Your probationary period at the Cosmo K Manufacturing Group continues. Your supervisor, Gerry, assigns you a project each week to test your competence in finance.

 

The company is considering the addition of a new office machine that will perform many of the tasks now performed manually. For this week’s task, Gerry has given you the responsibility of evaluating the cash flows associated with the new machine. He has requested the report to be delivered within the week.

 

Evaluation of a New Office Machine

 

The Cosmo K Manufacturing Group currently has sales of $1,400,000 per year. It is considering the addition of a new office machine, which will not result in any new sales but will save the company $105,500 before taxes per year over its 5-year useful life. The machine will cost $300,000 plus another $12,000 for installation. The new asset will be depreciated using a a modified accelerated cost recovery system (MACRS) 5-year class life. It will be sold for $25,000 at the end of 5 years. Additional inventory of $11,000 will be required for parts and maintenance of the new machine. The company evaluates all projects at this risk level using an 11.99% required rate of return. The tax rate is expected to be 35% for the next decade.

 

 

 

Tasks:

 

Answer the following questions:

 

• What is the total investment in the new machine at time = 0 (T = 0)?
• What are the net cash flows in each of the 5 years of operation?
• What are the terminal cash flows from the sale of the asset at the end of 5 years?
• What is the NPV of the investment?
• What is the IRR of the investment?
• What is the payback period for the investment?
• What is the profitability index for the investment?
• According to the decision rules for the NPV and those for the IRR, is the project acceptable?
• Is there a conflict between the two decision methods? If so, what would you use to make a recommendation?
• What are the pros and cons of the NPV and the IRR? Explain your answers.

 

Complete the external environmental scan for your organization.

Perform an internal competitive environmental scan for your organization.

Write a summary of no more than 1,400 words that does the following:

• Identifies and analyzes the most important external environmental factor in the remote, industry, and external operating environments 
• Identifies and analyzes the most important internal strengths and weaknesses of your organization: include an assessment of the organization’s resources

• Assesses the organization’s competitive position and possibilities 
• Analyzes the structure of the organization and how this affects organizational performance

(11-2)  Operating cash flows, rather than accounting profits, are used in project analysis. What is
the basis for this emphasis on cash flows as opposed to net income?

(11-4)  Explain why sunk costs should not be included in a capital budgeting analysis but
opportunity costs and externalities should be included.

(11-5)  Explain how net operating working capital is recovered at the end of a project’s life and
why it is included in a capital budgeting analysis.

(11-7)  Why are interest charges not deducted when a project’s cash flows are calculated for use in
a capital budgeting analysis?

(11-8)  Most firms generate cash inflows every day, not just once at the end of the year. In capital
budgeting, should we recognize this fact by estimating daily project cash flows and then
using them in the analysis? If we do not, will this bias our results? If it does, would the
NPV be biased up or down? Explain.

(11-11)  In theory, market risk should be the only “relevant” risk. However, companies focus as
much on stand-alone risk as on market risk. What are the reasons for the focus on stand-
alone risk?

Chapter 11 Problems

(11-3)  Allen Air Lines must liquidate some equipment that is being replaced. The equipment
originally cost $12 million, of which 75% has been depreciated. The used equipment can
be sold today for $4 million, and its tax rate is 40%. What is the equipment’s after-tax net
salvage value?

(11-4)  Although the Chen Company’s milling machine is old, it is still in relatively good working
order and would last for another 10 years. It is inefficient compared to modern standards,
though, and so the company is considering replacing it. The new milling machine, at a
cost of $110,000 delivered and installed, would also last for 10 years and would produce
after-tax cash flows (labor savings and depreciation tax savings) of $19,000 per year. It
would have zero salvage value at the end of its life. The firm’s WACC is 10%, and its
marginal tax rate is 35%. Should Chen buy the new machine?

(11-6)  The Campbell Company is considering adding a robotic paint sprayer to its
production line. The sprayer’s base price is $1,080,000, and it would cost another
$22,500 to install it. The machine falls into the MACRS 3-year class, and it would be
sold after 3 years for $605,000. The MACRS rates for the first three years are 0.3333,
0.4445, and 0.1481. The machine would require an increase in net working capital
(inventory) of $15,500. The sprayer would not change revenues, but it is expected to
save the firm $380,000 per year in before-tax operating costs, mainly labor.
Campbell’s marginal tax rate is 35%.

a. What is the Year 0 net cash flow?
b. What are the net operating cash flows in Years 1, 2, and 3?
c. What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of
working capital)?
d. Based on your IRR analysis, if the project’s cost of capital is 12%, should the machine be purchased?

Chapter 12 Problems

(12-1)  Broussard Skateboard’s sales are expected to increase by 15% from $8 million in
2013 to $9.2 million in 2014. Its assets totaled $5 million at the end of 2013.
Broussard is already at full capacity, so its assets must grow at the same rate as
projected sales. At the end of 2013, current liabilities were $1.4 million, consisting
of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of
accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted
payout ratio is 40%. Use the AFN equation to forecast Broussard’s additional funds
needed for the coming year.

