Instructor - Lead Question

Metro Bus Company had $400,000 of revenue and $401,000 of expense (including depreciation) for the current year resulting in a $1,000 net loss. All revenues were received in cash. All expenses were paid in cash, except for depreciation of $181,000. At the end of the year, the Balance Sheet shows $225,000 of Cash and $1,775,000 of other assets. The Company has no debt and all of the busses are modern - there is no plan to purchase more busses. Although there is sufficient Retained Earnings and they historically have paid dividends of $25,000, Management has decided against paying a dividend to stockholders in the current year. Instead, they issue a statement to their stockholders, explaining that "with a $1,000 net loss, Management feels there is insufficient cash for the dividend."

What is the Company's cash flow? What is the difference between cash flow and net income? Evaluate the accuracy of Management's statement: "with a $1,000 net loss, Management feels there is insufficient cash for the dividend." Evaluate the plan to skip the dividend. How would your response change if the stockholders were (a) common stockholders, (b) non-cumulative preferred, or (c) cumulative preferred?

1. The following data relate to Bebe Ltd, a manufacturing company.

Revenue for the year Sh.1,500,000

Costs as percentages of sales %

Direct materials 30%

Direct labour 25%

Variable overheads 10%

Fixed overheads 15%

Selling and distribution 5%

On average:

(a) Accounts receivable take 2.5 months before payment.

(b) Raw materials are in inventory for three months.

(c) Work in progress represents two months' worth of half produced goods.

(d) Finished goods represents one month's production.

(e) Credit is taken as follows:

(i) Direct materials 2 months

(ii) Direct labour 1 week

(iii) Variable overheads 1 month

(iv) Fixed overheads 1 month

(v) Selling and distribution 0.5 months

Work in progress and finished goods are valued at material, labour and variable expense cost.

Required

Compute the working capital requirement of Corn Co assuming the labour force is paid for 50 working weeks a year

Required information

Information for Pueblo Company follows:

The total fixed costs are $42,000.

Determine target sales needed to earn a $21,000 target profit.

Your company, Dominant Retailer, Inc., is considering a project whose data are shown below. Revenue and cash operating expenses are expected to be constant over the project's 5 year expected operating life; annual sales revenue is $95,000.00 and cash operating expenses are $37,500.00. The new equipment's cost and depreciable basis is $135,000.00 and it will be depreciated by MACRS as 5 year property. The new equipment replaces older equipment that is fully depreciated but can be sold for $7,500. In addition, the new equipment requires an additional $5,000 of net operating working capital, which can be fully recovered at the end of the project. The new equipment is expected to be sold for $10,995 at the end of the project in year 5. The marginal tax rate is 28.00%. What is the project's Initial Cash Outlay at Year 0?  Note:  Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Using the information from problem 2 on Dominant Retailer, Inc., what is the NPV of the Project if Dominant Retailer’s WACC is 12.75%? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

Brian and Company is a consulting group that offers fool-proof pricing and revenue optimization Service guaranteed to deliver $2M in Benefit to a customer. It cost Brian and Company $550k to provide this service. Unfortunately, they have a competitor, Dissenture that provides a similar, but somewhat inferior service that only delivers $1.5 M in guaranteed benefit. It also cost Dissenture $500k to provide this service. When competing with Dissenture, what price does Brian and company need to charge in order to guarantee that they win the business? Assume that neither Dissenture nor Brian and company will price below cost and that both of them know each other’s costs and the customer benefits in each case. How would Brian’s price need to change if it only cost Dissenture $400K to provide their service?

Dana Company projects a sales revenue of $150,000 during the calendar year 2014. Using the income statement provided below, prepare a pro-forma income statement using the percent-of-sales method.

Income Statement

Dana Dairy Products

For the Year Ended December 31, 2013

Common-Sized Income Statement

Revenue and expense data for the current calendar year for Tannenhill Company and for the electronics industry are as follows. Tannenhill’s data are expressed in dollars. The electronics industry averages are expressed in percentages.

a. Prepare a common-sized income statement comparing the results of operations for Tannenhill Company with the industry average. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

b. The company is managing the cost of manufacturing product   than the industry, and has slightly   selling and administrative expenses relative to the industry. The combined impact causes net income as a percent of sales to be   than the industry average.

For this assignment, please submit the answers to the following questions, as well as an Excel spreadsheet which documents the work you did.

Do poets die young? According to William Butler Yeats, “She is the Gaelic muse, for she gives inspiration to those she persecutes. The Gaelic poets die young, for she is restless, and will not let them remain long on earth.” One study designed to investigate this issue examined the age at death for writers from different cultures and genders. Three categories of writers examined were novelists, poets, and nonfiction writers. The ages at death for female writers in these categories from North America are given in the dataset on blackboard (data file : Female Writers.xls). Most of the writers are from the United States, but Canadian and Mexican writers are also included.

a)   Use Excel to build a boxplot of the three associated data sets. If the population mean death ages were the same for the three populations, would you expect to see a boxplot like this? Please elaborate.
b)   Write down both the null and alternative hypothesis for the one-way ANOVA.

c)   Run the one-way ANOVA test in Excel; make sure you save this in your spreadsheet somewhere where it can be found.

d)   You will see a value for F-stat. Report this value, and explain how it is related to MSA and MSW.

e)   In general, what is a p-value? In your table, what p-value is reported, and what exactly does it mean?

f)   At the .05 level of significance, is there evidence of a difference in mean age of death among the various types of female writers? Explain your decision.

Using the revenue function given in the earlier question above, at an interest rate of 25%, if the firm makes it optimal choice, then its total profit would be? Revenue equal to $4.7k^0.5

A) 4.4

B) 4.85

C) 5.33

D) 5.75

previous question:

A firm uses capital, K, to produce revenue. The revenue function is given as Revenue = $4.7K^0.5. If the interest rate is currently 21%, what is optimal K for the firm to choose?

Group of answer choices

2

3

4

5