BUSINESS DECISION: ADMINISTERING A GOVERNMENT PROGRAM

According to the Food and Nutrition Service of the U.S. Department of Agriculture, in one school year the National School Lunch Program served 31.2 million school lunches. Of these, 16.1 million students received free lunches, 3.2 million received lunches at a reduced price, and 11.9 million paid full price for their lunches.

The federal government reimburses school districts $2.99 for each free lunch, $2.29 for each reduced-price lunch, and $0.25 for each paid lunch. In addition to cash reimbursements, schools are entitled to receive USDA foods called "entitlement" foods at a value of 19.50 cents for each lunch served.

You are the administrator in charge of the school lunch program for your school district. Last month the schools in your district served 25,000 free lunches, 15,000 "reduced price" lunches, and 60,000 regular priced lunches.

a. Calculate the amount of reimbursement you expect to receive from the NSLP for last month.

b. In addition to the lunch reimbursement, the NSLP program pays your district $0.045 per one-half pint of milk served with each meal. If each student averaged 1 one-half pint of milk per meal, calculate the total amount of milk reimbursement you expect for last month.

c. The Bottom Line − What is the total amount of reimbursement your district will receive for last month?

d. Red Tape − The government paperwork you must submit requires that you report the average reimbursement per student for both lunch and milk combined last month. Calculate this amount. Round to the nearest cent.

*I have gotten that $1.29 is the correct answer for d, yet I cannot get the right answers for the first three questions*

Blue Ridge Mill, was considering the addition of new on-site long-wood woodyard. The addition would have two primary benefits: to eliminate the need to purchase short-wood from an outside supplier and create the opportunity to sell short-wood on the open market as a new market for Worldwide Paper Company (WPC). The new woodyard would allow the Blue Ridge Mill not only to reduce its operating costs but also to increase its revenues. The proposed woodyard will utilise new technology that allows tree-length logs, called long-wood, to be processed directly, whereas the current process required short-wood, which had to be purchased from the Shenandoah Mill. This nearby mill, owned by a competitor, has excess capacity that allows it to produce more short-wood than it needs for its own pulp production. The excess is sold to several different mills, including the Blue Ridge Mill. Thus, adding the new long-wood equipment would mean that Prescott would no longer need to use the Shenandoah Mill as a short-wood supplier and that the Blue Ridge Mill would instead compete with the Shenandoah Mill by selling on the short-wood market. The question for Prescott was whether these expected benefits were enough to justify the $18m capital outlay plus the incremental investment in working capital over the six-year life of the investment. Construction would start within a few months, and the investment outlay would be spent over two calendar years: $16m in 2020 and the remaining $2m in 2021. When the woodyard begins operating in 2021, it would significantly reduce the operating costs of the mill. These operating savings would come mostly from the difference in the cost of producing short-wood on-site versus buying it on the open market and were estimated to be $2m for 2021 and $3.5m per year thereafter. Prescott also planned on taking advantage of the excess production capacity afforded by the new facility by selling short-wood on the open market as soon as possible. For 2021, he expected to show revenues of approximately $14m, as the facility came on-line and began to break into the new market. He expected shortwood sales to reach $20m in 2022 and continue at the $20m level through 2026. Prescott estimated that the cost of goods sold (before including depreciation expense) would be 75%. In addition to the capital outlay of $18m, the increased revenues would necessitate higher levels of inventories and accounts receivable. Therefore the amount of working capital investment each year would equal 15% of incremental sales for the year. At the end of the life of the equipment, in 2026, all the net working capital on the books would be recoverable at cost fully. Taxes would be paid at a 30% rate, and the equipment depreciation is to be calculated on a straight-line basis over the six-year life to zero balance. However, the new equipment is estimated to have a salvage value (scrap value) of $3m at the end of its life. WPC’s accountants have told Prescott that depreciation charges could not begin until 2021, when all the $18m had been spent and the equipment is in service. WPC has a company policy to use 15% as the hurdle rate for such investment opportunities. The hurdle rate is based on the study of the company’s cost of capital conducted 5 years ago.

A) Perform a sensitivity analysis on NPV of the project on the following scenarios: (i) Sales increases/decreases by 10%. (ii) Cost of capital increases/decreases by 10%. Comment on the feasibility of the project under each scenario.

A 20 year annuity pays 1600 per month at the end of each month. if the discount rate is 10% compounded monthly for the first nine years and 8% compounded monthly thereafter, what is the present value of the annuity?

A stock's beta is 1.4, its standard deviation is 30% and you expect that it will earn 12% expected return. The risk free rate is 3% and the market's expected risk premium is 8%. The stock plots _____ (above/below) the SML and according to the CAPM it is _____ (underpriced/overpriced). The stock's Jensen's alpha is _____ % (rounded to two decimals), its Treynor measure is _____ (no units,use numbers in decimals to calculate) and is Sharpe ratio is _____ (no units,use numbers in decimals to calculate)

The Federal Reserve lowers interest rates in the economy to increase economic activity. Using the capital budget decision tools, discuss how decreasing interest rates can cause firms to make more investments

Your firm has been hired to develop new software for the​ university's class registration system. Under the​ contract, you will receive $ 510,000 as an upfront payment. You expect the development costs to be $ 444,000 per year for the next 3 years. Once the new system is in​ place, you will receive a final payment of $ 862,000 from the university 4 years from now.

a. What are the IRRs of this​ opportunity?(Hint: Build an Excel model which tests the NPV at​ 1% intervals from​ 1% to​ 40%. Then zero in on the rates at which the NPV changes​ signs.)

b. If your cost of capital is 10 %​, is the opportunity​ attractive?

Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4 will be $ 1.2 million.  

c. What is the IRR of the opportunity​ now?

d. Is it attractive at the new​ terms?

(**Please show work**)

You must price a small business that is expected to produce $25,000 in annual CFs (starting next year) and grows at 6% per annum for 15 years. The business sunsets after year 15. What is the maximum amount you would pay for the business (today) if the discount rate is 8.75%?

One year​ ago, your company purchased a machine used in manufacturing for $ 110,000. You have learned that a new machine is available that offers many​ advantages; you can purchase it for $ 150,000 today. It will be depreciated on a​ straight-line basis over ten​ years, after which it has no salvage value. You expect that the new machine will contribute EBITDA​ (earnings before​ interest, taxes,​ depreciation, and​ amortization) of $ 45,000 per year for the next ten years. The current machine is expected to produce EBITDA of $ 22,000 per year. The current machine is being depreciated on a​ straight-line basis over a useful life of 11​ years, after which it will have no salvage​ value, so depreciation expense for the current machine is $ 10,000 per year. All other expenses of the two machines are identical. The market value today of the current machine is $ 50,000. Your​ company's tax rate is 38 %​, and the opportunity cost of capital for this type of equipment is 12 %. Is it profitable to replace the​ year-old machine?

Managing network performance is always a great challenge. This doubles when multiple point products are used to manage it. For this discussion, pick one of the following topics associated with network management and research it accordingly.

Your main post will describe how you will manage the network based on the topic you chose. Networking and server monitoring Bandwidth analysis Firewall-log management Configuration management IP address and switch-port management Fault management Assume the network you must manage belongs to a global business with thousands of employees across the world. List the topic of choice and include a summary of your management utilization.

Find the present value of $700 due in the future under each of these conditions:

1. 15% nominal rate, semiannual compounding, discounted back 4 years. Do not round intermediate calculations. Round your answer to the nearest cent.

   $  

2. 15% nominal rate, quarterly compounding, discounted back 4 years. Do not round intermediate calculations. Round your answer to the nearest cent.

   $  

3. 15% nominal rate, monthly compounding, discounted back 1 year. Do not round intermediate calculations. Round your answer to the nearest cent.

   $  

4. Why do the difference in the PV's Occur?

. LO❸ Mel’s Photography borrowed $15 000 on March 10 on a demand note. The loan was repaid by payments of $4000 on June 20, $3000 on September 1, and the balance on November 15. Interest, calculated on the daily balance and charged to Mel’s Photography current account on the last day of each month, was at 5.5% on March 10 but was changed to 6.25% effective June 1 and to 6% effective October 1. How much did the loan cost?

You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 11 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

  
a. Calculate the profitability index for project X. (Do not round intermediate calculations and round your answer to 2 decimal places.)

  
b. Calculate the profitability index for project Y. (Do not round intermediate calculations and round your answer to 2 decimal places.)

c. Which project would you select based on the profitability index?

• Project X

• Project Y

Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment. Project H represents an investment in a hydraulic lift. Keller wishes to use a net present value profile in comparing the projects. The investment and cash flow patterns are as follows: Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

a. Determine the net present value of the projects based on a zero percent discount rate.

b. Determine the net present value of the projects based on a discount rate of 10 percent. (Do not round intermediate calculations and round your answers to 2 decimal places.)

BOND YIELDS

Last year Carson Industries issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065 and it sells for $1,270.

1. What is the bond's nominal yield to maturity? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   What is the bond's nominal yield to call? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   Would an investor be more likely to earn the YTM or the YTC?
   -Select-Since the YTC is above the YTM, the bond is not likely to be called.Since the coupon rate on the bond has declined, the bond is not likely to be called.Since the YTM is above the YTC, the bond is likely to be called.Since the YTC is above the YTM, the bond is likely to be called.Since the YTM is above the YTC, the bond is not likely to be called.Item 3
   
2. What is the current yield? (Hint: Refer to Footnote 7 for the definition of the current yield and to Table 7.1.) Round your answer to two decimal places.
   %
   
   Is this yield affected by whether the bond is likely to be called?
   1. If the bond is called, the current yield and the capital gains yield will remain the same.
   2. If the bond is called, the capital gains yield will remain the same but the current yield will be different.
   3. If the bond is called, the current yield and the capital gains yield will both be different.
   4. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different.
   5. If the bond is called, the current yield will remain the same but the capital gains yield will be different.
   
   -Select-IIIIIIIVVItem 5
   
3. What is the expected capital gains (or loss) yield for the coming year? Use amounts calculated in above requirements for calcuation, if reqired. Round your answer to two decimal places. Enter a loss percentage, if any, with a minus sign.
   %
   
   Is this yield dependent on whether the bond is expected to be called?
   1. If the bond is not expected to be called, the appropriate expected total return is the YTC.
   2. If the bond is expected to be called, the appropriate expected total return will not change.
   3. The expected capital gains (or loss) yield for the coming year depends on whether or not the bond is expected to be called.
   4. The expected capital gains (or loss) yield for the coming year does not depend on whether or not the bond is expected to be called.
   5. If the bond is expected to be called, the appropriate expected total return is the YTM.

• Discuss the features that all financial statements prepared under IFRS 1 must possess.