Robert Montoya, Inc., is a leading producer of wine in the United States. The firm was founded in 1950 by Robert Montoya, an Air Force veteran who had spent several years in France both before and after World War II. This experience convinced him that California could produce wines that were as good as or better than the best France had to offer. Originally, Robert Montoya sold his wine to wholesalers for distribution under their own brand names. Then in the early 1950s, when wine sales were expanding rapidly, he joined with his brother Marshall and several other producers to form Robert Montoya, Inc., which then began an aggressive promotion campaign. Today, its wines are sold throughout the world.
The table Wine market has matured and Robert Montoya's wine cooler sales have been steadily decreasing. Consequently, to increase winery sales, management is currently considering a potential new product: a premium red wine using the cabernet sauvignon grape. The new wine' is designed to appeal to middle-to-upper-income professionals. The new product, Suave Mauve, would be positioned between the traditional table wines and super premium table wines. In market research samplings at the company's Napa Valley headquarters, it was judged superior to various competing products. Sarah Sharpe, the financial vice president, must analyze this project, along with two other potential investments, and then present her findings to the company's executive committee.
Production facilities for the new wine would be set up in an unused section of Robert Montoya's main plant. New machinery with an estimated cost of $1,800,000 would be purchased, but shipping costs to- move the machinery to Robert Montoya's plant would total $80,000, and installation charges would add another $120,000 to the total equipment cost. Furthermore, Robert Montoya's inventories (the new product requires aging for 5 years in oak barrels made in France) would have to be increased by $100,000. This cash flow is assumed to occur at the time of the initial investment. The machinery has a remaining economic life of 4 years, and the company has obtained a special tax ruling that allows it to depreciate the equipment under the MACRS 3-year class life. Under current tax law, the depreciation allowances are 0.33, 0.45, 0.15, and 0.07 in Years 1 through 4, respectively. The machinery is expected to have a salvage value of $200,000 after 4 years of use.
The section of the plant in which production would occur had not been used for several years and, consequently, had suffered some deterioration. Last year, as part of a routine facilities improvement program, $300,000 was spent to rehabilitate that section of the main plant. Earnie Jones, the chief accountant, believes that this outlay, which has already been paid and expensed for tax purposes, should be charged to the wine project. His contention is that if the rehabilitation had not taken place, the firm would have had to spend the $300,000 to make the plant suitable for the wine project.
Robert Montoya's management expects to sell 125,000 bottles of the new wine in each of the next 4 years, at a wholesale price of $50 per bottle, but $30 per bottle would be needed to cover cash operating costs. In examining the sales figures, Sharpe noted a short memo from Robert Montoya's sales manager which expressed concern that the wine project would cut into the firm's sales of other wines-this type of effect is called cannibalization. Specifically, the sales manager estimated that existing wine sales would fall by 5 percent if the new wine were introduced. Sharpe then talked to both the sales and production managers and concluded that the new project would probably lower the firm's existing wine sales by $60,000 per year, but, at the same time, it would also reduce production costs by $40,000 per year, all on a pre-tax basis. Thus, the net externality effect would be -$60,000 + $40,000 = -$20,000. Robert Montoya's federal-plus-state tax rate is 40 percent, and its overall cost of capital is 10 percent, calculated as follows:
WACC = Wd r d (1-T) + Wsrs
= 0.5(10%) (0.6) + 0.5(14%)
= 10%.
Now assume that you are Sharpe's assistant and she has asked you to analyze this project, along with two other projects, and then to present your findings in a "tutorial" manner to Robert Montoya's executive committee. As financial vice president, Sharpe wants to educate some of the other executives, especially the marketing and sales managers, in the theory of capital budgeting so that these executives will have a better understanding of capital budgeting decisions. Therefore, Sharpe wants you to ask and then answer a series of questions as set forth next. Keep in mind that you will be questioned closely during your presentation, so you should understand every step of the analysis, including any assumptions and weaknesses that may be lurking in the background and that someone might spring on you in the meeting.
5. Estimate the project’s operating cash flows. (Hint: Again use Table 1 as a guide.) What are the project’s NPV, IRR, modified IRR (MIRR), and payback? Should the project be under-taken?
