Briefly, describe the nature and use of the following corporate planning tools:

Organizational objectives

1. Consider the following two projects. The cost of capital for both projects is 15%.

1. Calculate the IRR for each project and determine which one is better.
2. Calculate the NPV for each project and determine which one is better.
3. Based on profitability index method, which project is better?
4. Overall, which project should be accepted assuming they are mutually exclusive? Why?

1. A college is considering the installation of a copier system. Two alternative models are available. Once selected, each model will be replaced at the end of its life by its own replica. The appropriate discount rate for the cash flows of the college is 8%. Cash flows related to the two models are as follows. All cash flows are outflows; initial purchase cost at year 0 and expenses to operate the copier system such as electricity and maintenance during its life. Model XIV has service life of 3 years and model SYC has service life of 5 years.

1. Which model is better if each is used just one round?
2. Which model is better if each model has to be replaced at the end of its life indefinitely?

Explain the types of Venture Investors?

Define passive investing and explain the difference from active investing

Managing compensation costs, headcount, and participation/communication issues

Cisco systems, Hewlett-Packard, American Airlines, and General Motors are examples of companies that have cut employment or cut wages and/or benefits to reduce labor costs in hope of becoming more competitive and more profitable. Indeed, American and GM went through bankruptcy in part to gain control over labor costs. In contrast, some companies- Southwest Airlines, Nucor, and Lincoln Electric- have a no-layoff practice and do not appear to have cut wages or benefits even in years when sales have declined significantly (They have also not gone through bankruptcy).

To what degree would you have others at the company participate in the design of the new compensation system? Who would participate? Would you follow a policy of pay openness in communicating your compensation system? Provide a rationale for your decision.

You borrow $10,000 on 1/1/2020, at the annual interest rate of 4%, and will repay in 10 annual installments, beginning on 12/31/2020, and continuing at the end of each year for subsequent years.  The installments are not level, but will increase at an annual rate of 3% with the first payment of $x.  Thus, the second payment will be $x(1.03), the third payment will be $x(1.03)², etc.

(a)        Calculate $x.

(b)       What is the total amount of payments?  (Just add the payments, without interest.)

(c)        What is the total amount of interest?

(d)       Assume that all the calculations are repeated without the 3% annual increase, i.e., assume level repayments.  Withoutdoing the actual calculations, do you expect the total amount of interest to be higher than, the same as, or lower than your answer in part (c)?

A​ BBB-rated corporate bond has a yield to maturity of 11.8%. A U.S. treasury security has a yield to maturity of 10.2%. These yields are quoted as APRs with semiannual compounding. Both bonds pay​ semi-annual coupons at a rate of 11.1% and have five years to maturity. a. What is the price​ (expressed as a percentage of the face​ value) of the treasury​ bond? b. What is the price​ (expressed as a percentage of the face​ value) of the​ BBB-rated corporate​ bond? c. What is the credit spread on the BBB​ bonds?

Your classmates are a group of friends who have decided to open a small retail shop. The team is torn between two storefront ideas. The first idea is to open a high-end antique store, selling household items used for decorations in upscale homes. Members of the team have found a location in a heavily pedestrian area near a local coffee shop. The store would have many items authenticated by a team member’s uncle, who is a certified appraiser. In discussing the plan, however, two group members suggest shifting to a drop-off store for online auctions such as eBay. In this business model, customers drop off items they want to sell, and the retail store does all the logistics involved – listing and selling the items on eBay, and then shipping them to buyers – for a percentage of the sales price. They suggest that a quick way to get started is to become a franchisee for a group such as “I Sold It”

Questions

1. What is the business strategy for each store concept?
2. How would the organizational structure be different for the concepts?

Imagine you are an administrator at a hospital that is considering the implementation of EHR. Some providers are for it while others argue against it. As an administrator, you are obligated to consider ethics concerns as well as appropriate resource allocation. Discuss the ethics concern that you must consider in this situation. Now, think about the investment costs of EHR. Which principles of ethics can you use to defend (or not) the investment required to implement EHR?

 Solar Designs is considering an investment in an expanded product line. Two possible types of expansion are under review. After investigating the possible​ outcomes, the company made the estimates shown in the following​ table:

Initial investment   $13,000   $13,000
Annual rate of return      
Pessimistic   12%   10%
Most likely   23%   23%
Optimistic   24%   26%

The pessimistic and optimistic outcomes occur with a probablity of​ 25%, and the most likely outcome occurs with a probability of​ 50%.

a.  Determine the range of the rates of return for each of the two projects.

b.  Which project is less​ risky?

c.  If you were making the investment​ decision, which one would you​ choose? What does this imply about your feelings toward​ risk?

d.  Assume that expansion​ B's most likely outcome is 24​% per year and that all other facts remain the same. Does this change your answer to part ​c?

A- What is the dollar price of a zero coupon bond with 12 years to maturity if the YTM is 8%?

b- What is the dollar price of a zero coupon bond with 5 years to maturity if the YTM is 11%?

c- What is the dollar price of a bond paying a coupon rate of 5% with 8 years to maturity if the YTM is currently 7%?

Suppose you manage a $4.485 million fund that consists of four stocks with the following investments:

If the market's required rate of return is 13% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.

***PLEASE ANSWER WITH FORMULAS INCLUDED***

Newman Industries is a leading supplier of cosmetics.

In the letter to stockholders as part of the 2008 annual report, President and CEO Jennifer White offered the following remarks:

Fiscal 2008 was clearly a mixed bag for Newman, the industry, and the economy as a whole.

Still, we finished with revenue growth of 15 percent—and that’s significant. We believe it’s a good indication that Newman continued to pull away from the pack and gain market share. For that, we owe a debt of gratitude to our employees worldwide, who aggressively brought costs down— even as they continued to bring exciting new products to market.

The statement would not appear to be telling you enough. For example, Chauhan says the year was a mixed bag with revenue growth of 15 percent. But what about earnings? You can delve further by examining the income statement in Exhibit 1. Also, for additional analysis of other factors, consolidated balance sheet(s) are presented in Exhibit 2 on page 92.

1. Referring to Exhibit 1, compute the annual percentage change in net income per common share-diluted (second numerical line from the bottom) for 2005–2006, 2006–2007, and 2007–2008.
2. Also in Exhibit 1, compute net income/net revenue (sales) for each of the four years. Begin with 2005.
3. What is the major reason for the change in the answer for Question 2 between 2007 and 2008? To answer this question for each of the two years, take the ratio of the major income statement accounts to net revenues (sales).

Cost of sales

Research and development

Selling, general and administrative expense

Provision for income tax

4. Compute return on stockholders’ equity for 2007 and 2008 using data from Exhibits 1 and 2.

Exhibit 1

5. Analyze your results to Question 4 more completely by computing ratios 1, 2a, 2b, and 3b (all from this chapter) for 2007 and 2008. Actually, the answer to ratio 1 can be found as part of the answer to question 2, but it is helpful to look at it again.

What do you think was the main contributing factor to the change in return on stockholders’ equity between 2007 and 2008? Think in terms of the Du Pont system of analysis.

6. The average stock prices for each of the four years shown in Exhibit 1 were as follows:
   2005. 11¼  
   2006. 16¾
   2007. 28½
   2008. 9½

1. Compute the price/earnings (P/E) ratio for each year. That is, take the stock price shown above and divide by net income per common stock-dilution from Exhibit 1.
2. Why do you think the P/E has changed from its 2007 level to its 2008 level? A brief review of P/E ratios can be found under the topic of Price-Earnings Ratio Applied to Earnings per Share in Chapter 2.