Problem 2: You operate your own small building company and have decided to bid on a government contract to build a pedestrian walkway in a national park during the coming winter. The walkway is to be of standard government design and should involve no unexpected costs. Your present capacity utilization rate is moderate and allows sufficient scope to understand this contract, if you win it. You calculate your incremental costs to be $268,000 and your fully allocated costs to be $440,000. Your usual practice is to add between 60% and 80% to your incremental costs, depending on capacity utilization rate and other factors. You expect three other firms to also bid on this contract, and you have assembled the following competitor intelligence about those companies. Issue Rival A Rival B Rival C Capacity Utilization At full capacity Moderate Very low Goodwill Considerations Very concerned Moderately concerned Not concerned Production Facilities Small and inefficient plant Medium sized and efficient plant Large and very efficient plant Previous Bidding Pattern Incremental cost plus 35-50% Full cost plus 8-12% Full cost plus 10-15% Cost Structure Incremental costs exceed yours by about 10% Similar cost structure to yours Incremental costs 20% lower but full costs are similar to yours Aesthetic Factors Does not like winter jobs or dirty jobs Does not like messy or inconvenient jobs Likes projects where it can show its creativity Political Factors Decision maker is a relative of the buyer Decision maker is seeking a new job Decision maker is looking for a promotion Show all of your calculations and processes. Describe your answers in three- to five-complete sentences. a.What price would you bid if you must win the project? b.What price would you bid if you want to maximize the expected value of the contribution from this contract? c.Defend your answers with discussion, making any assumptions you feel are reasonable and/or are supported by the information provided.

3. The cost of debt

What do lenders require, and what kind of debt costs the company?

The cost of debt that is relevant when companies are evaluating new investment projects is the marginal cost of the new debt to be raised to finance the new project.

Consider the case of Peaceful Book Binding Company (PBBC):

Peaceful Book Binding Company is considering issuing a new 30-year debt issue that would pay an annual coupon payment of $100. Each bond in the issue would carry a $1,000 par value and would be expected to be sold for a price equal to its par value.

PBBC’s CFO has pointed out that the firm would incur a flotation cost of 1% when initially issuing the bond issue. Remember, the flotation costs will be _________the proceeds the firm will receive after issuing its new bonds. The firm’s marginal federal-plus-state tax rate is 35%.

To see the effect of flotation costs on PBBC’s after-tax cost of debt (generic), calculate the after-tax cost of the firm’s debt issue with and without its flotation costs, and select the correct after-tax costs (in percentage form):

This is the cost of _______ debt, and it is different from the average cost of capital raised in the past.

1. (8 pts.) PBS (Sept. 6, 2010) cited a report (Organisation for Economic Co-operation and Development) examining both the speed and cost of the Internet. PBS reported the following: "Japan has the fastest average connection speed at 61 megabits per second and the lowest monthly connection price (per mbps) at $0.27. The United States ranked 15th with an average connection of 4.8 mbps and monthly price (per mbps) of $3.33." Below are the updated data for 2012 (adapted slightly for this assignment). The first column is the cost mbps and the second column includes the cost inclusive of the line charges.

                                         Cost MBPS    Total Cost/Month

Find the mean, median, and mode for the data for the cost MBPS.

          Mean =                            Median =                            Mode = ___________                   

Find the range, standard deviation, and variance for these data.

          Range =                               S =                                S2 =  ____________         

Find the mean, median, and mode for these data for the total monthly cost inclusive of the line charges.

           Mean =                            Median =                            Mode = ___________                   

Find the range, standard deviation, and variance for these data.

           Range =                               S =                                S2 =  ____________         

Write a short email describing the results of this study to a friend. Remember to convey the results of the study particularly in relation to variability. What does this study tell you about Internet costs around the globe?

2. (5 pts.) Iron levels for a sample of adult women on a vegan diet are recorded below (normal iron levels: women 40-150; men 50-175 mcg/dL).

65

           115

146

           117

95

           108

           132

           127

             86

             48

85

           117

126

           117

             98

           118

           111

           123

             85

             43

   Find the mean, median, and mode for the data.

        Mean =                             Median =                          Mode =  ___________                 

Find the range, standard deviation, and variance for the data.

         Range =                                 S =                               S2 =  ___________                   

You have a friend who has just decided to become a vegan. What would you tell your friend?

3. (2 pts.) Find the area between the following z-scores.

   Answer                  : z = 0 and z = 1.45

   Answer                  : z = 0 and z = 1.67

   Answer                  : z = -.96 and z = 0

   Answer                  : z = -1.92 and z = 0

4. (2 pts.) Find the area between the following z-scores

   Answer                 : z = -1.4 and z = .8

   Answer                 : z = -2.8 and z = 1.73

   Answer                 : z = -1.6 and z = -.35

   Answer                : z = 1.3 and z = 1.92

5. (3 pts.) Students completed an exam with a mean = 50 and a standard deviation of 8. Using this information, answer each of the questions below.

   Answer                 : Clem received a score of 56 on the test. What percentage of students scored less than Clem?

