MBA-AC721 Project Part 2 Create the 2018 budget for Buy-Right Bike Store (BRBS). Add a worksheet to your Project Excel workbook for BRBC Budgeted Income Statement and create the 2018 budget using the following information.

Budgeted Sales of Bike C: Online 75,000 bikes; instore 5,000 bikes. Bike C is purchased from Built-Right Bike Company, a sister company in the Biltmore Bicycle Corporation (BMBC), for $52 and is sold for $104.

Inventory: Beginning inventory: $ 52,000

Purchases 4,108,000

Sales ?

Ending Inventory $ 52,000

Employees:

Managerial Staff: Manager: 1 FTE, $45,000 annual salary plus 20% benefits

Bookkeeper: 1 FTE, $40,000 annual salary plus 20% benefits

Purchasing & Receiving Supervisor: 1 FTE, $35,000 annual salary plus 20% benefits Other staff: Warehouse: 2.5 FTEs make $15 per hour plus 17% benefits Online sales staff: 2 FTEs, $15 per hour plus 17% benefits (no commission)

NOTE: 1 FTE = 2080 hours

Store Hours: Monday – Saturday 10:00 am – 6:00 pm

2 sales clerks work from 10-3 M-F

3 sales clerks work from 3-6 M-F

4 sales clerks work 10-6 on Saturdays

Sales clerks earn $15 per hour plus 17% benefits Instore sales staff share commission equal to 10% of instore sales.

Budgeted Utility cost: $13,200

Budgeted Marketing Cost: $175,000

Contributions & community service: 10% of instore revenue

Other costs (includes depreciation, insurance, etc): $1,300,000

Income tax 29% of Net Revenue

Roger and Zoë spend their vacation time at a nice cottage that they own in the countryside. Farmer Torti lives next door and normally lets his twelve sheep graze in his field. The sheep eat so quickly that it causes them to burp loudly, a very disruptive sound for Roger and Zoë vacationing next door. Torti is willing to remove sheep from the field when Roger and Zoë are there, but his marginal cost of doing so is $1 for the first sheep he removes, $2 for the second sheep, $3 for the third, etc. Roger and Zoë derive a (combined) marginal benefit of $12 for the first sheep Torti removes, $11 for the second sheep he removes, $10 for the third sheep he removes, etc.

a. Calculate the efficient number of sheep in the field if Roger and Zoë stay at the cottage.

b. Calculate the maximum amount Roger and Zoë would be willing to pay Torti to reduce his sheep to the efficient number.

c. Calculate the minimum amount Torti would be willing to accept to reduce his sheep to the efficient number

d. Calculate the range of prices per sheep that Roger and Zoë could pay Torti to achieve the efficient number.

A sound barrier built between the two properties could block 50 percent of the burping sound.

e. Calculate the efficient number of sheep in the field if there were a sound barrier and if Roger and Zoë stay at the cottage.

f. Calculate the total benefit to Roger and Zoë if the sound barrier were there and the corresponding efficient number of sheep were in the field.

g. Calculate the total cost to Torti if the sound barrier were there and the corresponding efficient number of sheep were in the field.

h. Calculate the maximum amount Roger and Zoë would be willing to contribute to the construction of the sound barrier.

i. Calculate the maximum amount Torti would be willing to contribute to the construction of the sound barrier.

Sunburst Veggies is a vertically-integrated company which both grows[1] and processes organic vegetables. Their company-grown vegetables are canned and then sold wholesale to grocery stores. The company began their operations in San Marcos, Texas in the mid-1990s and the corporate headquarters remain there. Sunburst grows a wide variety of organic (non-GMO) vegetables in greenhouses, some of which cover more than 200 acres. The vegetables are shipped from manufacturing facilities near the greenhouses. This assures the vegetables are processed as quickly as possible after being picked which inspired the company’s marketing tag line: “fresh from the field.”

Consumer demand for organically-grown vegetables has increased tremendously since Sunburst began operations 10 years ago. Gross revenues have increased 500% since year 1. The firm now has five greenhouses and processing plants in locations near the following cities: Sacramento, CA; San Marcos, TX; Baton Rouge, LA; Montgomery, AL; and Jacksonville, FL. They employ nearly 600 people.

