Harvey is riding his bicycle, no-handed, and at a very fast speed down a park path. Trish, a jogger, accompanied by her dog, Rover on a leash is approaching Harvey from the other direction. Because he knows that he is bigger and faster on his bike, Harvey expects Trish to move out of his way. Unfortunately, Trish does not and as Harvey passes Trish, he side-swipes her knocking her to the ground and injuring her. Rover is inadvertently released when Trish falls, and he runs off into the road.
Monty is driving carefully down the road. Seeing Rover running into his path and wanting to avoid hitting him, Monty swerves driving off the road and onto the sidewalk, damaging his wheel alignment when he jumps the curb.
Grandma Jenkins is babysitting young Elvis, her grandson. Elvis happens to be playing hopscotch on the sidewalk across the street from the park. Fortunately, Monty's veering car stops far short of Elvis, and all is well for the tot (except for anxiety he suffered when he looked up and saw Monty's car heading straight for him). Unfortunately, Grandma Jenkins, observing the car veering off the road and heading straight toward her grandson, suffers a heart attack.
Analyze the following questions based on Negligence -
Is Harvey liable for Grandma Jenkins' heart attack?
Is Harvey liable for the anxiety that Elvis suffered?
Is Harvey liable for the damage to Monty's car?
Is Harvey liable for the injuries suffered by Trish and the loss of Rover?
In: Accounting
Tidal WaveTidal Wave
is considering purchasing a water park in
Atlanta comma GeorgiaAtlanta, Georgia,
for
$ 2 comma 200 comma 000$2,200,000.
The new facility will generate annual net cash inflows of
$ 520 comma 000$520,000
for
tenten
years. Engineers estimate that the facility will remain useful for
tenten
years and have no residual value. The company uses straight-line depreciation. Its owners want payback in less than five years and an ARR of
1212%
or more. Management uses a
1010%
hurdle rate on investments of this nature.
|
LOADING... |
(Click the icon to view the present value annuity table.) |
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(Click the icon to view the present value table.) |
|
LOADING... |
(Click the icon to view the future value annuity table.) |
LOADING... |
(Click the icon to view the future value table.) |
Read the requirements
LOADING...
.
Requirement 1. Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment. (If you use the tables to compute the IRR, answer with the closest interest rate shown in the tables.) (Round the payback period to one decimalplace.)
|
The payback period is |
years. |
(Round the percentage to the nearest tenth percent.)
|
The ARR (accounting rate of return) is |
%. |
(Round your answer to the nearest whole dollar.)
|
Net present value $ |
The IRR (internal rate of return) is between
▼
16% and 18%
20% and 22%
22% and 24%
18% and 20%
.
Requirement 2. Recommend whether the company should invest in this project.
Recommendation:
▼
Do not invest in the new facility.
Invest in the new facility.
In: Accounting
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?
In: Finance
The marketing department of Deer Park has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Budgeted unit sales | 11,900 | 12,900 | 14,900 | 13,900 |
The selling price of the company’s product is $18 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $72,000.
The company expects to start the first quarter with 1,785 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,985 units.
Required:
1. Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.
2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.
3. Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.
In: Accounting
You work for the National Park Service testing a small cannon used to prevent avalanches by shooting down snow overhanging the sides of mountains. In order to determine the range of the cannon, it is necessary to know the speed with which the projectile leaves the cannon (muzzle speed), relative to the ground. The cannon you are testing has a weight of 500 lbs. and shoots a 20-lb. projectile. During lab tests where the cannon is held and cannot move, the muzzle speed is 400 m/s. You want to calculate the projectile's muzzle speed with respect to the ground under field conditions when the cannon is mounted so that it is free to move (recoil) when fired. You take the case where the cannon is fired horizontally using the same shells as in the laboratory.
In: Physics
Jensen Company owns a building in a suburban industrial park. It purchased the building four years ago for $3 million. It is now deciding whether to lease the building or to use it as a distribution center. It could be rented immediately. Given today’s market conditions, rental income of $120,000 per year would be expected. To convert the building to make it useful as a distribution center would require an immediate expenditure of $400,000. Having the distribution center at this location would provide Jensen with $140,000 per year in cost savings, at today’s prices. The cash flows associated with this decision are not very risky, so a real discount rate of just 3% per year is required. For simplicity, assume that: (i) there are no taxes, (ii) the building could be rented or used as a distribution center forever, (iii) ongoing cash flows, including rents and distribution cost savings, would increase with the overall inflation rate, and (iv) all cash flows except the initial $400,000 would occur at year end. (the last assumption implies that one year of inflation would affect the first lease payment and distribution cost saving)
(a) The inflation rate is forecast to be 4% per year. What nominal discount rate is appropriate for this project?
