CHAPTER 9 CASE Jackson Erectors    Making Capital Investment Decisions

Jackson Erectors is a midsized electronics manufacturer located in Austin, Texas. The company president is Shelly Couts, who inherited the company. The company originally repaired radios and other household appliances when it was founded more than 70 years ago. Over the years, the company has expanded, and it is now an established manufacturer of various specialty electronic items. The company’s finance department has hired YOU, a recent MBA graduate to do an analysis of a proposed new product.

One of the major revenue-producing items manufactured by Jackson is a “controller” which are used in various types of automated equipment. Jackson currently has one model on the market and sales have been good. The technology in electronic devices is constantly changing. However, as with any electronic item, technology changes rapidly, and the current model has limited features in comparison with newer models. Jackson spent $400,000 to develop a prototype for a new controller that will be “state of the art”. The company has spent a further $100,000 for a marketing study to determine the expected sales figures for the new model.

Jackson can manufacture the new controller for $300 each in variable costs. Fixed costs for the operation are estimated to run $4.0 million per year. The estimated sales volume is 70,000, 90,000, 95,000, 85,000, and 75,000 per year for the next five years, respectively. The unit price of the new controller will be $550. The necessary equipment can be purchased for $40.0 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $2.5 million.

Net working capital for the controller will be 15 percent of sales and will occur with the timing of the cash flows for the year (i.e., there is no initial outlay for NWC). Changes in NWC will thus first occur in Year 1 with the first year's sales. Jackson has a 30 percent corporate tax rate and a required return of 12 percent. Shelly has asked you to prepare a report that answers the following questions:

QUESTIONS

Prepare a detailed pro forma income statement including calculation of Operating Cash Flows

1. What is the payback period of the project?
2. What is the profitability index of the project?
3. What is the IRR of the project?
4. What is the NPV of the project?
5. How sensitive is the NPV to changes in the price of the new Controller? Assume a 5% price reduction
6. How sensitive is the NPV to changes in the quantity sold? Assume a 700 per year unit reduction in quantity sold
7. Should Jackson produce the new Controller?
8. Suppose Jackson looses sales on other models because of the introduction of the new model. How would this affect your analysis?

Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other households appliances. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. Jay McCanless, a recent MBA graduate, has been hired by the company's finance department. One of the Major revenue-producing items manufactured by Conch Republic is a smartphone. Conch Republic currently has one smartphone model on the market, and sakes have been excellent. The smartphone is a unique item in that it comes in a variety of tropical colors and is preprogrammed to play Jimmy Buffett music. however, as with any electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with newer models. Conch Republic spent $750,000 to develop a prototype for a new smartphone that has all features of the existing smartphone but adds new features such as WiFi tethering. the company has spent a further $200,000 for a marketing study to determine the expected sales figures for the new smartphone.

Conch Republic can manufacture the new smartphone for $220 each in variable costs. Fixed costs for the operation are estimated to run $6.4 million per year. The estimated sales Volume is 155,000, 165,000, 125,000, 95,000, and 75,000 per year for the next five years, respectively. The unit price of the new smartphone will be $535. The necessary equipment can be purchased fro $43.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $6.5 million.

As previously stated, Conch Republic currently manufactures a smartphone. Production of the existing model is expected to be terminated in two years. If Conch Republic does not introduce the new smartphone, sales will be 95,000 units and 65,000 units for the next two years, respectively. The price of existing smartphone is $385 per unit, with variable costs of $145 each and fixed costs of $4.3 million per year. If Conch Republic does introduce the new smartphone, sales of the existing smartphone will be 20 percent of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. Conch Republic has 21 percent corporate tax rate and a required return of 12 percent.

Shelley has asked Jay to prepare a report that answers the following questions.

Questions:

1. What is the payback period of the project?

2. What is the profitability index of the project?

3. What is the IRR of the Project?

4. What is the NPV of the project?

German company and the swap dealer pays and receives under the swap contract that satisfies the following:

 The same swap dealer is involved in this currency swap with the US company and the German company.