Potential Sites: Sunburst is at maximum capacity in all locations and must add another greenhouse and processing plant in order to continue their sales growth to new customers (and to assure they have no out-of-stock issues for existing customers). Both the greenhouse operations for growing the vegetables and the canning facility require large volumes of fresh water. It is essential to locate near an interstate highway because all shipments are shipped via semi-trucks.

Two sites are being considered near the towns of Gulfport, Mississippi and Little Rock, Arkansas. Because of extensive damage caused in Gulfport by Hurricane Katrina in August 2005 (and more recently by Hurricane Harvey), the cost of real estate in that area is significantly lower than in Little Rock.

Estimated Operating Costs: Estimates of operating costs for the two locations are as follows:

                                                                                        Gulfport             Little Rock

         Life of greenhouse & processing plant                        50 years                  50 years

         Expected annual sales (# cases)                                   300,000                  300,000

         Selling price (average per case)                                         $90                         $90

         Variable costs (average per case)                                  $60.00                    $60.00

         Fixed Costs (annual):

       Salaries & fringe benefits (labor is higher in L.R.)   $1,300,000              $1,500,000

       Depreciation* (see calculations on pg. 2)                   $455,000                $485,000        

       Other fixed costs                                                      $655,000                $655,000

         Total Fixed Costs                                                  $2,410,000              $2,640,000

*Straight-line depreciation on buildings is over 50 years, based on the initial investment with -0- salvage. Equipment is depreciated using straight-line over 20 years with -0- salvage value. Land is not depreciated. Calculations have been simplified more than would be in business (only for use in this problem).

Estimated Capital Investment: Sunburst owns some used greenhouse equipment that they could transfer from one of their existing locations to either Gulfport or Little Rock. The book value of that equipment is $1,900,000 and requires some modifications up-front (cost of $300,000) to get it ready for use in either location. They already own some used manufacturing equipment that can be transferred to either new location; this has a book value of $1,000,000 (and, does not require any modification). Both types of equipment have been sitting idle (unused) for the past year. There is no other alternate use for the equipment.    The summary of estimated initial capital investment in each of the two locations follows:

                                                                               Gulfport                      Little Rock

         Land                                                            $4,000,000                       $7,500,000

         Greenhouse Buildings                                   $3,500,000                       $4,000,000

         Manufacturing Building                              $10,000,000                     $11,000,000

                    Sub-total for Buildings                     $13,500,000                     $15,000,000

         Greenhouse Equipment (used):

              Book value (transferred)                           $1,900,000                       $1,900,000

              Modifications (up-front)                              $300,000                         $300,000

         Manufacturing Equipment (used):

              Book Value (transferred)                          $1,000,000                       $1,000,000

         Other equipment (to be capitalized)                  $500,000                         $500,000

                    Sub-total for Equipment                     $3,700,000                       $3,700,000        

              Total                                                     $21,200,000                     $26,200,000

Depreciation Calculations (as shown in *total on previous page):

Gulfport Buildings              $13,500,000 / 50 years = $270,000  

Gulfport Equipment              $3,700,000 / 20 years = $185,000

                             Total Depreciation – Gulfport = $455,000

Little Rock Buildings                                                 $15,000,000 / 50 years = $300,000

Little Rock Equipment                                                 $3,700,000 / 20 years = $185,000

                                                                Total Depreciation – Little Rock = $485,000

Other Relevant Information:

Minimum desired rate of return is 11%.

All current locations are earning an average 14% return on sales.

Payback period for all prior capital investments has been not more than 3.75 years.

For simplicity, assume there are no income taxes.

REQUIREMENT #1 - QUANTITATIVE ANALYSIS (MUST be in Excel & use Excel functionality for ALL calculations):

Prepare an Income Statement in the Contribution Margin format for each location.

Identify which of the items on the Income Statement are “relevant” for each location.

Calculate Breakeven Point (in Sales Dollars) for each location

REQUIREMENT #2 – RECOMMENDATION & QUALITATIVE FACTORS: (MUST be in Word and must use 1-inch margins on all sides and Times Roman 12-point font.)