Fill in Xs. Payback period of S = about 2 years, L = about 3 years. Omit MIRR.
6. Now suppose the project had involved replacement rather than expansion of existing facilities. Describe briefly how the analysis would have to be changed to deal with a replacement project.
Depreciable basis = price + freight + installation. In year 1, 2,000,000 X 33% (or 0.33) MACRS factor = 660,000 (depreciation expense). 2,000,000 – 660,000 = 1,340,000 end-of-year book value.
MACRS Depr. End-of-year
Year Factor Expense Book Value
1 33% 660,000 1,340,000
2 X X X
3 X X X
4 7 140,000 0
100% 1,800,000
Cash Flow Statements:
Year 0 Year 1 Year 2 Year 3 Year 4
Unit price $ 50 X X $ 50
Unit sales 100,000 X X 100,000
Revenues 5,000,000 X X 5,000,000
Operating costs 3,000,000 X X 3,000,000
Depreciation 660,000 X X 140,000
Other project effects 20,000 X X 20,000
Before tax income 1,320,000 X X 1,840,000
Taxes 528,000 X X 736,000
Net income 792,000 X X 1,104,000
Plus depreciation 660,000 X X 140,000
Net op cash flow 1,452,000 X X 1,244,000
Salvage value 200,000
SV tax X
Recovery of NWC X
Termination CF X
Project NCF ($-2,100,000) X X X X
========= = = = =
In: Accounting
Assume you are starting an energy drink company in the United States and are working on a business proposal. Generate a forecasts (table with numbers) by evaluating and analyzing appropriate data (industry, regional, and national including demand data from a similar company). Please cite your sources (if applicable). Thank you in advance.
In: Operations Management
Consequences of Poverty in the United States
The consequences of poverty are far reaching and multifaceted. Sociologists often try to understand the complex and interrelated ways that poverty adversely affects people’s lives along a number of dimensions. Reflect on what you have learned about the impact of poverty as you watch the following video.
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One problem addressed by the video is a lack of food, clothing, and medical care among the students at Whitney Elementary. With the help ofincreased government assistance , the principal created programs to help poor and homeless students get the basic supplies they needed. In her view, many of these problems have been worsened by .
Research shows that children enduring poverty, like those at Whitney Elementary, are more likely to:
Encounter stressful family environments and health problems that can hinder academic performance
Excel in school due to higher levels of motivation to escape poverty
If Charlie grows up to remain poor as an adult, her experience would be illustrative of intergenerational poverty. This problem draws the attention of sociologists because it can lead to an underclass of people who are:
Persistently poor and disadvantaged along many social dimensions
Poor for only a short time but require a great deal of government aid
Another consequence of poverty is a lack of political power among the poor. Studies show that they are much less likely to vote than the wealthy, in part because of political alienation that:
Makes them feel powerless and estranged from government
Allows them to trust the free market to solve their economic problems
In: Psychology
Sulfuric acid is the chemical produced in the United States with the highest volume of production. In one of the earliest processes used to make it, an ore containing iron pyrites (FeS2) is roasted (burned) with air. The following reactions take place in the roasting furnace: The gas leaving the reactor goes to a catalytic converter in which most of the SO2 produced is further oxidized to SO3: Finally, the gas leaving the converter passes through an absorption tower, in which the SO3 is absorbed in water to produce sulfuric acid (H2SO4). (a) An ore containing 82 wt% FeS2 and 18% inerts is fed to a roasting furnace. Dry air is fed to the furnace in 40% excess of the amount theoretically required to oxidize all of the sulfur in the ore to SO3, an FeS2 oxidation of 85% is obtained, with 40% of the FeS2 converted forming sulfur dioxide and the rest forming sulfur trioxide. Two streams leave the roaster: a gas stream containing SO2, SO3, 02, and N2, and a solid stream containing unconverted pyrites, ferric oxide, and inert material in the ore. Calculate the required feed rate of air in standard cubic meters per 100 kg of ore roasted and the molar composition and volume (SCMJ100 kg of ore) of the gas leaving the roasting oven.
