The goal of this second stage in our equity analyst project is to select one industry out of this list of 24 whose performance prospects you determine are best over the next year. Here are some factors to consider when comparing industry groups:[1]

Degree of Competition in the Industry

Supply/Demand Dynamics for the Industry’s Products

Industry Cost Structure

Degree of Government Regulation-Favorable or Not

Exposure to the Business Cycle

Relative Financial Norms and Standards

Your team is asked to write a 5-10 page paper providing your analysis of the issues involved in your selection of the industry group that you conclude is most likely to prosper in the coming months and your justification of your choice of that industry.

Team Analysis of Select Industry Groups

This analysis is a team assignment that requires your team to analyze a select group of alternative industries to determine which is most likely to perform best in terms of growth and earnings over the next 12 months. Your instructor will create your teams, ideally based on similar views about the near-term prospects for the U.S. economy expressed in the Individual Asset Allocation Exercise.

To guide this second stage analysis, you are asked to rely on the North American Industry Groups database available at Yahoo! Finance. The system is comprised of 9 macroeconomic sectors, 31 business segments and 215 industry groups. This database is readily accessible via Yahoo! Finance at

http://biz.yahoo.com/ic/ind_index.html

To simplify the exercise the 215 industry groups within the database have been reduced to a more analytically manageable 24 industry groups (each with public firms listed at Yahoo! Finance totaling no less than 5 and no more than 15 companies) in 7 macroeconomic sectors as follows:

Basic Materials

Aluminum

Major Integrated Oil &Gas

Nonmetallic Mineral Mining

Consumer Goods

Appliances

Confectioners

Office Supplies

Financial

REIT-Healthcare Facilities

REIT-Hotel/Motel

REIT-Industrial

Healthcare

Drugs-Generic

Home Health Care

Hospitals

Industrial Goods

Manufactured Housing

Pollution & Treatment Controls

Services

Advertising Agencies

Air Delivery & Freight Services

Drug Stores

Electronic Stores

Home Improvement Stores

Jewelry Stores

Technology

Computer Based Systems

Long Distance Carriers

Personal Computers  

Utilities

Water Utilities

To access more details on these groups go to http://biz.yahoo.com/ic/ind_index.html and click on any of the names of the 24 groups to go to each industry’s “Industry Center” page. Additional useful information is available via the link to “Industry Browser” on the left. Also, on each industry’s summary page click on “Company Index” and then on “Public” on the subsequent page next to “View:” to get the list of public companies in this industry. Our focus is on publicly listed companies in which we might ultimately invest. The list of public companies is provided alphabetically. Following each name is the company’s ticker symbol in brackets. See http://www.investopedia.com/terms/s/stocksymbol.asp or http://www.investorwords.com/4968/ticker_symbol.html for brief definitions of stock/ticker symbols.

Please note that on occasion the ticker symbol may also be followed by other letters, such as PK or OB (see http://www.investopedia.com/ask/answers/04/022004.asp or http://www.investopedia.com/ask/answers/120.asp for explanations). It is recommended that we ignore stocks so designated in these exercises.

PART A

GanJee Pty Limited (GanJee) owns and develops properties in the Gosford CBD on the Central Coast of NSW. Upon completion of construction the company leases the apartments and retail space and provides tennants services including waste removal, maintenance and shared facilities like airconditioning. All leases are signed for a period of less than 5 years and are then reviewed before renewal or extension. You wish to establish the fair value of one of GanJee’s Gosford properties using AASB 13/IFRS 13. GanJee purchased the property in 2001 when the Gosford CBD was in decline. At the time, GanJee was able to snap up the property for $0.5 million. In 2015, existing property was demolished and GanJee constructed two impressive tower block buildings with retail space below. The property also includes a hotel, office space and apartments. Construction was expensive, costing $400 million. You have ascertained the following information for your assessment: • The company commissioned the expert opinion of two reputable independent expert appraisers. These appraisers delivered valuation A and valuation B. Valuation A contained the appraiser’s opinion that the property value for GanJee’s Gosford holding had a fair value of $1.3 billion based upon earnings before interest and tax multiplied by a conservative earnings multiple of 6 which is more likely to be considered fair by a potential buyer for the properties. The second valuer in providing valuation B expressed the opinion that the properties had a fair value of $2.75 billion based upon earnings before interest and tax multiplied by an earnings multiple of 8 which is more likely to be considered fair by a potential seller of the property. Both appraisers acknowledged that valuing the property in the current economic climate was difficult as generally there are very few sales of comparable properties. The appraisers communicated that they used their experience in observing valuations of residential rather than commercial and residential properties.  The directors estimate that the current cost of replacing the property would be $1.8 billion based on the current design with today’s construction costs, including labour, materials and overheads. Property prices in the Gosford CBD have increased substantially since 2001. The CBD went through a rapid growth phase in 2017 but there is currently a lull as the City Council does not wish to have new development. The GanJee property is surrounded by fairly derelict buildings which makes valuation difficult. • Present value of future cash flows: The directors have calculated net cash inflows over the next 20 years estimated to be $300 million per year, based on projected cash flows from rental income, tax savings and expenditures. The directors expect that the building will need substantial renovation in 20 years’ time. The directors based their valuation on the following factors: ✓ discount rate of 11.5% to 14.5%; ✓ average subsequent tenure period of ten years for retail units (ILU) and four years for serviced apartments (SA).

