Lapps Inc. makes a gift product that sells best during the holiday season. Retailers stock up in the fall, so Lapps's sales are largest in October and November and drop dramatically in December. The firm expects the following revenue pattern for the second half of this year ($000). The third quarter figures are actual results, while the fourth quarter is a projection. Jul Aug Sep Oct Nov Dec Revenue $5,500 $6,000 $7,500 $8,000 $9,500 $4,000 Historically, Lapps collects its receivables according to the following pattern. Months after sale 1 2 3 % collected 60% 30% 9% The firm offers a 2% prompt payment discount, which is taken by about half of the customers that pay in the first month. Lapps receives inventory one month in advance of sales. The cost of material is 40% of revenue. Invoices are paid 45 days after receipt of material. The firm uses temporary labor to meet its seasonal production needs, so payroll can be estimated at 35% of the current month's sales. Other expenses are a constant $1.8 million per month. A $.7 million tax payment is scheduled for November, and an expansion project will require cash of $.5 million in October and $.8 million in December. Lapps has a $6 million short-term loan outstanding at the end of September. Monthly interest is 1% of the previous month-end balance. Prepare Lapps's cash budget for the fourth quarter.

PLEASE SHOW EQUATIONS

The Australian economy is expected to record a contraction in GDP of around 10 per cent over the first half of 2020; total hours worked are expected to decline by around 20 per cent and the unemployment rate is forecast to rise to around 10 per cent in the June quarter. Inflation is expected to be negative in the June quarter largely as a result of lower fuel prices and free child care. (Source RBA)

Fiscal Policy Responses

Over the past month, the Federal Government has announced an unprecedented fiscal injection of $194 billion (almost 10 per cent of GDP) consisting of $39 billion directly to business, $25 billion to households and the $130 billion Job-Keeper payment to support business and households through the COVID-19 shutdown.

Monetary Policy responses

The Reserve Bank of Australia has reduced the cash rate to 0.25%

Possible Outcome

A plausible baseline scenario is that the various restrictions are progressively relaxed in coming months and are mostly removed by the end of September, except for some restrictions such as international travel. If this occurs, and the spread of the virus in Australia remains limited, GDP growth is likely to turn around in the September quarter and the recovery would strengthen from there.

Questions:

1.Use the ADAS model to describe the monetary responses of the RBA to the pandemic. Is this an expansionary or contractionary monetary policy? What is the main objective of this monetary policy? What are the possible risks you see in this monetary policy?

2.Use the ADAS model to describe the fiscal policy responses of the Australian government. Is this fiscal response a demand side policy or a supply side policy? What are the intended effects?

Chapter 5 Case

You are the Chief Financial Officer (CFO) for Zen Distributors Inc., a media broker that secure shelf space in independent bookstores for small publishing companies. As a member of the company’s executive team, you are preparing the operating budget for the fourth quarter of 2020. Your intent is to summarize the budget for team members and provide them with detailed schedules that support your overview.  

Zen’s general ledger provides you with current account data on September 30, 2020 (the end of the third quarter) of operations:

Jack Closer, Vice President of Sales, estimated that sales should increase slightly from their fourth quarter levels of the previous year. Per your request, he forwarded his monthly fourth quarter sales estimates to you, along with the current month’s actual sales and his forecast for January 2021.

You next met with Mary Balance, Zen’s Controller. Ms. Balance informed you that the company prices its products to ensure a 25% gross profit margin on sales. Zen has met that margin throughout the first three quarters of 2020, and she was confident that the firm would meet this target margin in the near term. Mary also told you that, on average, 60% of Zen’s customer pay in cash. Those customers receive a one percent discount on the invoice price.

The remaining 40% of the customers pay on account. Credit sales terms are n/2EOM. This means credit customers must pay the full invoice price by the end of the month following the month in which they purchased merchandise. Mary explained, “Our customers are pretty sophisticated, and they constantly manage their cash flows--just as we do. Consequently, if we make a credit sale in October, they will pay us by the end of November.” Finally, Mary said, “We screen our customers very carefully before extending them credit. Our customers pay what they owe us. We don’t have any bad debts, and we don’t expect any in the future.”  

Mary also provided you with third quarter monthly expense data to assist in constructing your budget. The next table presents that information:

She concluded that, “As you know, we pay our operating expenses in the month we accrue them.”

               Procurement officer Jim Washburn managed inventory so that its ending balance equaled 80% of the next month’s cost of goods sold. Washburn said, “We can construct monthly purchase budgets as follows: add desired ending inventory to cost of goods sold, which are 75% of sales, to determine required inventory for a month. Then we subtract that month’s beginning inventory to determine required purchases for the month.” Washburn also stated that the accounts payable clerk pays one-half of each month’s inventory cost in the month of acquisition, and the remaining 50% in the following month.

               Ashleigh McNamara, head of capital expenditures, informed you that Zen will make a cash purchase of $1,500 worth of hand-held scanning devices in early October. McNamara said “We will use operating cash to pay for the scanners because they are an inexpensive capital acquisition.” Per corporate policy, the firm will depreciate this equipment over thirty months on a straight-line basis. Ashleigh added, “They’ll be useless at the end of that time, so we will scrap them.”    