Based on the quantitative analysis, which location would you recommend and why?

Would your recommendation change based on qualitative factors? These might include available workforce, logistical considerations, risk from weather events, potential impact of global warming. Students must do some research of their own to identify the difference in such factors for the two locations. Because qualitative factors cannot be quantified, how would you evaluate the importance of such non-financial items?

Do the qualitative factors impact your recommendation? If “yes,” in what way?

- Dont worry about excel file not being attached. I only need help with qualitative analysis.(#2 of the question).

1.

CASE STUDY

Australian Motor Execs (AME) is set up as a proprietary company and is considering whether to enter the discount rental car market in Tasmania. This project would involve the purchase of 100 used, late model, mid-sized cars at the average price of $18,000. In order to reduce their insurance costs, AME will have a LoJack Stolen Vehicle Recovery System installed in each car at a cost of

$1,500 per vehicle. The rental car operation projected by AME will have two locations: one near Hobart airport and the other near Launceston airport. At each location, AME owns an abandoned lot and building where it could store its vehicles. If AME does not undertake the project, the lots can be leased to an auto-repair company for $90,000 per year (total amount for both lots). The $25,000 annual maintenance cost (total for both lots) will be paid by AME whether the lots are leased or used for this project. This discount rental car business is expected to have minimum impact on AME’s regular car rental business in Tasmania, where the net cash flow is expected to fall by only

$20,000 per year.

For taxation purposes, the useful life of the cars is determined to be five years and they will be depreciated using the most advantageous depreciation method set out by the Income Tax Assessment Act. It is assumed that the cars will first be used at the beginning of the next financial year: 1 July 2018.

Before starting this new operation, AME will need to redevelop and renovate the buildings at each airport location. This is expected to cost $220,000 for both locations. AME has also budgeted

$80,000 in marketing costs that will be spent prior the start of operation and during the first two years of operation. In addition, if the project is undertaken, a total new injection of $150,000 in net working capital will be required.

Maeve, the company CFO would like you help her examine the viability of the project for the next five years taking into account the projections of sales and operating costs prepared by AME’s accountants. Given the risk associated with the project, she believes it is reasonable to use a cost of capital of 12% for the evaluation of this project. Further financial data relating to the project can be found in the appendix.

*Question1. Discuss which costs are relevant for the evaluation of this project and which costs are not. Your discussion should be justified by a valid argument and supported by references to appropriate sources.

APPENDIX: Additional information for the case

Initial capital expenditure

Acquisition of the car fleet (including LowJack system): $18,000 + $1,500 per vehicle

Renovation of building at airport locations :$220,000

Injection of net Working capital $150,000

For tax purposes, the cars (including the LowJack system) may be depreciated using either the prime cost or the diminishing value methods as set out in Division 40 of the Income tax Assessment Act (ITAA) 1997. The economic life of 5 years has been approved by the Commissioner of taxation. Maeve indicated to you that the company will retain the method that is the most advantageous to the company from a financial point of view.

Assume that AME is not able to claim any tax deduction for the capital expenditure relating to the renovation of the building until the business is sold. At that time the cost of renovation is taken into account to calculate the capital gain.

Marketing costs

The $80,000 marketing costs will be incurred as follows:

$40,000 immediately before the launch of the new operation (1/7/2018)

$20,000 at the beginning of year 2 (1/7/2019) i.e. end of year 1

$20,000 at the beginning of Year 3 (1/7/2020) i.e. end of year 2

These costs are fully tax deductible in the year they are incurred (assume calendar year).

Revenue projections

Revenue projections from car rental for the next five years are as follows

Operating costs

Operating variable costs associated with the new business represent 10 % of revenue. Annual operating fixed costs (excluding depreciation) are $1800 per vehicle.

Existing administrative costs are $550,000 per annum. As a result of the new operation these administrative cost will increase by 20 %.

Tax rate

The company is subject to a tax rate of 27.5% on its profits. The capital gain (if any ) on the sale of the business would also be taxed at 27.5%.