Required

Discuss each of the above four values as a basis for establishing a fair value for the property. In accordance with AASB 13/IFRS 13 which methodology do you believe is most appropriate? What additional information if any would you wish to obtain to make a better estimate?

PART B

Walkabout Park wants to determine fair value of the animals in their zoo. They hold the animals primarily for breeding and preservation of native species but also for the benefit of the local population and school group visits.

Required

Provide your recommendation for how the entity should go about measuring the biological assets’ fair value. In your response provide an explanation of possible alternatives and justify your recommendation.

Question 9

One of the key early tests of Einstein's General Theory of Relativity was

the bending of the path of starlight and resulting apparent shift in the position of stars because of the Sun's mass.

sending a twin in a spaceship to the nearest star and back at a high Lorentz factor.

the Michelson-Morley experiment.

measuring the time dilation effect from gas falling into a black hole.

Question 10

According to General Relativity,

Group of answer choices

you can think of space as "flowing in" towards massive objects.

space-time has curvature.

time runs fastest far away from massive objects.

the path of light is bent when photons move through curved space.

All of these choices are correct.

None of these choices is correct.

Question 11

You are in a rocket ship deep in space and are about to pass a fellow traveler going the opposite direction at 99.9% the speed of light. You think her clock is _________ than yours and she thinks that your clock is __________ than hers.

faster; faster

faster; slower

slower; slower

slower; faster

Question 12

By observing a _____________ in 1919, astronomers were able to test the prediction that a massive object bends the path taken by light.

Group of answer choices

transit of the planet Mercury across the Sun

transit of the planet Venus across the Sun

supernova

total solar eclipse

total lunar eclipse

Question 13

The twin paradox is

a hypothetical experiment that demonstrates that special relativity is wrong

a hypothetical situation that seemingly presents a paradox but is actually resolved by a clearer understanding of the situation

a real experiment that demonstrates that special relativity is wrong

a real experiment that is consistent with the predictions made by special relativity

Question 14

Within special relativity, time dilation refers to ...

the slowing of the passage of time due to motion near the speed of light.

the speeding up of the passage of time due to motion near the speed of light.

the gradual slowing of the rotation of pulsars.

the Doppler shift of light.

Question 15

The alteration of our perception of space and time due to motion near the speed of light is described by

Group of answer choices

special relativity

general relativity

Newton's laws of motion

Galileo's law of inertia

Question 16

The curving of space by a massive object is described by which theory?

