In: Accounting
Assume Dell's annual inventory holding cost is 40% to account for the cost of capital for financing the inventory, the warehouse space, and the cost of obsolescence. In 2001, Dell's 10-K reports showed that the company had $400 million in inventory and COGS of $26,442 million.
a) What is the per-unit inventory cost of Dell?
b) What Dell has to pay for holding a laptop that is worth $1000 in
cost value?
In: Operations Management
a proposed cost-saving device has an installed cost of 725000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is 135000, the marginal tax rate is 21 percent, and the,project discount rate is 13 percent. The,device has an estimated Year 5 salvage value of 98000. what level of pretax cost saving do,we require for this project to be profitable?
yr
3
yr
5
yr
7 yr
1.
33.33. 20.
00 14.29
2.
44.45.
32.00. 24.49
3.
14.81.
19.20. 17.49
4.
7.41.
11.52. 12.49
5.
11.52. 12.49
6.
5.76.
8.93
7.
8.93
8.
4.46
pretax cost savings
In: Finance
A delivery car had a first cost of $32,000, an annual operating cost of $15,000, and an estimated $6000 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 2 years and must be sold now as a used vehicle. At an interest rate of 11% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle?
In: Economics
a delivery car had a first cost of $30000, an annual operating cost of $15000, and an estimated $4500 salvage value after its 6 year life. Due to an economic slowdown, the car will be retained for only 2 years and must be sold now as a used vehicle. At an interest rate of 10% per year, what must the market value of the 2-year-old vehicle be in order for its AW value to be the same as the full 6-year life cycle?
In: Economics
|
The Cost of Capital: Cost of New Common Stock If a firm plans to issue new stock, flotation costs (investment
bankers' fees) should not be ignored. There are two approaches to
use to account for flotation costs. The first approach is to add
the sum of flotation costs for the debt, preferred, and common
stock and add them to the initial investment cost. Because the
investment cost is increased, the project's expected return is
reduced so it may not meet the firm's hurdle rate for acceptance of
the project. The second approach involves adjusting the cost of
common equity as follows: Quantitative Problem: Barton Industries expects
next year's annual dividend, D1, to be $2.50 and it
expects dividends to grow at a constant rate g = 4.5%. The firm's
current common stock price, P0, is $24.30. If it needs
to issue new common stock, the firm will encounter a 5.5% flotation
cost, F. Assume that the cost of equity calculated without the
flotation adjustment is 12% and the cost of old common equity is
11.5%. What is the flotation cost adjustment that must be added to
its cost of retained earnings? Round your answer to 2 decimal
places. Do not round intermediate calculations. What is the cost of new common equity considering the estimate
made from the three estimation methodologies? Round your answer to
2 decimal places. Do not round intermediate calculations. |
In: Finance
The financial analyst at Company ABC gathered cost information for one element of the cost of its high performance widgets. In January, when ABC made 100 units, the cost was $8,000. In February when ABC made 140 units, the cost was $10,560. Which of the following is true?
a. The cost is a fixed cost.
b. The cost is a variable cost
c. The cost is a mixed cost.
d. The cost was a fixed cost in January and a variable cost in February.
In: Accounting
I understand that it is smart to isolate relevant cost sometimes instead of total cost, but how do you know when it is more efficient to isolate relevant cost sometimes?
In: Accounting
Determining the Cost of Capital: Cost of New Common Stock
If a firm plans to
issue new stock, flotation costs (investment bankers' fees) should
not be ignored. There are two approaches to use to account for
flotation costs. The first approach is to add the sum of flotation
costs for the debt, preferred, and common stock and add them to the
initial investment cost. Because the investment cost is increased,
the project's expected return is reduced so it may not meet the
firm's hurdle rate for acceptance of the project. The second
approach involves adjusting the cost of common equity as
follows:
L
The difference between the flotation-adjusted cost of equity and
the cost of equity calculated without the flotation adjustment
represents the flotation cost adjustment.
Quantitative
Problem: Barton Industries expects next year's annual
dividend, D1, to be $2.00 and it expects dividends to
grow at a constant rate gL = 4%. The firm's current
common stock price, P0, is $21.90. If it needs to issue
new common stock, the firm will encounter a 4.9% flotation cost, F.
Assume that the cost of equity calculated without the flotation
adjustment is 12% and the cost of old common equity is 11.5%. What
is the flotation cost adjustment that must be added to its cost of
retained earnings? Round your answer to 2 decimal places. Do not
round intermediate calculations.
%
What is the cost of
new common equity? Round your answer to 2 decimal places. Do not
round intermediate calculations.
%
In: Finance
Discuss the components of cost to a performance evaluation. Do you feel the cost is justified?
In: Operations Management