Question
In: Accounting
Problem 6-3 Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years...
Problem 6-3
Assume that Wal-Mart Stores, Inc. has decided
to surface and maintain for 10 years a vacant lot next to one of
its stores to serve as a parking lot for customers. Management is
considering the following bids involving two different qualities of
surfacing for a parking area of 12,500 square yards.
Bid A: A surface that costs $5.50 per square yard
to install. This surface will have to be replaced at the end of 5
years. The annual maintenance cost on this surface is estimated at
25 cents per square yard for each year except the last year of its
service. The replacement surface will be similar to the initial
surface.
Bid B: A surface that costs $11.00 per square yard
to install. This surface has a probable useful life of 10 years and
will require annual maintenance in each year except the last year,
at an estimated cost of 10 cents per square yard.
Click here to view factor tables
Compute present value of the bids. You may assume that the cost of
capital is 10%, that the annual maintenance expenditures are
incurred at the end of each year, and that prices are not expected
to change during the next 10 years. (Round factor
values to 5 decimal places, e.g. 1.25124 and final answer to 0
decimal places, e.g. 458,581.)
|
Present value of outflows for Bid A |
$ |
|
|
Present value of outflows for Bid B |
$ |
Which bid should be accepted by Wal-Mart.
Solutions
Expert Solution
| Present value of outflows for Bid A | 129,435 |
| Present value of outflows for Bid B | 144,699 |
Bid A will be Accepted.
|
| Installation/Replacement cost | 5.5*12500 | 68,750 |
| Maintainance Cost | 0.25*12500 | 3,125 |
| BID B | |||||
| Year | Installation | Maintainance Cost | Total Outflow | PV Factor | Present value |
| 0 | 137,500 | 137,500 | 1 | 137,500 | |
| 1 | 1,250 | 1,250 | 0.90909 | 1,136 | |
| 2 | 1,250 | 1,250 | 0.82645 | 1,033 | |
| 3 | 1,250 | 1,250 | 0.75131 | 939 | |
| 4 | 1,250 | 1,250 | 0.68301 | 854 | |
| 5 | 1,250 | 1,250 | 0.62092 | 776 | |
| 6 | 1,250 | 1,250 | 0.56447 | 706 | |
| 7 | 1,250 | 1,250 | 0.51316 | 641 | |
| 8 | 1,250 | 1,250 | 0.46651 | 583 | |
| 9 | 1,250 | 1,250 | 0.4241 | 530 | |
| 10 | - | 0.38554 | - | ||
| 144,699 |
| Installation/Replacement cost | 11*12500 | 137500 |
| Maintainance Cost | 0.1*12500 | 1,250 |
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ekkarill92 answered 1 year agoRelated Solutions
Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant...
Assume that Wal-Mart Stores, Inc. has decided
to surface and maintain for 10 years a vacant lot next to one of
its stores to serve as a parking lot for customers. Management is
considering the following bids involving two different qualities of
surfacing for a parking area of 12400 square yards.
Bid A: A surface that costs $5.25 per square yard
to install. This surface will have to be replaced at the end of 5
years. The annual maintenance cost...
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Question 5 Assume that Wal-Mart Stores, Inc. has decided to
surface and maintain for 10 years a vacant lot next to one of its
stores to serve as a parking lot for customers. Management is
considering the following bids involving two different qualities of
surfacing for a parking area of 11,800 square yards.
Bid A: A surface that costs $5.50 per square yard to install.
This surface will have to be replaced at the end of 5 years. The
annual...
Question 5 Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years...
Question 5
Assume that Wal-Mart Stores, Inc. has decided
to surface and maintain for 10 years a vacant lot next to one of
its stores to serve as a parking lot for customers. Management is
considering the following bids involving two different qualities of
surfacing for a parking area of 12,000 square yards.
Bid A: A surface that costs $5.50 per square yard
to install. This surface will have to be replaced at the end of 5
years. The annual...
Assume that Wal-Mart, Inc. has decided to surface and maintain for 10 years a vacant lot...
Assume that Wal-Mart, Inc. has decided to surface and
maintain for 10 years a vacant lot next to one of its stores to
serve as a parking lot for customers. Management is considering the
following bids involving two different qualities of surfacing for a
parking area of 11,800 square yards.
Bid A: A surface that costs $5.50 per square yard to
install. This surface will have to be replaced at the end of 5
years. The annual maintenance cost on...
Assume that Walmart stores Inc. has decided to surface and maintain for 10 years a vacant...
Assume that Walmart stores Inc. has decided to surface and
maintain for 10 years a vacant lot next to one of its stores to
serve as a parking lot for customers. Management is considering the
following bids involving two different qualities of surfacing for a
parking area of 12,000 square yards. Bid A: a surface that cost
$5.75 per square yard to install. This surface will have to be
replaced at the end of 5 years. The annual maintenance cost...
Your answer is partially correct. Try again. Assume that Wal-Mart Stores, Inc. has decided to surface...
Your answer is partially correct. Try again. Assume that
Wal-Mart Stores, Inc. has decided to surface and maintain for 10
years a vacant lot next to one of its stores to serve as a parking
lot for customers. Management is considering the following bids
involving two different qualities of surfacing for a parking area
of 11,700 square yards. Bid A: A surface that costs $6.00 per
square yard to install. This surface will have to be replaced at
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Using the ratios and information given for Wal-Mart Stores, Inc., a retailer, analyze the short-term liquidity...
Using the ratios and information given for Wal-Mart Stores,
Inc., a retailer, analyze the short-term liquidity and operating
efficiency of the firm as of January 31, 2014.
Financial ratios
for the years ended January 31,
2014
2013
Liquidity
Current (times)
0.88
0.83
Quick (times)
0.24
0.22
Cash flow liquidity (times)
0.44
0.46
Average collection period
6 days
6 days
Days inventory held
46 days
46 days
Days payable outstanding
38 days
40 days
Cash conversion cycle
14 days
12 days...
Wal Mart Stores Consolidated Income Statement (amounts in millions) Year 4 Year 5 Year 6  
Wal Mart Stores Consolidated Income Statement (amounts in
millions)
Year
4
Year
5
Year
6
Year 7
Sales
Revenues
$83,412
$94,749
$106,146
Cost of Goods
Sold
$65,586
$74,564
$83,663
Accounts Receivables
$
690
$
900
$
853
$
845
Inventories
$11,014
$14,064
$15,989
$
15,897
Question # 6
Please calculate the accounts receivable and inventory ratios
for years 5 thru 7.
Question # 7
Does any of the inventory scenarios and interpretations that we
discussed at the...
2. Wal-Mart Stores, Inc., and Payless ShoeSource, Inc., have been aggressive in stocking larger size women...
2. Wal-Mart Stores, Inc., and Payless ShoeSource, Inc., have
been aggressive in stocking larger size women shoes and Nordstrom
reports that its larger sizes typically sell out first. The
following is a random sample of shoe sizes for twelve mothers and
their daughters who shop at Nordstrom. Does the data support the
Management assertion that the demand for larger show sizes has
increased. Use 0.025 significance level.
1
2
3
4
5
6
7
8
9
10
11
12
Daughter...
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