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A social media site that allows community members to rate restaurants wants to ensure that the reviews are genuine reviews of the community and not favorable reviews orchestrated by the friends of the restaurant owners. It uses several metrics when examining reviews, one of which is the “percent favorable.” It theorizes that a spike in the percent favorable might represent a campaign by the restaurant, but also recognizes that it might reflect genuine customer sentiment, or just random variation. So it collects 4 days’ worth of such data on a periodic basis and subjects it to a hypothesis test. For one restaurant, the percent favorable has stood at 60% for the last year. One recent 4-day sample showed 72% favorable—23 favorable reviews and 9 unfavorable.

(a) Specify and conduct an appropriate hypothesis test.

(b) In a couple of sentences, interpret the results of your hypothesis test.

(c) Given the three possible causes of a spike in favorable ratings (restaurant campaign, actual customer sentiment, and random variation) and discuss the role of a hypothesis test in distinguishing among the three causes.

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The financial data given below shows the capital structure of Akabebi Company Limited. 10% Sh.1,000 debenture 4,900,000 Ordinary share capital (Sh.20) 18,000,000 Retained earnings 6,000,000 TOTALS 28,900,000 The structure is considered optimum and the management would wish to maintain this level. Akabebi Company Limited intends to invest in a new project which is estimated to cost Sh.16,800,000 with an expected net cash flow of Sh.3,000,000 per annum for 10 years. The management has proposed to raise the required funds through the following means: 1.Issue 100 10% debentures at the current market value of Sh.5,000 per debenture. 2.Utilize 60% of the existing retained earnings. 3.Issue 10% Sh.20 preference shares at the current market price of Sh.25 per share 4.Issue ordinary shares at the current market price of Sh.45 per share. Floatation cost per share is estimated to be 12% of the share value. The company’s current dividend yield is 5% which is expected to continue in the near future. Corporation tax rate is 30%. Required: (a)Determine the current dividend per share. (3 marks) (b)Determine the number of ordinary shares to be issued. (2 marks)

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