   Answer                 : Ewald received a score of 40 on the test. What percentage of students scored higher than Ewald?

   Answer                 : Roscoe received a score of 45 on the test. What percentage of students scored higher than Roscoe?

   Answer                 : Myrtle received a score of 47 on the test. Buford received a score of 54 on the test. What percentage of student scored between Myrtle and Buford?

Black Mountain Ski Resort has been granted a 20 - year permit to develop and operate a skiing operation in a national park. After 20 years the site must be returned to its original condition. The roads may remain, as they can be used for fire prevention purposes. In the spring and summer before the ski hill opened, the following transactions and events occurred:

You must use the following Long-Lived asset accounts

Ski Lift

Ski Chalet

Land improvement

Roads

Parking lot

1. Installed three ski lifts for a total cost of $150,000,000. It is estimated that the scrap metal from the lifts could be sold for $4,000,000 at the end of 20 years.
2. Built a Ski chalet for $70,000,000
3. Removed Trees and cleared the area for ski runs at a cost of $40,000,000
4. Received $ 10,000,000 for the trees that were removed for the ski runs.
5. Put in roads for a cost of $50,000,000.
6. Paved an area at the base of the mountain for a parking lot at a cost of $10,000,000.
7. Estimated that it would cost $20,000,000 to dismantle the ski lifts in 20 years. The chalet could be removed for a cost of $15,000,000. Re-foresting the site would cost $5,000,000. Removing the parking lot will cost $3,000,000. Calculate the PV of Site Restoration using a risk rate of 6% and provide the journal entry.

8. Using Straight Line Depreciation record the depreciation for the first year of operations on the Long-Lived assets and site restoration costs. Put all the depreciation expense in one account and then create accumulated depreciation accounts for each asset that requires depreciation.

9. Allocate the interest expense on the site restoration costs for the first three years

10. Using the table below prepare the balance sheet presentation of all the accounts involved in this question for the end of the third year of operations.

    	Cost	Accumulated Depreciation	Net Carrying Amount
    Property Plant and Equipment
    Ski Lift
    Ski Chalet
    Land Improvement
    Roads
    Parking Lot
    Site Restoration Costs
    Total Property Plant and Equipment

    Long Term Liabilities

    Obligation for future restoration =

11. At the end of the project the actual cost of restoring the site is $43,000,000, as originally estimated. Prepare the journal entry to record the payment of these costs at the end of the project

    Date	Explanation/ Account	Debit	Credit

    what would be the total expenses associated with the site restoration in the first, second and 20^th year?

    Year	Depreciation of Site Restoration Costs	Interest expense accrual on obligation for future site restoration	Total Expense relating to site restoration
    1
    2
    20

    Calculations

in my chem lab brass and nitric acid reacted to form copper ions and I had to calculate the percent copper in the brass. I came out with a percentage of 36%. It was expected that the copper int he brass percentage would be higher. So what could be some likely causes of experimental error for the percentage of copper in brass to be much lower?

Please provide an excel file that can answer questions similiar to this one by chaning the data and inputing new data

1.You sell short 100 shares of the GTY stock at $80 per share. Assume your broker requires an initial margin of 40% and a maintenance margin of 25%.

1)If the stock price drops to $70, what is the percentage margin?

Initial total stock value: $80(100)=$8,000

If the stock price drops to $70,

Total stock value: $70(100)=$7,000

Required margin deposit when the short position was entered into: $8,000(.40)=$3,200.

Percentage margin =

2)If the stock price increases above a certain level, P, the percentage margin would drop below the maintenance margin of 25% and you will get a margin call. What is P?

Percentage margin =

3)If the stock price increases to $95, how much money do you have to add to your account to restore the maintenance margin of 25%?

Let this amount to be X.

Percentage margin =

X=675

The TSM Corporation’s stocks are currently selling at $45 per share. You believe that the stock is overvalued and decide to take a short position on the stock. You short 100 shares for a total of $4,500. Your broker borrow this number of shares from his clients, sell them, and deposit $4,500 in your account. You cannot withdraw it. In addition, you must post a margin as collateral. Assume your broker requires an initial margin of 60% and a maintenance margin of 40%.

Percentage margin:

The equity value in account is equal to cash received from the short sale, plus the required margin deposit, minus the value of the stock owed. The initial margin requirement is 60%, so the initial required margin deposit is $4,500(.60)=$2,700. Initially the value of the stock owed is also $4,500.

So initially, the percentage margin is equal to

If the stock price drops to $40,

Percentage margin =

If the stock price increases to $50,

Percentage margin =

If the price increases above a certain level, P, the percentage margin would drop below the maintenance margin of 40% and you will get a margin call. What is P?

Percentage margin =

If the stock price increases to $60, how much money do you have to add to your account to restore the maintenance margin of 40%?

Let this amount to be X.