(12-8)  Stevens Textiles’s 2013 financial statements are shown here:

Balance Sheet as of December 31, 2013 (Thousands of Dollars)

Cash                                       $  1,080     Accounts payable                  $  4,320
Receivables                             6,480     Accruals                                     2,880
Inventories                             9,000     Line of credit                                             0
Total current assets           $16,560     Notes payable                                     2,100
Net fixed assets                            12,600     Total current liabilities                  $  9,300
Mortgage bonds                       3,500
Common stock                                      3,500
______         Retained earnings                            12,860
Total assets                          $29,160        Total liabilities and equity     $ 29,160

Income Statement for December 31, 2013 (Thousands of Dollars)

Sales                                                              $36,000
Operating costs                                                  32,440
Earnings before interest and taxes     $  3,560
Interest                                                                      460
Pre-tax earnings                                   $ 3,100
Taxes (40%)                                                     1,240
Net income                                                  $ 1,860
Dividends (45%)                                      $  837
Addition to retained earnings                      $ 1,023

a. Suppose 2014 sales are projected to increase by 15% over 2013 sales. Use the
forecasted financial statement method to forecast a balance sheet and income
statement for December 31, 2014. The interest rate on all debt is 10%, and cash
earns no interest income. Assume that all additional debt in the form of a line of
credit is added at the end of the year, which means that you should base the
forecasted interest expense on the balance of debt at the beginning of the year. Use
the forecasted income statement to determine the addition to retained earnings.
Assume that the company was operating at full capacity in 2013, that it cannot sell
off any of its fixed assets, and that any required financing will be borrowed as
notes payable. Also, assume that assets, spontaneous liabilities, and operating costs
are expected to increase by the same percentage as sales. Determine the additional
funds needed.
b. What is the resulting total forecasted amount of the line of credit?

Write a three- to five-page paper about any negotiation that you have been involved in. For this assignment, discuss a negotiation that did not result in the best possible solution for all parties. This negotiation can relate to a work experience, a family or friend experience, or any other experience where you were an active member of a negotiation.

Discuss how the negotiation experience actually happened, then consider the negotiating techniques that you have learned about in the past 4 weeks of class, and then offer an explanation of how you could have conducted the negotiation better. Explain where your new learning from the course might have been helpful in this previous negotiation.

Deliverable: A three- to five-page paper outlining your response to the above assignment

 

describe every thing about affted fector . goal , time frame and other thing include in Negotiation Exercise

Write a 350-word paper about how critical thinking can be used in everyday life. Include the following in your paper:
•Identify three lessons that you learned from this course.
•Describe each of them and explain why they are meaningful to you.
•How will each of these lessons apply to your everyday life?

Format all sources consistent with APA standards.

Submit your answers in the Assignment Files tab above.

What are some actions that should be taken by a safety practitioner when an organization’s safety culture starts to drift into a negative state?

Owners of a company have decided to expand their operations. They have hired you to be a financial analyst, to help with the underwriting process to help sell $100 million in new 10-year bonds to finance a new plant.  The owners of the company do not know what the bond features or the coupon rate the company would likely have.

Although you are aware of bond features, you are uncertain as to the costs and benefits of some features, but the owners of the firm have asked you to prepare a report to the owners describing the effect of each of the following bond features on the coupon rate of a bond.  They would also like for you to explain the advantages and disadvantages of each feature.

The memo needs to address the following –

1. The security of the bond
2. The seniority of the bond
3. The presence of a sinking fund
4. A call provision with specified call dates and call price
5. A deferred call accompanying the above call provision
6. A make whole call provision
7. Any positive covenants
8. Any negative covenants
9. A conversion feature on the non-public company
10. A floating coupon.

Instructions –

The assignment should be done in a term paper format with appropriate appendixes when required.  Your paper should demonstrate thoughtful consideration of the ideas and concepts presented in the chapters and provide new thoughts and insights relating directly to this topic. Your response should reflect scholarly writing and current APA standards. Be sure to adhere to University’s Academic Integrity Policy.

Questions:

1. A. build a graph showing how inflation-adjusted investment of $1 in residential real estate changed in 1972-2014 and include it in your deliverable. Note that Fisher equation relates nominal return to real (inflation-adjusted) return:

In other words, estimate real return every year, compound it, and build a graph. Note that CPI in data file stands for Consumer Price Index and, therefore, the change in this index is the annual rate of inflation.
B. Comment on relationship between real estate prices and inflation. Does residential real estate offer protection against inflation? Quantify your answer. You may take a closer look at numbers in period of high inflation in the United States. Also, report pairwise correlations for various asset classes in 1975-2014.
C. Does investment in real estate investment trusts proxy for investment in residential real estate? In other words, can they be viewed as a substitute to investment in residential housing? You need to report pairwise correlations and cumulative returns over the 1975-2014 period to support your answer.
D. The United States and Canada’s housing data in Figure 1 is widely cited to rationalize expectations of a price correction in the Canadian housing market. Two arguments can be put forward to support expectation of price correction in Canada. Try to reproduce these arguments.

Figure 1. Real house prices: Canada vs US

This week’s assignment will provide information regarding marketable objectives found within the strategic plan for your chosen HCO. The information can be applied to the Introduction portion of the marketing plan for your Final Project. After reading Chapter 7 and reviewing the strategic plan of your chosen healthcare organization, construct a two- to three-page paper in which you discuss the following:

• The key marketing objectives found in your chosen HCO’s strategic plan
• Why the objectives fit the role of the health care organization
• What key marketing objectives a marketing director should focus on when developing a marketing plan (Explain your reasoning.)

The paper

• Must be five to Six double-spaced pages in length (not including the title page and references page) and formatted according to APA style as outlined in the Ashford Writing Center.
• Must include a separate title page with the following:
  • Title of paper
  • Student’s name
  • Course name and number
  • Instructor’s name
  • Date submitted
• Must use at least three scholarly sources in addition to the course text.
• Must document all sources in APA style
• Must include a separate references page that is formatted according to APA style