Imagine you are CEO of a large company and your board has asked you to take a more sustainable approach to reporting firm performance Do you adopt Triple Bottom Line reporting or Balanced Scorecard? Why or why not? Now imagine you operate a large call centre in Bangalore, India. What social measures would you use for triple bottom line reporting?
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The sales and marketing team hired Smith and Smith Consulting to conduct a market survey. The total cost for this consulting was $32,500. Based on the survey and their own experience the sales and marketing has provided a sales forecast. The suggested price of the fire starter is $2.50 per starter and they would be sold as a four pack for $10.00. The unit sales forecast is 20,000 4-packs in year 1, 45,000 in year 2, 60,000 in year 3, 75,000 in year 4, and then increasing by 5,000 each year thereafter. Sales and marketing expenses are expected to be 10% of total revenue.
The production team forecasts that the fixed costs needed for the fire starter production line will be $90,000 per year. Variable costs for materials (cardboard, wood shavings, wax, packaging, etc.) will be $0.85 per unit or $3.40 per four pack. The labor and maintenance costs will vary based on what equipment will be purchased.
There are two brands of equipment that will do the job; The ABC brand and the XYZ brand.
The ABC brand is more expensive, but higher quality and more efficient. It will cost $525,000 plus an additional $30,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years and would be sold then for $55,000. Maintenance of the ABC equipment would cost $5,000 per year but every 3 years the equipment would need an overhaul that would increase the cost to $75,000 for that year. Since the ABC equipment is more efficient the variable labor cost would be $0.60 per four pack.
The XYZ brand is less expensive. It will cost $395,000 plus an additional $40,000 for shipping and installation. The equipment would be depreciated to zero over 5 years using straight line depreciation. It is expected that the equipment would last for 8 years and would be sold then for $35,000. Maintenance of the ABC equipment would cost $10,000 per year but every 3 years the equipment would need an overhaul that would increase the cost to $85,000 for that year. The variable labor cost with the XYZ brand equipment would be $0.80 per four pack.
The increase in working capital (accounts receivable and inventory) is expected to be $60,000 at the beginning of the project and will be the same for both machines. The company’s cost of capital is 14% and its tax rate is 40%. Since her production team believes that both brands of equipment will last for eight years Michelle wants this analyzed as an eight year project.
Michelle has always believed in buying quality so she is leaning towards the ABC brand equipment. But after hearing that you have learned about capital budgeting in your Finance class at UVU she wants to take advantage of your expertise. Michelle has asked you to analyze her choices and give her some advice on which option would provide the best financial outcome for Green-Log Manufacturing.
Prepare an analysis and professional report for Michelle. The report should include attached schedules. The letter should explain what analytical techniques you are using, why you are using those techniques, what the results show, what you would recommend to Michelle and why. Also make sure that the letter includes the following:
1. The cash flows associated with the different equipment brands for each year of the project.
2. The PB period, Discounted PB, IRR, and NPV for the two alternatives.
3. Your recommendation of which brand of equipment should be purchased.
**PLEASE INCLUDE YOUR RECOMMENDATION**
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You own a 6.5 percent, semiannual coupon bond that matures in 12 years. The par value is $1,000 and the current yield to maturity is 6.4 percent. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 25 basis points?
-2.04 percent |
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-2.11 percent |
||
-2.31 percent |
||
-2.44 percent |
||
-2.26 percent |
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Describe the financial crisis of 2007- 2009. What were the primary causes of this financial crisis?
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A GoodCredit company issued a bond with par value of $1,000.00, a time to maturity of 15.00 years, and a coupon rate of 7.90%. The bond pays interest annually. If the current market price is $790.00, what will be the approximate capital gain on this bond over the next year if its yield to maturity remains unchanged? NOTE: Capital gain is change in bond price. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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How can duration be used to determine a rough measure of the percentage change in the price of a bond as a result of interest rate changes?
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explore how motivation might be related to creativity within an organisation and the wider implications for organisational success.
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You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: Sales price per abalone = $44.10 Variable costs per abalone = $11.00 Fixed costs per year = $478,000 Depreciation per year = $117,000 Tax rate = 21% The discount rate for the company is 13 percent, the initial investment in equipment is $936,000, and the project’s economic life is 8 years. Assume the equipment is depreciated on a straight-line basis over the project’s life and has no salvage value. a. What is the accounting break-even level for the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the financial break-even level for the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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Buying your suppliers is a way of guaranteeing price stability and improving the co-ordination of your value chain. But does it make sense? Consider the ways in which purchasing a supplier represents a form of market failure, and consider the inefficiencies that might arise as a result. . The recommended word count is 300 - 400 words.
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You want to buy your dream house by borrowing $300,000 for 15 years, with monthly payments. The bank quotes a fixed rate of 5.5%. What is the total interest you paid by the end of the 5th year?
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Why would you want to invest in a bond over a stock? What are some of the risks associated with investing in bonds?
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. Problem 8.07
Click here to read the eBook: Risk in a Portfolio Context: The
CAPM Problem Walk-Through PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $3.79 million investment fund. The fund consists of four stocks with the following investments and betas:
If the market's required rate of return is 9% and the risk-free
rate is 5%, what is the fund's required rate of return? Do not
round intermediate calculations. Round your answer to two decimal
places. |
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You are considering making a movie. The movie is expected to cost $ 10.8 million up front and take a year to produce. After that, it is expected to make $ 4.1 million in the year it is released and $ 2.2 million for the following four years. What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.6 %? What is the payback period of this investment?
The payback period is _____ years. (Round to one decimal place.)
If you require a payback period of two years, will you make the movie? ▼ No Yes . (Select from the drop-down menu.)
Does the movie have positive NPV if the cost of capital is 10.6 %? If the cost of capital is 10.6 %, the NPV is $ ____million.(Round to two decimal places.)
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a. You have just purchased the options listed below. Based on the information given, indicate whether the option is in the money, out of the money, or at the money, whether you would exercise the option if it were expiring today, what the dollar profit would be, and what the percentage return would be. (Enter “0” if there is no profit or return from not exercising the option. Round your answer to 2 decimal places.)
Company | Option | Strike | Today's Stock Price |
Moneyness of the option? |
Premium | Exercise? | Payoff (per Share) | Profit (per Share) | Return |
CAB | Call | 19 | $18.80 | (Click to select)In the moneyOut of the money | 1.15 | (Click to select)YesNo | % | ||
CAB | Put | 19 | $18.80 | (Click to select)In the moneyOut of the money | 3.68 | (Click to select)NoYes | % | ||
CAB | Call | 45 | $46.05 | (Click to select)Out of the moneyIn the money | 5.84 | (Click to select)NoYes | % | ||
CAB | Put | 45 | $46.05 | (Click to select)Out of the moneyIn the money | 0.88 | (Click to select)NoYes | % | ||
b. Now suppose that time has passed and the stocks’ prices have changed as indicated in the table below. Recalculate your answers to part a.
Company | Option | Strike | Today's Stock Price |
Moneyness of the option? |
Premium | Exercise? | Payoff (per Share) | Profit (per Share) | Return |
CAB | Call | 30 | $29.10 | (Click to select)In the moneyOut of the money | 0.51 | (Click to select)NoYes | % | ||
CAB | Put | 30 | $29.10 | (Click to select)Out of the moneyIn the money | 4.87 | (Click to select)YesNo | % | ||
CAB | Call | 45 | $42.84 | (Click to select)Out of the moneyIn the money | 1.35 | (Click to select)NoYes | % | ||
CAB | Put | 45 | $42.84 | (Click to select)Out of the moneyIn the money | 2.75 | (Click to select)NoYes | % |
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