1. On April 1, 2018, Sukyoon registered the book store with the local government and the IRS by investing $500. Sukyoon owns 10 shares of the company. Jay also invested $2,000 for 40 shares of the company. Jay agreed that Sukyoon would be running the business.
2. To house the business, the company bought an abandoned building near Snell Park for $150 on April 1. The purchase documents allocated $100 to the land and $50 to the building. The company paid for the building with $30 cash and a $120 (5 year/10%) mortgage from the Community Bank. The company expect the building have the useful life of 4 years with the expected salvage value of $
3. On May 1, the company purchased 40 bookshelves at an average cost of $6 per unit. ($240 total). Sukyoon felt the shelves would only last for two years, at which time they would have no remaining value for sale.
4. On June 15, the book store ordered hundreds of used books from AMAZON for $800 to be delivered on the same day. The book store was able to purchase the inventory “on account”, which meant he had up to 90 days after delivery to pay the supplier.
5. On July 1, the book store signed a contract with a local advertising agency to provide various forms of advertising for a period of one year. The company paid $100 upfront for advertising through June 30, 2019
6. On June 30, the book store also hired two employees, Eugene and Sarah, to run the store. They signed employment contracts promising each salaries of $5 per month
7. On July 1, the book store recorded its first sales of used books totaling $600, most of which were paid in cash immediately. The original cost of these used books was $200. However, Sukyoon allowed a select number of students to pay later. The amount of credit sales out of the total sales was $100.
8. On July 5, Jay called to check in on the business. Upon hearing that Clarkson “The Great” Book Store only had $__________ of cash left in the bank, Jay became concerned about his investment. Thinking fast, Sukyoon stated that he was so confident of Clarkson “The Great” Book Store’s prospects that he declared and paid a $0.10 per share dividend. This dividend seemed to reassure Jay.
9. On July 10, the book store paid Amazon $200 it was owed
10. On July 15, one students who purchased a book on credit on July 1 went bankrupt and the book store decided to write off sales of $2 to him.
11. On July 31, the book store’s two employees were paid wages of $10 total during this one-month period and Sukyoon drew a salary of $10.
12. On July 31, the book store’s made a payment of $8 in principal and interest payment of $4 to the Bank.
13. On July 31, the company booked the depreciation expenses relating to the fixed assets during the 4-month period and booked the expense relating to the service provided by a local advertising agency during July.
14. On July 31, the book store booked 10% of the pretax income as an income taxes expenses.

Create an income statement, balance sheet, and cash flow statement

ABC company is considering producing a new range of smartphones that will require it to build a new factory. Feasibility studies have been done on the factory which cost $5 million. The studies have found the following:

1. The factory will cost $25 million and will have a useful life of 20 years.

2. The land where the factory will go is currently used as a carpark for workers and it is assumed that the company will have to pay $200000 per year for their workers to park in a nearby carpark.

3. The factory will be depreciated on a straight line basis and will have a salvage value of $0 but it is believed that most of it can be sold for scrap after 20 years for $50000.

4. Due to the nature of the business they are in, they will have to perform some environmental tests to make sure that some of the chemicals they are using are not entering the ground water around the factory. These tests will be performed every 5 years and cost $625000.

5. Through the building of this factory and the selling of the phones it produces, it’s revenue will increase by $5 million in year 1 and remain at this level for the operational life of the factory.

6. The extra costs that the company accrues per year due to the project are $435000 for labour, $50000 for overhead like power and water bills and marketing costs for the new line of phones will be $500000 per year but will decrease by $15000 per year as the phone gains greater penetration.

7. The company’s current cost of capital is 8% per year.

8. The tax rate is 30%.

9. The project requires an initial investment in working capital of $1000000 that is returned in year 20.

Use the above information to answer the following. I AM ONLY LOOKING FOR AN ANSWER TO C.

