ABC Meat Processing, Inc. is considering an upgrade to their facilities. The CEO and largest shareholder of the company was recently inspired by the movie about Dr. Temple Grandin, and believes that implementing some of Dr. Grandin's designs could increase the efficiency and profitability of the company.

A task force of engineers and marketers was formed to analyse different designs. They have settled on their top recommendation, and have come to you for a financial analysis.

The upgrades are expected to last for 7 years. It is expected that the implementation of this design will increase the number of cattle that can be processed by 11,250 per year. The revenue generated by one head of cattle is expected to be $2,500 in the first year of the project; and the cost of one head of cattle is expected to be $1,350 in the first year of the project. The revenue and cost per unit are expected to increase at a constant rate of 2% annually for the life of the project.

The updgrades will cost $55 million and will be depreciated on a straightline basis over the 7-year economic life of the project. The project will also require an immediate investment in net working capital of $400,000 which will be recovered at the end of the project.

The company's marginal tax rate is 35%. Additionally, the company is financed entirely with equity, and the cost of equity r_e = 9%.

A.) What is the NPV of this project? Round your answer to the nearest dollar, and do not include symbols or commas in your answer. For example, write "$1,234,567.89" as "1234568".

B.) However: the CEO wants to finance the updgrades entirely with debt so as not to dilute his control of the company. Assuming this is possible and that the company could raise the $55 million with an issue of bonds priced to yield 5% and maturing in 7 years, the annual interest expense for each of the next 7 years would be $2.750 million.

What is the value of the project with leverage? Round your answer to the nearest dollar, and do not include symbols or commas in your answer. For example, write "$1,234,567.89" as "1234568".

Please use Excel financial functions or algebraic time value of money equations.

Prof. Business has a self-managed retirement plan through her University and would like to retire in 8years and wonders if her current and future planned savings will provide adequate future retirement income. Here’s her information and goals.

Prof. Business wants a 20-year retirement annuity that begins 8 years from today with an equal annual payment equal to $110,000 today inflated at 2% annually over 8 years. Her first retirement annuity payment would occur 8 years from today. She realizes her purchasing power will decrease over time during retirement.

Prof. Business currently has $640,000 in her University retirement account. She expects these savings and any future deposits into her University and any other retirement account will earn 7.5% compounded annually. Also, she expects to earn this same 7.5% annual return after she retires.

Answer the following questions to help Prof. Business finalize her retirement planning.

1.What is Prof. Business’ desired annual retirement income?

2.How much will Prof. Business need 8 years from today to fund her desired retirement annuity?

3.In addition to the $640,000 balance today, Prof. Business will fund her future retirement goal from question 2 by making 8 annual equal deposits at 7.5% compounded annually into her retirement accounts starting a year from today (the last deposit will be made when Prof. Business retires). How large does this annual deposit need to be in addition to the initial $640,000 invested in Prof. Business’ retirement fund?

4.This annual figure from #3 is morethan the Prof.’s current annual contribution, which makes her feel a little anxious about her future planned retirement. Also, Prof. Business’ annual retirement account contribution is based on a percentage of her salary and will increase as her salary increases. So, let’s re-plan her retirement income. Let’s account for the fact that her and the University’s contributions to Prof. Business’ University retirement plan are based on a certain percentage of her salary and will increase as her salary increases. Based on this formula, her first upcoming end of the year deposit will be $20,200 and let’s assume that her annual deposit and salary will grow at a 2% annual rate over the remaining 7 years (8 total deposits) to Prof. Business’ retirement. These deposits are in addition to the $640,000 she currently has today in the University retirement plan. Answer the following based on these assumptions. a)How much money will Prof. Business have in her retirement account immediately after her last deposit 8 years from today? b)What would be the equal annual payment from her 20-year retirement annuity whose first payment occurs exactly 8 years from today?

Analyzing Foreign Currency Hedges

The Arizona Company, a U.S.-based manufacturer, ordered a piece of equipment from Sonora Inc., a Mexico-based supplier, agreeing to pay 300,000 Mexican pesos upon delivery of the equipment in three months time. At the time of the contract signing, the exchange rate between the U.S. dollar and the Mexican peso was 10P:$1.

With concerns about a weakening U.S. dollar, The Arizona Company decided to hedge its currency exposure by purchasing a forward foreign exchange contract from a local bank.

The forward contract committed The Arizona Company to pay $30,300 in three months in exchange for 300,000 pesos.

What was the forward foreign exchange rate implicit in the contract (assuming no transaction costs)?

Round to two decimal places. Hint - provide the number of Pesos to each US$.

1.) __________________

If the foreign exchange rate in three months was 9.8P:$1, how much did The Arizona Company save by purchasing the currency hedge?

Round to the nearest dollar.

2.) ________________

If the foreign exchange rate in three months was 9.0P:$1?, how much did the company save by purchasing the currency hedge?

Round answer to the nearest dollar.