1- A mother and newborn baby both need blood transfusions. The father is not currently available for typing and donation. Mother is type O negative and baby is type O positive.

The father of the baby must be Rh
. The mother
safely donate blood to the baby. The father arrives later and after typing his blood its concluded that he can safely donate to his baby - which means that his blood type is
.

2- A mother and newborn baby both need blood transfusions. The father is not currently available for typing and donation. Mother is type O negative and baby is type O positive.

Use Punnett Squares to figure out what the fathers possible genotype(s)? Pick all that apply.

Group of answer choices

OO

AA

BO

AB

BB

AO

3- Why are X-linked recessive genetic disorders more commonly seen in males?

Group of answer choices

For an X-linked disorder to occur, an individual must receive one allele only found on the X chromosome and a second allele found only on the Y chromosome, which females do not have.

Females only have X chromosomes, and genes on the X chromosome are not expressed.

Females must receive two copies of the recessive allele to exhibit the disorder, but males need only one copy.

The alleles of sex-linked genes are carried only on the Y chromosome, which females do not have.

4- A sugar molecule, phosphate group and one of four nitrogenous bases make up this structure which is found in DNA.

Group of answer choices

RNA

nucleotide

base pair

5- What type of macromolecule is DNA?

Group of answer choices

protein

carbohydrate

nucleic acid

lipid

6- What type of RNA specifies the order of amino acids in a protein using a series of three base codons?

Group of answer choices

tRNA

mRNA

rRNA

7- What type of RNA is responsible for bringing the correct amino acid to the ribosome by pairing its’ three base anti-codon with a complementary codon on another RNA molecule?

Group of answer choices

mRNA

tRNA

rRNA

8- The chromosome theory of inheritance states what?

Group of answer choices

all genes are located on chromosomes

all chromosomes are located on genes

all DNA is made of only of genes

9- During transcription what occurs?

Group of answer choices

a strand of RNA is made from a template strand of DNA

a strand of DNA is made from a template strand of RNA

a protein is built
10- During translation what occurs?

Group of answer choices

a protein is built at the ribosome using mRNA

a strand of RNA is made from a template strand of DNA

a protein is built in the nucleus using DNA

QUESTION 2:

S.B.Consult Ltd, recognized as the leader in hospital supplies, has received an invitation to supply FBC, ECG, and dental machines to Justab Hospital in Kasoa. The contract will be for 10 years, and management is considering appraising the investment to enable them present their proposals for the contract. The following information was extracted from the recently published accounts of S.B. Consult Ltd.

The Treasury unit of S.B.Consult Ltd has estimated that it will require GH¢ 10 million to finance the new project. The total amount would be raised through 10% Irredeemable bonds at the current market price. The cost of Preference shares and Bonds will not change but equity shareholders will demand an increase of 20% on the current cost of equity.

S.B.Consult Ltd has a beta of 0.8, the market risk premium for the steel industry is 6.25%, and the Government of Ghana Bond rate is 20%. The current market price for Irredeemable Bonds of GH¢1,000 nominal value is GH¢850.

S.B. Consult Ltd’s dividend policy is to pay constant dividend and this policy will not change into the foreseeable future. The recent dividend paid was GH¢20 per share. S.B. Consult Ltd is a Free Zones Company and therefore pays tax at a rate of 8%.

Required:

i) Calculate the current market capitalization of S.B. Consult Ltd.                    

(Hint: ?=??+ ? (??−??))

QUESTION 3:

Boateng Plaza Ltd, a hotel leisure company, is currently considering taking over a smaller private limited company, Badin Ltd. The board of Boateng Plaza is in the process of making a bid for Badin Ltd but first needs to place a value on the company.

Boateng Plaza has gathered the following data:

The company’s earnings yield is 12%.

Required:

i) As a Finance Manager, calculate the value of the company based on the present value of expected earnings.                                                                                                            

ii) Explain THREE problems associated with using P/E method for valuing firms.           

