Henry Jones is the owner of True Adventure Vacations, Inc. He is considering the purchase of computer equipment that will facilitate airline and hotel accommodations. He paid a consultant a $20,000 fee to identify the best computer system and to identify the best computer system and to identify related costs of the project. The computer will cost $300,000. Installation will cost $20,000 and training of personnel will cost $10,000. He will incur $50,000 in advertising costs to kick off the new improved services that will feature worldwide accommodations. He projects that there will be a $200,000 increase in sales annually over the 5 year life of the project. Costs are 60% of sales. The computer has a five year useful life and a salvage value of $30,000. Jones will use straight line depreciation. Working capital investment is $10,000 and will be fully recovered at the termination of the project in five years.

1. What is the annual after-tax cash flow for this project over the next five years? The tax rate is 34%.
2. What is the NPV of the project if the discount rate is 12%?

The electric field near the surface of Earth points downward and has a magnitude of 130 N/C.

(a) Compare the upward electric force on an electron with the downward gravitational force.

____upward force/ downward force

(b) What magnitude charge should be placed on a penny of mass 6 g so that the electric force balances the weight of the penny near Earth's surface?

C

a) Describe how a circular turn (or a circular coil) constitutes a dipole magnet.

b) Consider a solenoid of N turns with a radius r and length l, and carrying a current I. What is the magnitude of magnetic field inside the solenoid (but not near the ends)? Does this magnitude depend on distance the center of the solenoid? ?

c) What is the magnitude of magnetic field outside the solenoid (but not near the ends)?

Apex Art has been requested to prepare a bid on 500 pieces of framed artwork for a new hotel. Winning the bid would be a big boost for sales representative Jason Grant, who works entirely on commission. Sonja Gomes, the cost accountant for Apex, prepared the bid and calculated full product Costs of $121,000. Based on the company policy of pricing at 125% of full cost, Gomes gives Grant a figure of $151,200 to submit for the job.

Grant is very concerned. He tells Gomes that at that price, Apex has no chance of winning the job. He confides that he spent $500 of company funds to take the hotel’s purchasing agent to a basketball playoff game where the purchasing agent disclosed that a bid of $145,000 would win the job. He hadn’t planned to tell Gomes because he was confident that the bid she developed would be below that amount. Gomes reasons that the $500 he spent will be wasted if Apex doesn’t capitalize on this valuable information. In any case, the company will still make money if it wins the bid at $145,000 because it is higher than the full cost of $121,000.

Gomes suggests that if Grant is willing to use cheaper materials for the frame, he can achieve a bid of $145,000. The artwork has already been selected and cannot be changed, so the entire amount of the reduction in cost will need to come from framing materials.

A note regarding the bidding process:

The hotel would announce that it is seeking bids from suppliers interested in providing the artwork. The hotel would specify their requirements and a deadline for submitting bids. All interested companies, such as Apex Art, would submit bids in sealed envelopes. After the deadline has passed, the hotel company would unseal the bids and, assuming that at least one supplier submitted a bid within their maximum price (this is the info that Grant obtained from the purchasing agent which is not normally known to the bidders) would award the job. Generally, but not necessarily, the job is awarded to the company with the lowest bid.

Approaches to Ethical Decision Making

There is a large body of work stretching back thousands of years that discusses ethics. The list below is not intended to be either comprehensive or exhaustive. It is intended merely to provide a basic roadmap of the approaches that are commonly applied to business situations.

Long Term Self-interest (Egoism) - You should never take any action that is not in your or your organization’s long-term self-interest.

Personal Virtue - You should never do anything that is not honest, open, and truthful and that you would not be glad to see in the newspaper or TV.

Religious Injunction - You should never take an action that is unkind or that harms a sense of community.

Government Requirements - The law represents the minimal moral standards of society, so you should never take any action that violates the law.

Utilitarian Benefits - You should never take an action that does not result in greater good for society.   (cost vs. benefit analysis)

Individual Rights – You should never take an action that infringes on others’ agreed upon rights.

Justice - You should never take an action that would result in an unfair sharing of benefits or obligations.

Stakeholders are persons or groups with a legitimate interest in a company. Choose one or more as the most significant (but not all of them).

Questions:

1. State and describe the issues, if any, which may potentially violate ethical principles. Whose interests could be jeopardized due to the potential unethical behavior that you identified? Provide reasons why these stakeholders’ interests can be jeopardized.

2. What is Gomes’ rationale after Grant confides in her? Discuss the alternative courses of action that Gomes can take and the possible outcomes.

3. What should Gomes do, and why? Elaborate.

4. What can you conclude if Grant were to take Gomes’ suggestions, and what could be the consequences? What could be the possible consequences for taking the suggestion that you recommend?

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $5.8 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $6.1 million. The company wants to build its new manufacturing plant on this land; the plant will cost $13.3 million to build, and the site requires $850,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 12 years ago for $6 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $9.8 million. The company wants to build its new manufacturing plant on this land; the plant will cost $13.2 million to build, and the site requires $1,372,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

Cedar Point amusement park management is preparing the park's annual promotional plan for the coming season. Several advertising alternatives exist: newspaper, television, radio, and displays at recreational shows. The information below shows the characteristics associated with each of the advertising alternatives, as well as the maximum number of placements available in each medium. Given an advertising budget of $125,000, how many placements should be made in each medium to maximize total audience exposure? Formulate this as a linear programming problem to be solved using QM.

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $3.6 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $4.1 million. The company wants to build its new manufacturing plant on this land; the plant will cost $18.1 million to build, and the site requires $950,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%.
Year
₵

0
(100,000)

1
20,000

2
25,000

3
32,000

4
35,000

Using the CAPM approach, what is the cost of equity on this project?
[2 marks]
Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt? [2 mark]
What will be the weighted average cost of capital (WACC)? [2 mark]
Using the WACC computed in (c), what will be the NPV of the investment? ` [3 marks]
Compute the IRR for the project? [3 marks]
What will be your overall advice concerning viability of the project?
[2 marks]

A.
As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%.

Year                                    ₵

   0                                     ( 100,000)    
   
   1                                      20,000
  
   2                                      25,000

   3                                      32,000

   4                                      35,000

(i) Using the CAPM approach, what is the cost of equity on this project?

(ii) Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt?

(iii) What will be the weighted average cost of capital (WACC)?

(iv) Using the WACC computed in (c), what will be the NPV of the investment? `
(v) Compute the IRR for the project?
(vi) What will be your overall advice concerning viability of the project?