot study or estimate the range, and divide by 10. use some prior knowledge about the population, undertake a pilot study or estimate the range (7), and divide by 6. undertake a pilot study using members of the dive population who live near the present dive shops. none of these; if you do not have the actual standard deviation, you cannot use the formula.

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Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?

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