3.) __________________

1. The year is 1999 and the Ethical Pharmaceutics Company has just received FDA approval for high risk angioplasties and is bringing AngioMin to the market early January 2000 at the price of $200. The cost of manufacturing a single dose of AngioMin is $40. The key benefit of AngioMin is reduced side effects, complications, and risk of death following angioplasty. These benefits are most pronounced in the very high risk patients. Ethical Pharmaceutics Company’s marketing department decided to focus on the top 100 hospitals in the US where 80% of angioplasties are performed. In 2000 there will be 700,000 angioplasties and this number is expected to grow at 5% each year. 50% of all angioplasties are high risk and 20% of high risk angioplasties fall into the “very high risk” category. Ethical Pharmaceutics Co. is planning an aggressive marketing campaign to get on hospital formularies because (1) AngioMin’s patent protection will expire in late December 2010, after which point sales would immediately go to zero, (2) while there is no chance a better substitute will enter the market in 2000, Ethical Pharmaceutics Co. management estimates a 20% probability for each year 2001-2010, that a new significantly better than AngioMin drug will be brought to market and will replace AngioMin in any hospital that was using AngioMin at the time. Please help the Ethical Pharmaceutics Co. management determine the maximum total marketing budget for an average top hospital for educating, sponsoring travel to continuing-medical-education conferences in Hawaii, wining and dining hospital administrators, doctors, nurses, pharmacists, and their families to get AngioMin on the hospital formulary. (These practices are currently disallowed in the industry based on the voluntary pharmaceutical industry guidelines covering direct-to-physician marketing practices, but were fully acceptable and were widely used in the industry in the 1990s to early 2000s).

Please help the Ethical Pharmaceutics Co. marketing team estimate

a) CLV (customer lifetime value) of an average top hospital acquired in 2000, assuming that all high risk patients will get 1.5 doses of AngioMin during the angioplasty procedure

b) CLV of an average top hospital acquired in 2000, assuming that only very high risk patients will receive AngioMin (on average 1.5 doses will be needed per procedure)

c) To help the marketing team communicate the time value of acquiring hospitals as early as possible, calculate the net present value in 2000 of an average top hospital acquired in 2005. Assume that this hospital would administer AngioMin only to very high risk patients (on average 1.5 doses). Note that this is only possible if the new better substitute is not brought to market by 2005 and make sure that your calculations reflect this fact.

i dont need copy paste or handwritten anwers.

Ethics in Accounting

Effective financial reporting depends on sound ethical behavior. Financial scandals in accounting and the businesses world have resulted in legislation to ensure adequate disclosures and honesty and integrity in financial reporting. A sound economy is contingent on truthful and reliable financial reporting.

Instructions:

• Read the following scenario.
• Answer the questions that follow. (1-2 paragraphs per question)
• Reference back to your text book for guidance on how to think through the scenario.

Scenario:

Imagine you are the assistant controller in charge of general ledger accounting at Linbarger Company. Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance be maintained at $200,000 or more, as reported monthly. At June 30, the cash balance is $80,000. You give this update to Lisa Infante, the financial vice president. Lisa is nervous and instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Lisa says, “If we don’t get that cash balance over $200,000, we’ll default on our loan agreement. They could close us down, put us all out of our jobs!” Lisa continues, “I talked to Oconto Distributors (one of Linbarger’s largest customers) this morning. They said they sent us a check for $150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!”

Questions:

1. What is the accounting problem that the Linbarger Company faces?
2. What are the ethical considerations in this case? Provide rationale for why these are ethical considerations.
3. What are the negative impacts that can happen if you do not follow Lisa Infante’s instructions to wait one more day to post the balance?
4. Who will be negatively impacted if you do comply? Provide a rationale for why these individuals will be impacted.
5. What is one alternative that you could pursue in this scenario? Support your recommendations with information you learned in this class.

Lease conversion from operating to corporation:

A company has borrowing cost of about 4% in 2014 and lease balance $4,300.

Please calculate the payment, discount factor, PV, interest, lease obligation and lease balance. (show work please)

1. The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable income $430,000

1. Excess tax depreciation will reverse equally over a four-year period, 2021-2024.

2. It is estimated that the litigation liability will be paid in 2024.

3. Rent revenue will be recognized during the last year of the lease, 2024.

4. Interest revenue from the New York bonds is expected to be $20,000 each year until their maturity at the end of 2024.

(c)   Since this is the first year of operations, there is no beginning deferred tax asset or liability. Compute the net deferred tax expense (benefit).

(d)   Prepare the journal entry to record income tax expense, deferred taxes, and the income taxes payable for 2020.

Update the balance sheet above to reflect the transactions below, which occur on January 6, 2020

1. Buy $15,000 worth of manufacturing supplies on credit
2. Issue $85,000 in stock
3. Borrow $63,000 from a bank
4. Pay $5,000 owed to a supplier
5. Receive payment of $12,000 owed by a customer
6. Purchase equipment for $44,000 in cash
7. Pay $7,000 owed to a supplier

What is the final amount in Accounts Receivable?

Note: Transaction amounts are provided in dollars but the balance sheet units are thousands of dollars.

Please specify your answer in the same units as the balance sheet (i.e., enter the number from your updated balance sheet).

At the end of its fiscal year 2019, an analyst made the following forecast for ABC, Inc. (in millions of dollars):

ABC has a net debt of $823. Assume that free cash flow will grow at 4 percent per year after 2023. ABC had 300 million shares outstanding at the end of 2019, trading at $75 per share. Using a required return of 10 percent, calculate the following for ABC at the end of 2019 (You have to fill in the table below to show your working process):

1. The enterprise value                                                                          

[5 marks]

2. Equity value                                                                                       

[2 marks]

3. Equity value per share                                                                                   

[2 marks]

4. Based on your estimate, should investors buy the share of this company?

[1 mark]