Quiz 1 analysis

Hello All, 

Quiz1 grades have been posted. Following is the general analysis of the same 

Q1 

(a) most of you who attempted this part got it right. Part marks have been given as long as the steps have been shown and correct values have been substituted. Mistakes made in final answers due to calculations errors are not penalized. The single most mistake was that some of you simply reported the numbers without doing any calculations. The full mark goes to computing and comparing  the (benefit - cost) for each case. 
(b) To get the full mark students should mention that the sunk cost is unrecoverable and irrelevant to the future decision. Therefore the results that we get from part(a) are the same regardless of including or ignoring the sunk cost. Some students simply reiterated that the sunk cost makes no difference, which caused them to lose 1  mark. 

Q2. 

(a) Most students got this part right. The stock price for gamma is 50+6-3 and for theta is 25+3-0.

(b) Many student did not give a complete answer to this question. Please note that this part asks two questions: first "explain" how a company can still have value to investors without giving out dividend, and second "how" can the investor in this example who does not get dividend obtain the same level of cash as the investor who receives dividend? The answer to the "explain" question has one mark which most students got. You could get this 1 mark by stating that the money of dividend can stay in the company and raise the stock price, and the investors can sell their share to receive cash. Or you could show the rate of return in both cases of this example is the same. On the other hand, the answer to the "how" question was mostly absent, which has a 2 mark value. To get this 2 mark, the students should mention that the investors in gamma get dividend money equal to 3*100 = 300. For the investors in theta company to get the same amount of cash, the theta investors need to sell a certain number of their shares. The number of shares that need to be sold is equal to the needed cash (300) divided by the share price of theta at the end of the year (28). Thus the number of shares that the theta investors need to sell to get the same cash as the investors of gamma is equal to (300/28) = 10.7.

Q3                                                                                                                                                                  

Most of the student did well in this question.  There are slightly different ways to approach this problem. The main points points of this question are the following (1), (2) and (3). However, please note that if your approach is different than mine yet correct, full marks have been given.

(1) Read the table: in the table you get the index for different years. Main point of confusion is that in this table, you can compare different years with the same Kilo watt capacity. You cannot compare the year 2017 with capacity 250 vs. the  year 2023 with capacity 800. The capacities must be the same. For reading the table correctly 4 marks were assigned.

(2) all student should know and use the formula: Cx/Cb = (Qx/Qb)^M (**) to find M, but please not that while Qx and Qb refer to different capacities, Cx and Cb must be from the same year (the corresponding different capacities from the same year). This part was assigned 4 marks to accurately estimate M.

(3) in the last part, we use the same formula Cx/Cb = (Qx/Qb)^M for finding the cost at year 2023 with capacity 450KW. This part was assigned 2 marks. Some common mistakes were that student assumed a linear relationship instead of an logarithmic equation. Another common mistake was comparing different years with different capacities in the formula (**).