               In your role as CFO, you insist that Zen maintain an ending monthly cash balance of $4,000 to maintain financial flexibility. The company has an open line of credit with its banking partner to ensure that it can meet its cash balance goal. This agreement mandates a 12% annual interest rate for all short-term borrowings. Financing must take place at the beginning of the month in thousand dollar multiples. Repayments of borrowing must also occur in thousand dollar increments, and the bank only accepts interest payments when Zen repays principal.    

Required:

Compose a memorandum to Zen’s management team that highlights the key aspects of the 2020 fourth quarter operating budget. Supplement your summary with budgetary schedules and attach them to the executive summary. The budgetary flow that you select is as follows:

• Cash collections

• Inventory purchases

• Cash disbursements for purchases

• Cash disbursements for operating expenses

• Short-term financing budget (collections, disbursements, and financing)

You construct each of the above budgets on a monthly and quarterly basis.

               Finally, you conclude your budgets with projected (pro-forma) monthly and quarterly income statements and a pro-forma balance sheet on December 31. The company has a zero percent income tax rate, due to previous tax losses.  

A particle with charge q= 7.80?C is moving with velocity v= -3.8 E 3 j [m/s]. The magnetic force is measured to be F= (+7.60 E -3 i - 5.20 E -3 k) [N].

1. Calculate the components of the magnetic field
2. Can there be components of the magnetic field that are not determined by the Force?
3. Calculate the vector dot product F*B, what is the angle between F and B?

In MatLab, using linprog:

3.8.Paul has 2200 per year to invest over the next five years. At the beginning of each year he can invest in one–, two–, and three–year deposits at interest rates of 8%, 17% (total) and 27% (total), respectively. If Paul reinvests his money available each year, how much should he invest in each of the three deposits each year so that his total cash at the end of the five years is a maximum?

Consider the formation of hydrogen fluoride:

H₂(g) + F₂(g) ↔ 2HF(g)

If a 3.8 L nickel reaction container (glass cannot be used because it reacts with HF) filled with 0.0054 M H₂ is connected to a 3.6 L container filled with 0.036 M F₂. The equilibrium constant, K_p, is 7.8 x 10¹⁴ (Hint, this is a very large number, what does that imply?) Calculate the molar concentration of HF at equilibrium.

3.8 Bright Horizons Skilled Nursing Facility, an investor-owned company, constructed a new building to replace its outdated facility. The new building was completed on January 1, 2015, and Bright Horizons began recording depreciation immediately. The total cost of the new facility was $18,000,000, comprising (a) $10 million in construction costs and (b) $8 million for the land. Bright Horizons estimated that the new facility would have a useful life of 20 years. The salvage value of the building at the end of its useful life was estimated to be $1,500,000. a. Using the straight-line method of depreciation, calculate annual depreciation expense on the new facility b.Assuming a 40 percent income tax rate, how much did Bright Horizons save in income taxes for the year ended December 31, 2015, as a result of the depreciation recorded on the new facility (i.e., what was the depreciation shield)? c.Does the depreciation shield result in cash or noncash savings for Bright Horizons? Explain.

3.8 Bright Horizons Skilled Nursing Facility, an investor-owned company, constructed a new building to replace its outdated facility. The new building was completed on January 1, 2015, and Bright Horizons began recording depreciation immediately. The total cost of the new facility was $18,000,000, comprising (a) $10 million in construction costs and (b) $8 million for the land. Bright Horizons estimated that the new facility would have a useful life of 20 years. The salvage value of the building at the end of its useful life was estimated to be $1,500,000.

Using the straight-line method of depreciation, calculate annual depreciation expense on the new facility

Assuming a 40 percent income tax rate, how much did Bright Horizons save in income taxes for the year ended December 31, 2015, as a result of the depreciation recorded on the new facility (i.e., what was the depreciation shield)?

Does the depreciation shield result in cash or noncash savings for Bright Horizons? Explain.

Test the null hypothesis H0:μ=3.8against the alternative hypothesis HA:μ<3.8, based on a random sample of 25 observations drawn from a normally distributed population with x¯=3.6 and σ=0.72.

a) What is the value of the test statistic?

Round your response to at least 3 decimal places.

b) What is the appropriate p-value?

Round your response to at least 3 decimal places.

c) Is the null hypothesis rejected at:

i) the 10% level of significance?      YesNoClick for List  

ii) the 5% level of significance?      NoYesClick for List  

Test the null hypothesis H0:μ=3.8against the alternative hypothesis HA:μ≠3.8, based on a random sample of 35 observations drawn from a normally distributed population with x¯=4 and σ=0.89.

a) What is the value of the test statistic?

Round your response to at least 3 decimal places.

b) What is the appropriate p-value?

Round your response to at least 3 decimal places.

c) Is the null hypothesis rejected at:

i) the 5% level of significance?      NoYesClick for List  

ii) the 10% level of significance?      NoYesClick for List