 The US company’s net borrowing cost is 5.2% p.a. on $ and the German company’s net borrowing cost is 6.1% p.a. on €.

 The swap dealer pays and receives $ at 5.2% p.a.

(b) Suppose the US company has entered into a 5-year currency swap with the swap dealer regarding the swap mentioned above. The principal amounts are $15 million and €10 million. Suppose that the US company declares bankruptcy at the end of year 3 just before the exchange of payment, when the exchange rate is $1.6/€. What is the cost to the swap dealer in US dollars? Assume that, at the end of year 3, the risk free interest rate is 4% per annum in US dollars and 3% per annum in euros for all maturities. All interest rates are quoted with annual compounding. Assume that the theoretical forward exchange rates can be realized. Also assume there are 360 days in a year.

Hint: In the event of default at the end of year 3, the swap dealer will not receive cashflows from the US company nor pay cashflows to the US company. The cost of default to the dealer is the value of the swap to the swap dealer if the US company had not defaulted at Year 3.

Plz answer 2 sunb-question as a whole. thanks so much. will thumbsup if you did.

In a population of Siberian flying squirrels in western Finland, assume that the the number of pups born to each female over her lifetime has mean μ=3.66μ=3.66 and standard deviation σ=2.9598.σ=2.9598. The distribution of squirrel pups born is non‑normal because it takes only whole, non‑negative values.

Determine the mean number of pups, ¯¯¯¯¯X,X¯, such that in 90%90% of all random samples of such squirrels of size n=60,n=60, the mean number of pups born to females in the sample is less than ¯¯¯¯¯X.than X¯.

You may find the table of ZZ‑critical values useful.

Give your answer to at least two decimal places.

¯¯¯¯¯X=

In a population of Siberian flying squirrels in western Finland, assume that the the number of pups born to each female over her lifetime has mean ?=3.66 and standard deviation ?=2.9598. The distribution of squirrel pups born is non‑normal because it takes only whole, non‑negative values.

Determine the mean number of pups, x¯, such that in 70% of all random samples of such squirrels of size ?=40, the mean number of pups born to females in the sample is less than ?⎯⎯⎯.

What have you learned about the situation of African Americans in the US? Why African Americans who kill white victims are more likely to receive the death penalty than whites who kill blacks? What did you learn from this movie about the Elaine Tragedy?

Its for Sociology

D & B Enterprises is a cah basis taxpayer who makes widgets. It sell the widget for $500,000 in gross receips through December 2012. The company also received $200,000 from a life insurance policy that it received after the death of Russell, it's chief financial officer. Then on December 28, it recives payment in the amount of $100,000 for an order of widgets which it sent to the customer on December 20. Avon, the CEO, cashes the check on January 3 and then on January 7 uses it for payroll. The company also has an investment account that has $100,000 invested in State bonds which earned $3,400 in interest during the year. Avon comes to you regarding his 2012 tax liability and ask you what his taxable income is and why?

Name a US-based or foreign company that practices Corporate Social Responsibility (CSR) and describe what it is they do.

Do you tend to do business with companies who support social causes that you as a consumer are in favor of? Or does this have any bearing on your purchasing decision at all?

Maria contributed $100 from her paycheque at the beginning of every month from age 18 to 65 into RRSP account (no contribution on the month of her 65-th birthday). Anna contributed $4000 at the beginning of every year from age 35 to 55 into a similar RRSP account, then left the money in the fund to accumulate for another 10 years (no contribution in the year of her 55-th birthday). Money earned 4.8% compounded daily in both RRSP accounts.

(i) Who had a greater accumulated value, and by how much, when they retired at age 65?
(ii) Calculate how much interest both Maria and Anna earned in their RRSP accounts, respectively.

3. A university wants to estimate the percentage of their students who are the first in their families to go to college. There are 40,000 enrolled students. For each part, describe how the university might collect data using the given sampling method

a. Cluster sample

b. Simple random sample

c. Systematic sample

d. Stratified sample