You are asked to conduct a five-year economic feasibility study of an e-commerce site for a small office supply company. Due to construction time, the system will only be in operation for 6 months for the current year (Year 1). Once the system is in operation, you expect to reduce staff cost by $37,000 and to reduce printing/postage cost by $12,000 for a full year of operation between year 1 and year 3. The numbers will be $38,000 and $15,000, respectively, for year 4 and year 5.
New computer and software costs $6,000, and the cost of system development is estimated at $87,500. The software license and the cost of hiring/training a part-time operator is totaled $8,000 per full year of operation between year 1 and year 3. The same cost is estimated to be $9,000 for year 4 and 5.
1.) Calculate the NPV for the above project assuming a discount rate of 6%. Is there a break-even point in the first five years? If so, when? What is the ROI for the project? Make sure to prorate the appropriate system costs and benefits for Year 1. Make a spreadsheet showing all years.
2.) What is the impact on NPV if the discount rate is 9% instead? Does the NPV decreases with higher discount rate? Why or why not? Paste another copy of the spreadsheet.
3.) Use Goal Seek feature of Excel to find out the amount of the development cost that would make the NPV zero for the project.
In: Finance
Implement the Nickel class. Include Javadoc comments for the class, public fields, constructors, and methods of the class.
I have added the Javadoc comments but please feel free to format them if they are done incorrectly.
public class Nickel implements Comparable {
private int year;
/**
* The monetary value of a nickel in cents.
*/
public final int CENTS = 5;
/**
* Initializes this nickel to have the specified issue year.
*
* @param year
*
* @pre. year must be greater than or equal to 1858
*/
Nickel (int year){
}
/**
* Returns the issue year of this coin.
* @return
*/
public int issueYear() {
}
/**
* Compares this nickel to the specified object for equality. The result is true if obj
* is a nickel. The issue year is not considered when comparing two nickels for equality.
*
* @param obj
*
* @return
*/
public boolean equals(Object obj) {
}
/**
* Returns a hash code for this nickel. Specifically, this method returns the issue year of this nickel.
*/
public int hashCode() {
}
/**
* Compares this nickel to another nickel by their issue year.
* The result is a negative integer if this nickel has an earlier issue year than
* the other nickel, a positive integer if this nickel has a later issue year than
* the the other nickel, and zero otherwise. Specifically, this method returns the
* difference of the issue year of this nickel and the issue year of the other nickel.
*
* @param other
*
* @return
*/
@Override
public int compareTo(Nickel o) {
}
}
In: Computer Science
Sutter Lakeside Hospital, a taxpaying entity, is considering a new ambulatory surgical center (ASC). The building and equipment for the new ASC will cost $5,500,000. The equipment and building will be depreciated on a straight-line basis over the project’s five-year life to a $2,500,000 salvage value. The new ASC’s projected net revenue and expenses are as follows. Net revenues are expected to be $5,000,000 the first year and will grow by 9 percent each year thereafter. The operating expenses, which exclude interest and depreciation expenses, will be $4,500,000 the first year and are expected to grow annually by 3 percent for every year after that. Interest expense will be $700,000 per year, and principal payments on the loan will be $1,000,000 a year. In the first year of operation, the new ASC is expected to generate additional after-tax cash flows of $600,000 from radiology and other ancillary services, which will grow at an annual rate of 5 percent per year for every year after that. Starting in year 1, net working capital will increase by $350,000 per year for the first four years, but during the last year of the project, net working capital will decrease by $250,000. The tax rate for the hospital is 40 percent, and its cost of capital is 15 percent. Use both the NPV and IRR approaches to determine if this project should be undertaken. (Hint: see Appendices C, D, and E.)
In: Finance
Huntington Manufacturing manufactures a single product that it will sell for $83 per unit. The company is looking to project its operating income for its first two years of operations. Cost information for the single unit of its product is as follows:
| direct material per unit produced | $33 |
| Direct labor cost per unit produced | $13 |
| Variable manufacturing overhead (MOH) per unit produced | $7 |
| Variable operating expenses per unit sold | $3 |
Fixed manufacturing overhead (MOH) for each year is $294,000, while fixed operating expenses for each year will be $82,000.
During its first year of operations, the company plans to manufacture 21,000 units and anticipates selling 14,000 of those units. During the second year of its operations, the company plans to manufacture 21,000 units and anticipates selling 25,000 units (it has units in beginning inventory for the second year from its first year of operations).
1. Prepare an absorption costing income statement for:
a.Huntington 's first year of operations
b.Huntington 's second year of operations
Huntington Manufacturing Income Statement (Absorption Costing)
| (a) year 1 | (b) year 2 | |
| less: | ||
| less: | ||
2. Before you prepare the variable costing income statements for
Huntington, predict the company's operating income using variable
costing for both its first year and its second year without
preparing the variable costing income statements. Hint: Calculate
the variable costing operating income for a given year by taking
that year's absorption costing operating income an adding or
subtracting the difference in operating income as calculated using
the following formula:
Difference in operating income = (Change in inventory level in
units x Fixed MOH per unit)
Begin by calculating the difference in income each year using the formula provided.
| Change in Inventory | Fixed MOH | Difference In | |||
| year | level in units | x | per unit | = | operating income |
| 1 | x | = | |||
| 2 | x | = |
Now predict Huntington 's operating income under variable costing for both its first year and its second year of operations.
| operating income | |
| year | under variable costing |
| 1 | |
| 2 |
3. Prepare a variable costing income statement for:
a. Huntington's first year of operations
b. Huntington's second year of operations
Huntington Manufacturing Contribution Margin Income Statement (Variable Costing)
| (a) year 1 | (b) year 2 | |
| less: | ||
| less: | ||
In: Accounting
If its yield to maturity declined by 1%, which of the following bonds would have the largest percentage increase in value
A 1-year zero coupon bond. | |
A 1-year bond with an 8% coupon. | |
A 10-year bond with an 8% coupon. | |
A 10-year bond with a 12% coupon. | |
A 10-year zero coupon bond. |
In: Finance
A two-year T-Note has a face value of $1,000 and 10% annual coupon rate. I The coupons are paid semi-annually. I If the six-month, 1-year, 1.5-year, and 2-year rates are 4%, 4.5%, 4.8%, and 5% per year, compounded semi-annually, what is the price of this bond?
In: Finance
The Zinger Company is considering an $11,000 investment that has the following net cash inflows: Year 1………..$2,000
Year 2………..$2,000
Year 3………..$5,000
Year 4………..$4,000
Year 5………..$4,000
The payback period for this investment is:
a. 3.0 years.
b. 3.5 years.
c. 4.0 years.
d. 4.5 years.
In: Accounting
A company has the project costs $50,000 now and $6000 per year for 7 years beginning 1 year from now with increases of 8% per year thereafter for the next 9 years. Calculate a project’s present worth with a real interest rate of 10% per year and an inflation rate of 4% per year.
In: Economics
A contractor was doing the 10-year planning for a construction business, which uses a MARR of 15% per year. The contractor anticipates income of $150,000 per year for years 1-5, and income of $200,000 per year for years 6-10.
In: Finance
In: Finance