R.PI, Inc. Income Statement For the Year Endal 1231/2019 Question 5 (20 marks) Sales fall credit 5740.030 Los: Cost of goods cold RPI, Inc. is a manufacturer and retailer of high-quality sports clothing and gear. The firm was Gross profits started several years ago by a group of serious outdoor enthusiasts who fell there was a need Less: Operating and intered expenses for a firm that could provide quality products at reasonable prices, The result was RPI. Inc. General and administrative Since its inception, the firm has been profitable with sales that last year totaled $700,000 and Depreciation assets in excess of 5400,000. The firm now finds its growing sales outstrip its ability to Total finance its inventory needs. The firm now estimates that it will need a line of credit of Profit before Interest and taxes (EBIT) $100,000 during the coming year. To finance this funding requirement, the management Lew: Inand plans to seek a line of credit with its bank. Profit before taxes $110,100 Lew: Taxes 27.100 The firm's most recent financial statements were provided to its bank as support for the Net income available firm's loan request. Joanne Peebie, a loan analyst traince for the Morristown Bank and Trust, to common stockholders 5:2 900 has been assigned the task of analyzing the firm's loan request. Lew: Cash dividenda RPI, Inc. Balance Sheets Change in retained earnings $51,100 for 12/31/18 and 12/31/19 JO18 2019 Cash $16.030 $17,000 Marketable securities 7.00.0 7,200 Accounts receivable 42,000 38,000 Inventory 50.000 93.000 Prepaid rent 1.20:0 L.LOO Total current assets $116.200 $156 300 Net plant and equipment 286.000 290.0.00 Total assets $402 20 0 Limbifities ood Stockholders Equity Accounts payable $48.000 $55.000 Notes payable 16.000 13,000 Accruals 6.004 5.000 Total current liabilities $70.00-0 $73.0100 Long-term debt $160.000 $1502000 Common stockholders* equity $ 172. 20.0 $221300 Total liabilities and equity 5402.200 $463mrnr r'- r" 1.The concept of GDP is used by policy makers for many purposes that include keeping track ofthe growth of our economy and forecasting a recession; but it is also abused by some. Discuss some of the applications of GDP which may be considered improper use or abuse of the concept. 2." Even though the Great Recession ofcially ended, the unemployment rate is still considered high.' Discuss. 3.Discuss how the distribution of income among various groups of income earners have changed in this country during the past 5D years. in your opinion, do we need to initiate any policy to address the distribution of income? Make sure you provide references to anyconclusions you arrive at. 4.Many people feet the Fed, which is largely independent of Congress and the President, is too powerful. In fact, the Chairman of the Fed Board of Governors, Ben Bernanke, has been called the second most powerful person in the country. Do you think the Fed is too powerful? Should Congress have more oversight of the Fed? Share your thoughts. 5."N either monetary policy nor fiscal policy alone can be effective in formulating sound economic policies for recession.' Do you agree or disagree? Share your thoughts. Effou now should realize how important it is for economists to try and predict future conditions of the LLB. economy. Economists are also interested in the performance of the economy at a more local level. Discuss how local and national forecasts play an important role in the State and Federal levels. If here have been significant discussions on the government's scal policy during the Great Recession. in particular, many did not like the government's actions in salvaging the auto industry in providing guaranteed loans to GM and Chrysler. What is your opinion? Provide economic reasons for your opinion. Suppose the demand and supply for milk in the European Union (EU) is given by p = 124 - 0.7Q" and p = 7 + 0.2Q5, where the quantity is in the millions of liters and the price is in cents per liter, Assume that the EU does not import or export milk. (Note: 100 cents = 1 euro.) (a) Find the market equilibrium quantity, Q*, and equilibrium price, p*. millions of liters cents per liter (b) Find the consumer and producer surplus at the market equilibrium. (Round your answers to two decimal places.) consumer surplus million euros producer surplus million euros (c) The European farmers successfully lobby for a price floor of p = 40 cents per liter. What will be the new quantity sold in the market, Q? Q =[ millions of liters (d) Find the new consumer and producer surplus after the price floor. (Round your answers to two decimal places.) consumer surplus million euros producer surplus million euros (e) What is the deadweight loss from the price floor? (Round your answer to two decimal places.) million euros (f) If the EU authorities were to buy the surplus milk from farmers at the price floor of 40 cents per liter, how much would they spend in millions of euros? (Round your answer to two decimal places.) million euros