(b) Provide a NPV analysis and a recommendation of how the building should be used.
(c) Is the outcome of your NPV analysis sensitive to changes in the assumed inflation rate? (An intuitive answer without numbers is OK).
(d) Based on the information provided, is it possible to estimate the current market value of the building? If so, provide an estimate.
In: Finance
Water World
is considering purchasing a water park in Atlanta, Georgia, for
$1,950,000.
The new facility will generate annual net cash inflows of
$481,000
for
eighteight
years. Engineers estimate that the facility will remain useful for
eighteight
years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of
1010%
on investments of this nature.
LOADING...
(Click the icon to view the Present Value of $1 table.)
LOADING...
(Click the icon to view Present Value of Ordinary Annuity of $1 table.)
LOADING...
(Click the icon to view Future Value of $1 table.)
LOADING...
(Click the icon to view Future Value of Ordinary Annuity of $1 table.)Read the requirements
LOADING...
.
Requirement 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment.
First, determine the formula and calculate payback. (Round your answer to one decimal place, X.X.)
|
Amount invested |
/ |
Expected annual net cash inflow |
= |
Payback |
|
|
$1,950,000 |
/ |
$481,000 |
= |
4.1 |
years |
Next, determine the formula and calculate the accounting rate of return (ARR). (Round the percentage to the nearest tenth percent, X.X%.)
|
Average annual operating income |
/ |
Average amount invested |
= |
ARR |
|
|
$237,250 |
/ |
$975,000 (how did they get this?) |
= |
24.3 |
% |
Calculate the net present value (NPV). (Enter any factor amounts to three decimal places, X.XXX.)
|
Net Cash |
Annuity PV Factor |
Present |
||
|
Years |
Inflow |
(i=10%, n=8) |
Value |
|
|
1 - 8 |
Present value of annuity |
|||
|
0 |
Investment |
|||
|
Net present value of the investment |
||||
In: Accounting
A random sample of 17 police officers in Oak Park has a mean annual income of $35,800 and a standard deviation of $7,800. In Homewood, a random sample of 18 police officers has a mean annual income of $35,100 and a standard deviation of $7,375. Test the claim at α = 0.01 that the mean annual incomes in the two cities are not the same. Assume the population variances are equal.
a. Write down the type of test you will conduct.
b. Write down the null and alternative hypotheses.
c. Construct the test statistic.
d. Conduct the test.
e. What do you conclude?
In: Statistics and Probability
Water WorldWater World
is considering purchasing a water park in Atlanta, Georgia, for
$1,950,000.
The new facility will generate annual net cash inflows of
$481,000
for
eight
years. Engineers estimate that the facility will remain useful for
eight
years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of
10%
on investments of this nature.
LOADING...
(Click the icon to view the Present Value of $1 table.)
LOADING...
(Click the icon to view Present Value of Ordinary Annuity of $1 table.)
LOADING...
(Click the icon to view Future Value of $1 table.)
LOADING...
(Click the icon to view Future Value of Ordinary Annuity of $1 table.)Read the requirements
LOADING...
.
Requirement 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment.
First, determine the formula and calculate payback. (Round your answer to one decimal place, X.X.)
|
Amount invested |
/ |
Expected annual net cash inflow |
= |
Payback |
|
|
/ |
= |
years |
|||
In: Accounting
Question 1
A company is building an amusement park and has the following projected cashflows. Costs consist of building costs and staff salaries:
|
Year |
Building costs (assume as being paid at start of each respective year) |
|
1 |
$100,000 |
|
2 |
$50,000 |
|
3 |
$30,000 |
|
4 |
$45,000 |
5 $0 for year 5 and all future years for building costs
Staff salaries
$4,000 for year 1, increasing by a discrete step of $100 at the start of each future year, but paid continuously throughout each year, every year into the future
Revenue consists of ticket sales, merchandise sales, and food and beverage sales: Food and beverages
For all 30 years,
Tickets: $2000 per month for all years. Assume as paid at end of each month.
Merchandise: Equal to 1/3 of ticket sales
Food and beverages: $4250 per year, increasing by $50 per year in each future year. Assume the amount in each year is earned (paid) in the middle of each year.
Investors in the amusement park want to know what the Net Present Value (NPV) of this project is, assuming:
a risk discount rate (effective yield) of 14% per annum; and
a 30-year time horizon (i.e. all costs and revenues cease after 30 years).
(a) Calculate the present value of costs. Show all workings. [4 marks]
(a) Calculate the present value of revenue. Show all workings. [4 marks]
(b) Hence, calculate the NPV of the overall project. [1 mark]
In: Finance