Group of answer choices

special relativity

general relativity

Newton's laws of motion

Galileo's law of inertia

BETHESDA MINING COMPANY Bethesda Mining is a midsized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip mines. Most of the coal mined is sold under contract, with excess production sold on the spot market. The coal mining industry, especially high-sulfur coal operations such as Bethesda, has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for high-sulfur coal. Bethesda has just been approached by Mid-Ohio Electric Company with a request to supply coal for its electric generators for the next four years. Bethesda Mining does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in Ohio on 5,000 acres of land purchased 10 years ago for $4 million. Based on a recent appraisal, the company feels it could receive $6.5 million on an aftertax basis if it sold the land today. Strip mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would simply remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, Bethesda will need to purchase additional necessary equipment, which will cost $95 million. The equipment will be depreciated on a seven-year MACRS schedule. The contract runs for only four years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 60 percent of its initial purchase price in four years. However, Bethesda plans to open another strip mine at that time and will use the equipment at the new mine. Page 206 The contract calls for the delivery of 500,000 tons of coal per year at a price of $86 per ton. Bethesda Mining feels that coal production will be 620,000 tons, 680,000 tons, 730,000 tons, and 590,000 tons, respectively, over the next four years. The excess production will be sold in the spot market at an average of $77 per ton. Variable costs amount to $31 per ton, and fixed costs are $4,100,000 per year. The mine will require a net working capital investment of 5 percent of sales. The NWC will be built up in the year prior to the sales. Bethesda will be responsible for reclaiming the land at termination of the mining. This will occur in Year 5. The company uses an outside company for reclamation of all the company’s strip mines. It is estimated the cost of reclamation will be $2.7 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation to the state for use as a public park and recreation area. This will occur in Year 6 and result in a charitable expense deduction of $6 million. Bethesda faces a 38 percent tax rate and has a 12 percent required return on new strip mine projects. Assume that a loss in any year will result in a tax credit. You have been approached by the president of the company with a request to analyze the project. Calculate the payback period, profitability index, net present value, and internal rate of return for the new strip mine. Should Bethesda Mining take the contract and open the mine? GOODWEEK TIRES, INC.
4/30/2020 IEB Wireframe
https://textflow.mheducation.com/parser.php?secload=P2.6.f&fake&print 12/12
After extensive research and development, Goodweek Tires, Inc., has recently developed a new tire, the SuperTread, and must decide whether to make the investment necessary to produce and market it. The tire would be ideal for drivers doing a large amount of wet weather and off-road driving in addition to normal freeway usage. The research and development costs so far have totaled about $10 million. The SuperTread would be put on the market beginning this year, and Goodweek expects it to stay on the market for a total of four years. Test marketing costing $5 million has shown that there is a significant market for a SuperTreadtype tire. As a financial analyst at Goodweek Tires, you have been asked by your CFO, Adam Smith, to evaluate the SuperTread project and provide a recommendation on whether to go ahead with the investment. Except for the initial investment that will occur immediately, assume all cash flows will occur at year-end. Goodweek must initially invest $160 million in production equipment to make the SuperTread. This equipment can be sold for $65 million at the end of four years. Goodweek intends to sell the SuperTread to two distinct markets: 1. The original equipment manufacturer (OEM) market: The OEM market consists primarily of the large automobile companies (like General Motors) that buy tires for new cars. In the OEM market, the SuperTread is expected to sell for $41 per tire. The variable cost to produce each tire is $29. 2. The replacement market: The replacement market consists of all tires purchased after the automobile has left the factory. This market allows higher margins; Goodweek expects to sell the SuperTread for $62 per tire there. Variable costs are the same as in the OEM market. Goodweek Tires intends to raise prices at 1 percent above the inflation rate; variable costs will also increase at 1 percent above the inflation rate. In addition, the SuperTread project will incur $43 million in marketing and general administration costs the first year. This cost is expected to increase at the inflation rate in the subsequent years. Goodweek’s corporate tax rate is 40 percent. Annual inflation is expected to remain constant at 3.25 percent. The company uses a 13.4 percent discount rate to evaluate new product decisions. Automotive industry analysts expect automobile manufacturers to produce 6.2 million new cars this year and production to grow at 2.5 percent per year thereafter. Each new car needs four tires (the spare tires are undersized and are in a different category). Goodweek Tires expects the SuperTread to capture 11 percent of the OEM market. Page 207 Industry analysts estimate that the replacement tire market size will be 32 million tires this year and that it will grow at 2 percent annually. Goodweek expects the SuperTread to capture an 8 percent market share. The appropriate depreciation schedule for the equipment is the seven-year MACRS depreciation schedule. The immediate initial working capital requirement is $9 million. Thereafter, the net working capital requirements will be 15 percent of sales. What are the NPV, payback period, discounted payback period, IRR, and PI on this project?

Give examples of how to calculate total revenue, total cost, variable cost, fixed cost, marginal cost, ATC, AFC, and AVC.

What is the water-diamond paradox?

What is the meaning of step-variable cost, step-fixed cost, semi-variable (or mixed) cost, and curvilinear cost? Can you explain with one example?