Integrative—Complete investment decision
Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.11 million. This outlay would be partially offset by the sale of an existing press. The old press has zero book value, cost $1.02 million 10 years ago, and can be sold currently for $1.28 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.57 million higher than with the existing press, but product costs (excluding depreciation) will represent 46% of sales. The new press will not affect the firm's net working capital requirements. The new press will be depreciated under MACR
|
Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes |
|||||
|
Percentage by recovery year* |
|||||
|
Recovery year |
3 years |
5 years |
7 years |
10 years |
|
|
1 |
33% |
20% |
14% |
10% |
|
|
2 |
45% |
32% |
25% |
18% |
|
|
3 |
15% |
19% |
18% |
14% |
|
|
4 |
7% |
12% |
12% |
12% |
|
|
5 |
12% |
9% |
9% |
||
|
6 |
5% |
9% |
8% |
||
|
7 |
9% |
7% |
|||
|
8 |
4% |
6% |
|||
|
9 |
6% |
||||
|
10 |
6% |
||||
|
11 |
4% |
||||
|
Totals |
100% |
100% |
100% |
100% |
|
|
*These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. |
|||||
using a 5-year recovery period. The firm is subject to a 40% tax rate. Wells Printing's cost of capital is 11.1%.(Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6.)
a. Determine the initial investment required by the new press.
b. Determine the operating cash flows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.)
c. Determine the payback period.
d. Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed new press.
e. Make a recommendation to accept or reject the new press, and justify your answer.
In: Finance
Food companies have often been accused of targeting children with adverts for unhealthy products such as fast food, confectionery and snacks. Assess the extent of advertising of ‘unhealthy food’ to children based on this evidence is it more or less than other products? Are children targeted more than adults?
In: Economics
Your Professional Experience assignment is to develop a promotional message. This can be an email, letter, info graphic, image, or any other relevant material that answers why should students take a Professional Communications course.
In: Accounting
a. XYZ Inc. is accused of being a monopoly. The CEO claims that it’s not a monopoly, arguing that if XYZ were to raise its price it would lose sales. This is because consumers always have the option to spend their money on other goods. Is the CEO’s argument persuasive? Explain (6 pts.)
b. (Unrelated to the above) A monopoly firm is currently maximizing profit, earning economic profit of $10 million per year. It is now successfully sued by a former employee who is awarded $1 million. A manager of the firm argues that to recoup the lost $1 million, the firm needs to raise its price. Do you agree? Explain. (6 pts).
In: Economics
Access the article entitled “Biofeedback: Listen to the body” written by Alexander and Steefel (1995). After reading this informative article, answer any two of the following questions: Alexander & Steefel, 1995.pdf
Be sure to support your assertions and demonstrate the psychological relevance of your answers.
In: Psychology
In: Biology
When analyzing a novel, it's critical to use _______ to support your interpretation. A. denotation B. figurative language C. evidence D. opinion
In: Psychology
Please outline a brief research proposal to study the structure and function of a novel protein with known sequence but has never been investigated before.
In: Biology
Provide an explanation in support of or refuting the following statement: Humans would never develop natural immunity to a novel biological agent created in a laboratory
In: Biology
1. Problems and Applications Q1
A publisher faces the following demand schedule for the next novel from one of its popular authors:
|
Price |
Quantity Demanded |
|---|---|
|
(Dollars) |
(Copies) |
| 40 | 0 |
| 36 | 50,000 |
| 32 | 100,000 |
| 28 | 150,000 |
| 24 | 200,000 |
| 20 | 250,000 |
| 16 | 300,000 |
| 12 | 350,000 |
| 8 | 400,000 |
| 4 | 450,000 |
| 0 | 500,000 |
The author is paid $800,000 to write the novel, and the marginal cost of publishing the novel is a constant $4 per copy.
Complete the second, fourth, and fifth columns of the following table by computing total revenue, total cost, and profit at each quantity.
|
Quantity |
Total Revenue |
Marginal Revenue |
Total Cost |
Profit |
|---|---|---|---|---|
|
(Copies) |
(Dollars) |
(Dollars) |
(Dollars) |
(Dollars) |
| 0 | ||||
| 50,000 | ||||
| 100,000 | ||||
| 150,000 | ||||
| 200,000 | ||||
| 250,000 | ||||
| 300,000 | ||||
| 350,000 | ||||
| 400,000 | ||||
| 450,000 | ||||
| 500,000 | ||||
Which of the following quantity–price combinations would a profit-maximizing publisher choose? (Note: If the publisher is indifferent between more than one choice, select all of the indifferent combinations.) Check all that apply.
150,000 copies at a price of $28
200,000 copies at a price of $24
250,000 copies at a price of $20
300,000 copies at a price of $16
Complete the third column of the previous table by computing marginal revenue. (Hint: Recall that MR=ΔTRΔQMR=ΔTRΔQ.)
True or False: At each quantity, marginal revenue is less than the price.
True
False
Use the black points (plus symbol) to graph the marginal revenue from the 50,000th, 100,000th, 150,000th, 200,000th, 250,000th, and 300,000th copy of the novel. Remember to plot from left to right and to plot between integers. For example, if the marginal revenue of increasing production from 50,000 copies to 100,000 copies were 10, then you would plot a point at (75, 10). Next use the orange line (square symbol) to graph the marginal-cost curve faced by the publisher. Finally, use the blue points (circle symbol) to graph demand at the following quantities (in thousands): 0, 50, 100, 150, 200, 250, 300, 350, 400, 450, and 500.
Marginal RevenueMarginal CostDemandDeadweight Loss0501001502002503003504004505004036322824201612840-4PriceQuantity (Thousands of copies)200, 24Y-Intercept: 4Slope: 0
The marginal-revenue and marginal-cost curves intersect at a quantity of copies.
On the previous graph, use the black triangle (plus symbols) to shade the area representing deadweight loss.
If the author were paid $1 million instead of $800,000 to write the book, the publisher would the price it charges for a copy of the novel.
Suppose the publisher was not profit-maximizing but was concerned with maximizing economic efficiency, and the author of a novel was paid $800,000 to write the book.
In this case, the publisher would charge
for a copy of the novel and earn a profit of
. (Note: If the publisher experiences a loss, be sure to enter a negative number for profit.)
In: Economics