A. Calculate the free cash flows that come from this project for the 20 years it is operational. ​

B. Calculate the NPV, IRR and payback period of the project. Should they go ahead with the project? ​

C. Calculate the break even point for the following variables:​ (ANSWER IN EXCEL)

a. The cost of capital.

b. The yearly revenue.

c. The labour cost.

Problem 10-07 (Algorithmic)

Aggie Power Generation supplies electrical power to residential customers for many U.S. cities. Its main power generation plants are located in Los Angeles, Tulsa, and Seattle. The following table shows Aggie Power Generation's major residential markets, the annual demand in each market (in megawatts or MWs), and the cost to supply electricity to each market from each power generation plant (prices are in $/MW).

1. If there are no restrictions on the amount of power that can be supplied by any of the power plants, what is the optimal solution to this problem? Which cities should be supplied by which power plants? What is the total annual power distribution cost for this solution? If required, round your answers to two decimal places.
   
   The optimal solution is to produce  MWs in Los Angeles,  MWs in Tulsa, and  MWs in Seattle. The total distribution cost of this solution is $  .
   
2. If at most 3800 MWs of power can be supplied by any one of the power plants, what is the optimal solution? What is the annual increase in power distribution cost that results from adding these constraints to the original formulation? If required, round your answers to two decimal places.
   
   What is the optimal solution to produce ____ MWs in Los Angeles?
3. What is the optimal solution to produce ____ MWs in Tulsa?
4. What is the optimal solution to produce ____ MWs in Seattle?
5. What is the total distribution cost of this solution?
6. What is the increase in cost associated with the additional constraints?

The management of Ethan plc is trying to decide on a cost of capital to apply to the evaluation of investment projects. The company has an issued share capital of 500,000 ordinary K1 shares, with a current market value cum-div of K1.17 per share. It has also issued K200,000 of 10% debentures, which are redeemable at par in five years’ time and have a current market value of K105.30 cum-interest, and K100,000 of K1 irredeemable 6% preference shares, currently priced at K0.40 per share ex-div. The preference dividend has just been paid, and the ordinary dividend and debenture interest are due to be paid in the near future.
Management considers the current capital structure of the company to be similar to their plans for its long-term capital structure.
The ordinary share dividend will be K60,000 this year, and the Directors have published their view that earnings and dividends will increase by 5% a year into the indefinite future. The company pays tax at 25% per year in the same year as profits.
Required:
a) Calculate the WACC.
b) Discuss the importance of the cost of capital in project appraisal and highlight the impact
that a wrong discount rate would have on decision making.

The management of Ethan plc is trying to decide on a cost of capital to apply to the evaluation of investment projects. The company has an issued share capital of 500,000 ordinary K1 shares, with a current market value cum-div of K1.17 per share. It has also issued K200,000 of 10% debentures, which are redeemable at par in five years’ time and have a current market value of K105.30 cum-interest, and K100,000 of K1 irredeemable 6% preference shares, currently priced at K0.40 per share ex-div. The preference dividend has just been paid, and the ordinary dividend and debenture interest are due to be paid in the near future.
Management considers the current capital structure of the company to be similar to their plans for its long-term capital structure.
The ordinary share dividend will be K60,000 this year, and the Directors have published their view that earnings and dividends will increase by 5% a year into the indefinite future. The company pays tax at 25% per year in the same year as profits.
Required:
a) Calculate the WACC.
b) Discuss the importance of the cost of capital in project appraisal and highlight the impact
that a wrong discount rate would have on decision making.

Allione plc is trying to decide on a cost of capital to apply to the evaluation of investment projects. The company has an issued share capital of 600,000 ordinary K1 shares, with a current market value cum-div of K1.18 per share. It has also issued K300,000 of 10% debentures, which are redeemable at par in five years’ time and have a current market value of K105.30 cum-interest, and K100,000 of K1 irredeemable 6% preference shares, currently priced at K0.40 per share ex-div. The preference dividend has just been paid, and the ordinary dividend and debenture interest are due to be paid in the near future. Management considers the current capital structure of the company to be similar to their plans for its long-term capital structure. The ordinary share dividend will be K50,000 this year, and the Directors have published their view that earnings and dividends will increase by 5% a year into the indefinite future. The company pays tax at 25% per year in the same year as profits.

