The Elkton Company is considering a new project that requires an initial investment of $24,000,000 to build a new plant and purchase equipment. The investment will be depreciated using the straight line method over 10 years.   The new plant will be built on some of the company's land which has a current, after-tax market value of $5,000,000.  The company will produce widgets at a cost of $130 each and will sell them for $420 each. Annual fixed costs are $500,000.  Sales (in units) are expected to be 150,000 each year for the next 10 years, at which time the project will be abandoned.  At that time, the plant, equipment, and land is expected to be worth $13,400,000 before tax.  The company will need to purchase $1,000,000 worth of inventory & will recapture that investment at the end of the 10^thyear. No other investments in inventory are anticipated.  The cost of capital is 13% and the company's marginal tax rate is 35%.  Pleased do the following:

a)     Based on the NPV Should the project be accepted?

b)     Draft a short memo (paragraph or two) explaining your analysis and recommendation to your supervisor.

The Elkton Company is considering a new project that requires an initial investment of $24,000,000 to build a new plant and purchase equipment. The investment will be depreciated using the straight line method over 10 years.   The new plant will be built on some of the company's land which has a current, after-tax market value of $5,000,000.  The company will produce widgets at a cost of $130 each and will sell them for $420 each. Annual fixed costs are $500,000.  Sales (in units) are expected to be 150,000 each year for the next 10 years, at which time the project will be abandoned.  At that time, the plant, equipment, and land is expected to be worth $13,400,000 before tax.  The company will need to purchase $1,000,000 worth of inventory & will recapture that investment at the end of the 10^thyear. No other investments in inventory are anticipated.  The cost of capital is 13% and the company's marginal tax rate is 35%.  Pleased do the following:

a)     Based on the NPV Should the project be accepted?

b)     Draft a short memo (paragraph or two) explaining your analysis and recommendation to your supervisor.

Choosing a Source of Credit: The Costs of Credit Alternatives Jamie Lee Jackson, age 27, full-time student and part-time bakery employee, is busy setting up her new home. Her budget is a little tight now as she made the decision to move in to a place of her own, which gives her privacy and independence, but all of the expenses are now her responsibility. Jamie Lee applied for three store credit cards when she was shopping for her furnishings. The excitement of making selections and the attractiveness of percentages off her purchases made the credit card offers too good to pass up. It was all too easy to select the new furnishings when the cash was not immediately coming from her pocket. “The payments will not be due for at least 45 days from now, by the time all the accounts are opened and the grace periods are factored in. I am sure I will have enough to cover the balances by then,” Jamie Lee convinced herself. Jamie Lee’s new furnishings have been delivered, and she is quite happy with her choices. The bungalow is comfortable, and Jamie is now getting into a routine balancing the new move with work and school obligations. Unfortunately, the bills have begun to arrive in Jamie Lee’s mailbox; payments are soon due for all the new furniture and appliances. The corresponding annual interest rates on the credit card purchases were not something Jamie Lee factored in when she applied for the store credit cards. “Wow, 18.5 percent on one, and the other two have interest rates of 19 percent per year. Those interest fees can really add up quickly. The disclosure said that by making the minimum payments, I could be paid off in 14 years! I am not sure my appliances will still be working at that time, nor will the furniture still be in style 14 years from now.” Jamie Lee was starting to feel the consequences of overspending and knew she must develop a plan to pay off the purchases quickly! Assets: Checking account: $1,800 Savings account: $7,200 Emergency fund savings account: $2,700 IRA balance: $410 Car: $2,800 Liabilities: Student loan balance: $10,800(Jamie is still a full-time student, so no payments are required on the loan until after graduation) Credit card balance: $4,250(total of the three store credit cards) Income: Gross Monthly salary from the bakery: $2,750(Net Income: $2,175) Monthly Expenses: Rent: $350 Utilities: $70 Food: $125 Gas/maintenance: $130 Credit card payment: $0

Questions 1. Jamie Lee received an offer to transfer the balance of all her store credit cards to her bank credit card in the mail. It offered zero percent finance charges/interest for the first three months(90 days), and 18.5 percent interest rate thereafter until the balance is paid in full. Upon reading the fine print, there was a $50 transaction fee and interest accrued from the day the balance transfer was made if the balance is paid in full within the first 90 days. How could Jamie Lee use this balance transfer offer to her advantage? How is this offer a major disadvantage to Jamie Lee?

2. Based on Jamie Lee's current financial situation, could she possibly transfer option work?

3. What solution would you recommend for Jamie Lee to get her credit cards paid off as soon as possible? What are the advantages of your choices? What are the disadvantages of your choices?

The restaurant at the Hotel Galaxy offers two choices for breakfast: an all-you-can-eat buffet and an a la carte option, where diners can order from the menu. The buffet option has a budgeted meal price of $45. The a la carte option has a budgeted average price of $34 for a meal. The restaurant manager expects that 40 percent of its diners will order the buffet option. The buffet option has a budgeted variable cost of $25 and the a la carte option averages $18 per meal in budgeted variable cost. The manager estimates that 2,000 people will order a meal in any month.

For July, the restaurant served a total of 1,800 meals, including 600 buffet options. Total revenues were $27,600 for buffet meals and $42,000 for the a la carte meals.

Required:

a. Compute the activity variance for the restaurant for July. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

b. Compute the mix and quantity variances for July. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

20. A common kitchen trick to ripening fruit is to place unripe fruit near a piece of ripe fruit on the counter. This greatly increases the rate of ripening for the unripe fruit. How does this observation provide evidence that ethylene is a gas?

• Do you think the net effect of the new on-campus stadium at CSU for the economy of city of Fort Collins has been positive, negative, or near zero?
• Should the NFL and MLS share stadiums? Why or why not?

Hedonic Price Method:

a. Explain how the HPM can be used to measure the effects on housing values for homes that are located near

noisy airports.

b. What are some problems with the HPM approach (explain 2 problems)?

Guinea worm is one of the human diseases that is on the verge of eradication. There is no preventive vaccine or treatment available for the disease. Discuss the public health prevention and control efforts that have enabled the near eradication of Guinea worm disease globally.