A problem of interest to health officials (and others) is to determine the effects of smoking
during pregnancy on infant health. One measure of infant health is birth weight; a birth rate
that is too low can put an infant at risk for contracting various illnesses. Since factors other
than cigarette smoking that affect birth weight are likely to be correlated with smoking, we
should take those factors into account. For example, higher income generally results in access
to better prenatal care, as well as better nutrition for the mother. An equation that recognizes
this is:
bwght = β0 + β1 · cigs + β2 · f aminc + u
with bwght birth weight, ounces; cigs cigs smoked per day while pregnant; faminc 1988
family income, $ 1000s
(a) What are the most likely signs for β1 and β2?
(b) Do you think cigs and faminc are likely to be correlated? Explain why the correlation
might be positive or negative.
(c) Now estimate the equation with and without faminc, using the data in "pc2 01.xls".
Report the results in equation form, including the sample size and R2. Discuss your results, focusing on whether adding faminc substantially changes the estimated effect of cigs on bwght.

Alyssa works for an engineering firm that has been hired to design and supervise the construction of a highway bridge over a major river. the bridge will be a unique design, incorporating complex designs that will likely never be duplicated. how should alyssa deal with designing and overseeing the building of the bridge?

Suppose that the world price of steel is $100 a ton, india does not trade internationally, and the equilibrium price of steel in india is $60 a ton. suppose that india now begins to trade internationally. the price of steel in india the quantity of steel produced in india a. does not change; does not change b. falls; increases c. falls; decreases d. rises; decreases e. rises; increases the quantity of steel bought by india india steel. a. increases; exports b. decreases; imports c. decreases; exports d. does not change; neither imports nor exports e. increases; imports

If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. there are two approaches to use to account for flotation costs. the first approach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. because the investment cost is increased, the project's expected return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. the second approach involves adjusting the cost of common equity as follows: . the difference between the flotation-adjusted cost of equity and the cost of equity calculated without the flotation adjustment represents the flotation cost adjustment. quantitative problem: barton industries expects next year's annual dividend, d1, to be $1.90 and it expects dividends to grow at a constant rate g = 4.3%. the firm's current common stock price, p0, is $22.00. if it needs to issue new common stock, the firm will encounter a 6% flotation cost, f. assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%. what is the flotation cost adjustment that must be added to its cost of retaine