Required:

a) Calculate the WACC.

b) Discuss the importance of the cost of capital in project appraisal and highlight the impact that a wrong discount rate would have on decision making.

2 The management of Ethan plc is trying to decide on a cost of capital to apply to the evaluation of investment projects. The company has an issued share 'capital of 500,000 ordinary $l shares, with a current market value cum-div of $l.17 per share. It has also issued $200,000 of 10 debentures, which are redeemable at par in five years' time and have a current market value of$105.30 cum-interest, and $lOO,OOO of $l irredeemable 6 preference shares, currently priced at $0.40 per share ex-div. The preference dividend has just been paid, and the ordinary dividend and debenture interest are due to be paid in the near future. Management considers the current capital structure of the company to be similar to their plans for its long-term capital structure. The ordinary share dividend will be $60,000 this year, and the Directors have published their view that earnings'and dividends will increase by 5 a year into the indefinite future. The company pays tax at 25 per year in the same year as profits. Required: a) Calculate the WACC. b) Discuss the importance of the cost of capital in project appraisal .and highlight the impact that a wrong discount rate would have on decision making.

1) Roberto​ Inc. operates a chain of luxury hotels in the​ Asia-Pacific region. It charges​ $540 for a one night stay. However when​ 90% of the rooms are​ occupied, Roberto charges a premium of​ 20% on room tariff for the remaining rooms. What pricing method has Roberto Inc. ​adopted? Explain your answer.

2) Due to a recent downturn in the economy, sales of luxury hotel rooms have been on a steady decline for the last 12 months. A market research study conducted revealed that Roberto Inc. can only sell one night stays for $440. Accordingly, Roberto Inc. has decided to revise its sales price per one night stay to $440. The annual target volume after the price revision is 240 one night stays. Roberto Inc. wants to earn 40% on its sales amount. Calculate the target cost per unit. Show your workings.

3) Roberto Inc.’s revised target price of $440 was based on market research. Explain other methods that could be used when estimating a target price.

1. To economists, which of the following is true of pollution?

A. It is an externality.

B. It is always produced by third parties.

C. It is never caused by the consumers of the good, only by the producers.

D. It is never caused by the producers of the good, only by the consumers.

2.The free-rider problem is most likely to occur in which of the following cases?

A. A lighthouse

B. Buying apples at a farmers’ market

C. Visits to a local theme park

D. Visits to the emergency room

3. The term exclusion refers to which of the following?

A. The likelihood that the government may exclude the private sector from the production of certain goods

B. The possibility that you may receive benefits without having paid for them

C. The condition where you can’t consume a good if you don’t pay for it

D. The condition where your consumption of a good removes that good from someone else

4. Which of the following is a basic difference between public goods and private goods?

A. A private good is an internal good.

B. A public good must have no cost.

C. Public goods have the property of exclusion.

D. Private goods have the property of exclusion.

2. The new mayor of a Midwestern city has developed a list of administration goals and objectives for the city: (a) establish effective government by incorporating improved information systems and management practices; (b) improve intergovernmental cooperation for more cost-effective service delivery; (c) build public support for administration priorities through two-way communication; (d) make timely investments in roads, utilities, sewers, parks, and alternative transportation systems to encourage responsible growth and sustain a healthy economy; (e) maintain and improve the city as a place where people can live and work without fear; (f) protect the community’s natural assets and enhance environmental quality; (g) work to improve the economic health of the city in an equitable manner for all citizens; (h) support and facilitate access to basic social services for all citizens; (i) establish a customer-driven city workplace; and (j) maintain and improve park services and facilities. Use this statement to structure both a program budget format and a new performance budget format for the city. For the latter, identify measurable performance indicators.

Mikesell, John. Fiscal Administration (Page 306). Wadsworth Publishing. Kindle Edition.