It's a complete question, Sir

As a consultant specializing in economics, you have been hired by the small island nation of Petrolo. Although Petrolo’s landmass is small (about the size of Florida), it enjoys enormous oil reserves that rank number five in the world for high grade petroleum. To date Petrolo has not found it necessary to drill into its substantial but at a higher production cost of offshore reserves that are within the 18 mile territorial limit. Petrolo has prospered by pumping enough onshore oil to allow its government to provide handsome social benefits and low taxes to its population while maintaining full employment. Although its only industry is crude oil supply, the country enjoys one of the highest standards of living in the world. Unfortunately, the industrial economies of the world have slowed tremendously in petroleum consumption; world demand for oil is now at a 25 year low; oil prices are at about 30% of what they were a year ago. Today a barrel of oil is selling for $40 while Petrolo’s current average cost of pumping oil is $50 per barrel. As the special consultant to the President, you have been asked to evaluate the economic impact of four options and make a specific recommendation for what the country should do. The options are: Option 1: Stop pumping until the market price reaches at least the extraction cost of $50 a barrel. Option 2: Keep pumping to provide some cash flow. Option 3: Sell offshore licenses to private international companies, which would pay a royalty of $15 per barrel with all extraction costs borne by the licensees. Option 4: Prepare a bond to finance entry into the leisure market with high-end hotels, casinos and entertainment venues. Although this would restrict drilling operations to southern half of the island, the northern end of Petrolo could become a magnificent tourism venue for the world’s wealthy. Tax-free operations for the first ten years of operations for major hotel/casino operations would entice investment. Assignment Prepare a 4 - 6 page paper that uses 2 or more sources, adheres to APA standards and addresses the following: For each of the four options, identify three (3) potential economic impacts considering both possible benefits and downsides and implications for Petrolo’s government and citizens. Based on your analysis and research, make one or more specific recommendations to address the issue.

1) Which of the following is included in the cost of land?

A) The cost of fencing

B) The cost of paving

C) The cost of clearing the land

D) The cost of outdoor lighting

2) Which of the following is included in the cost of a plant asset?

A) Amounts paid to ready the asset for its intended use

B) Regular maintenance cost

C) Normal repair cost

D) Wages of workers who use the asset

3) A company purchased a used machine for $80,000.  The machine required installation costs of $8,000 and insurance while in transit of $500.  At which of the following amounts would the equipment be recorded?

A) $80,500

B) $88,500

C) $88,000

D) $80,000

4) Acme Investments plans to develop a shopping center.  In the first quarter, they spent the following amounts:

What amount should be recorded as the land improvements cost?

A) $7,200

B) $101,200

C) $46,200

D) $106,200

5) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000.  The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000.  The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

What is depreciation expense for 2013 if the company uses double-declining-balance depreciation?

A) $6,667

B) $6,000

C) $13,333

D) $12,000

6) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000.  The company expects to use the machine a total of 24,000 hours over the next 6 years.  The estimated sales price of the machine at the end of 6 years is $4,000.  The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

What is depreciation expense for 2013 if the company uses straight-line depreciation?

A) $6,667

B) $13,333

C) $12,000

D) $6,000

7) On January 1, 2013, Zane Manufacturing Company purchased a machine for $40,000.  The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2013 and 12,000 in 2014.

What is depreciation expense for 2013 if the company uses units-of-production depreciation?

A) $6,000

B) $13,333

C) $6,667

D) $12,000

8) Charterhouse Services purchased a van on January 1, 2012, for $56,000.  It has an estimated life of 5 years, and an estimated salvage value of $6,000.  Charterhouse uses straight-line depreciation.  At the end of 2013, what was the book value of the asset?

A) $36,000

B) $30,000

C) $36,000

D) $12,000

9) A plant asset is sold for $1,000.  The original cost was $9,000, salvage value was estimated at $200, and useful life was estimated at 12 years.  At time of sale, accumulated depreciation was $8,500.  The sale resulted in a gain of $500. (T/F)

10) An asset was purchased for $12,000. The asset's estimated useful life was 5 years, and its residual value was $2,000.  Straight-line depreciation was used.  How much gain or loss is reported if the asset is sold for $4,500 at the end of the third year?

A) $1,500 gain

B) $2,000 loss

C) No gain or loss

D) $1,500 loss

Explain the tradeoff between setup cost and carrying cost.