In: Chemistry
1. According to official statistics in the United States, a family is considered to live in poverty if its money income:
A. is below three times an average family's minimum food budget.
B. is below the income earned by 90 percent of all Americans.
C. is below the income earned by 80 percent of all Americans.
D. and all government transfers are below three times an average family's minimum food budget.
2. The minimum food budget used to determine the poverty line was determined in the:
A. 1960s but has been recalculated every decade to account for rising standards of living.
B. 1960s and is not recalculated to account for rising standards of living.
C. 1930s but has been recalculated every decade to account for rising standards of living.
D. 1930s and is not recalculated to account for rising standards of living.
3. Today, the Gini coefficient of income inequality for the United States is about .5. In 1975, it had been about .4. What do these numbers tell us?
A. Wealth is distributed less equally than income.
B. The number of rich people has fallen.
C. Income has become more unequally distributed.
D. The official definition of poverty has changed.
4. John Rawls's views on income distribution and fairness can best be described by the statement:
A. The lesser individuals' duty should be to work for the well-being of the brightest individuals.
B. A high level of income inequality is necessary to sustain the arts, beauty, education, and civilization.
C. Society's goal should be to maximize the welfare of the least well-off, but some inequality is necessary to meet this goal.
D. Property rights should be equally distributed, and the market should determine the distribution of income.
In: Economics
What is the validity to the assumption that migrating to the United States from other parts of the countries will have a profound effect on the cultural integrity of the kid growing up. **Basically I know the question maybe be confusing to understand but what I want to explore in this topic is the assumption people have with Americans having no culture and like other countries Pakistan or India, they have a sense of family hood here in the states sometimes we see kids become distant from parents etc, and I want to explore what is the reason behind it. Even in TV commercials sometimes they openly joke about marital couples not hanging out with parents etc. Which is kind of sad to some degree so this is something I want to possibly discuss about and try to make sense of whats exactly going on could be technology advancement people having less interaction with each other etc.
In: Psychology
An article reported that 7% of married couples in the United States are mixed racially or ethnically. Consider the population consisting of all married couples in the United States.
(a) A random sample of n = 50 couples will be selected from this population and p̂, the proportion of couples that are mixed racially or ethnically, will be computed. What are the mean and standard deviation of the sampling distribution of p̂? (Round your standard deviation to four decimal places.)
| mean | ||
| standard deviation |
(b) Is it reasonable to assume that the sampling distribution of
p̂ is approximately normal for random samples of size
n = 50? Explain.
Yes, because np < 10 and n(1 − p) < 10. Yes, because np > 10 and n(1 − p) > 10. No, because np < 10. No, because np > 10.
(c) Suppose that the sample size is n = 250 rather than
n = 50, as in Part (b). Does the change in sample size
change the mean and standard deviation of the sampling distribution
of p̂? What are the values for the mean and standard
deviation when n = 250? (Round your standard deviation to
four decimal places.)
| mean | ||
| standard deviation |
(d) Is it reasonable to assume that the sampling distribution of
p̂ is approximately normal for random samples of size
n = 250? Explain.
Yes, because np < 10. Yes, because np > 10. No, because np < 10. No, because np > 10.
(e) When n = 250, what is the probability that the
proportion of couples in the sample who are racially or ethnically
mixed will be greater than 0.08? (Round your answer to four decimal
places.)
In: Math
In: Economics
You are an economic advisor to the Treasurer of the United States. Congress is considering increasing the sales tax on gasoline by $.03 per gallon. Last year motorists purchased 10 million gallons of gas per month. The demand curve is such that every $.01 increase in price decreases sales by 100,000 gallons per month. You also know that for every $.01 increase in price, producers are willing to provide 50,000 more gallons of gasoline to the market. The legislature has stated that the $.03 tax will increase government revenues by $300,000 per month and raise the price of gasoline by $.03 per gallon. Is this correct? Explain and show your work.
In: Economics
True or False: Of the major economies in the world, the United States had the highest growth rate of real GDP per capita between 1982 and 2009.
・True
・False
Japan experienced average annual real GDP per capita growth of 2.0% between 1982 and 2009. Which of the following helped most to contribute to that growth?
・Redistributive policies designed to decrease poverty
・Privatization of previously nationalized industries
・Spending on research and development
In: Economics