Percentage margin =

X=1,200

he coal mining industry has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for coal. WHC has just been approached by Mid-Cen Electric Company with a request to supply coal for its electric generators for the next eight years. WHC does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine in The Gunnedah Basin on 5,000 acres of land purchased 10 years ago for $12 million. Based on a recent appraisal, the company feels it could receive $15.5 million if it sold the land today. Strip mining is a process where the layers of topsoil above a coal vein are removed and the exposed coal is removed. Some time ago, the company would simply remove the coal and leave the land in an unusable condition. Changes in mining regulations now force a company to reclaim the land; that is, when the mining is completed, the land must be restored to near its original condition. The land can then be used for other purposes. Because it is currently operating at full capacity, WHC will need to purchase additional necessary equipment, which will cost $77 million. To get the equipment in running order, there would be a $2 million shipping fee and a $3 million installation charge. The equipment will be depreciated to zero on a straight-line basis over its economic life of 15 years. The contract runs for only eight years. At that time the coal from the site will be entirely mined. The company feels that the equipment can be sold for 10 percent of its initial purchase price in eight years. However, WHC plans to open another strip mine at that time and will use the equipment at the new mine. The equipment also requires staff to be specially trained; fortunately, a similar equipment was purchased a year ago, and at that time the staff went through the $500,000 training program needed to familiarise themselves with the type of equipment. WHC’s Corporate Finance (BAFI1059) S2 2020 Page 3 of 9 management is uncertain whether to charge half of this $500,000 training fee to the new project. The equipment also requires annual maintenance cost of $325,000. The contract calls for the delivery of 500,000 tons of coal per year at a price of $93 per ton. WHC feels that coal production will be 620,000 tons, 680,000 tons, and 730,000 tons, respectively, over the first three years, and 590,000 tons per year over the remaining years. The excess production will be sold in the spot market at an average of $75 per ton in Year 1 with an expected decrease of 2% per annum in the following years. Variable costs amount to $35 per ton in Year 1 with an expected increase of 5% per annum in the following years. Fixed costs are $5,000,000 per year. The mine will require a net working capital investment of 5 percent of sales. The net working capital will be built up in the year prior to the sales. WHC will be responsible for reclaiming the land at termination of the mining. The company uses an outside company for reclamation of all the company's strip mines. It is estimated the cost of reclamation will be $2.5 million. In order to get the necessary permits for the strip mine, the company agreed to donate the land after reclamation to the state for use as a public park and recreation area. This will occur in Year 9 and result in a charitable expense deduction of $15.5 million. Company tax rate is 30% and market return is 8.35%

Find the NPV and whether it should open the mine ? show all working out

The Province of Quebec is facing power shortfalls. Quebec Hydro plans to address this problem by investing in developing coal fired energy and hydropower facilities in the coming seven years, and have $1.5 billion with which to do so.   Every $ million spent on coal fired plants will result in 15 megawatts of power capacity when the plant construction is completed, and every $ million spent on hydropower dams will result in 20 megawatts of power capacity when the dam construction is completed. Completion of coal fired plants takes 3 years and completion of hydropower dams takes 4 years.    Once these facilities are built they will require additional operating funds that are equivalent to 25% of their initial cost annually. Funds set aside for plant operations cannot be used to invest in new plants or dams, but can be invested in the stock market and net an interest of 12%. Any unspent funds can also be invested in this way. Quebec Hydro currently has 40 megawatts of capacity and it can price energy so as to keep the demand at this level in the next two years. Thereafter, however demand will rise to 56, 60, 68, 75, and 87 megawatts of additional power in the third, fourth, fifth, sixth and seventh years, respectively. Assume that once a plant is operational, it is always operational.

a) FORMULATE the Linear Programming decision model that meets the power demand, and maximizes the funds available to Quebec Hydro at the end of the seventh year. Define all decision variables and label (1-5 word description) each constraint. Define C_t and HP_tto be the amount invested in coal fired plants and hydropower dams, respectively, in year t. Define F_t to be the money invested into the stock market in year t. NOT SOLVE THE MODEL.

Lobo, Inc., a construction contractor, has asked for your advice on the following:

New City filed suit against Lobo at the end of 2018 seeking $10 million in civil penalties and injunctive relief based upon violation of the New City construction code pertaining to green building standards.   New City alleged that Lobo had violated the code in various projects undertaken over the past two years. At the end of 2019, the parties had engaged in discovery and begun settlement negotiations. Lobo offered to settle for $500,000. New City rejected this amount and countered with $6 million. Lobo's attorney advised that the ultimate settlement would probably be $3.5 to $5 million based on the information learned in discovery, the settlement negotiations thus far, and the risk and expense of a lengthy trial. Lobo's attorney explained that no amount within that range was better estimate than any other amount. New City follows U.S. GAAP.

Required:

1. What amount (if any) did Lobo make at the end of 2019 (make the entry) to accrue a loss?   Why (what conditions must be satisfied for such an accrual)? Was any disclosure required? If so, be specific as to any amounts that should be disclosed and feel free to draft the disclosure note. (You also must cite the applicable provisions of the ASC).

2. Now assume that Lobo properly made an accrual as a litigation loss of $4.3 million in 2019. In late-2020, Lobo entered into a full settlement with the City for a total of $2 million to cover the cost of the violation. What journal entry (if any) should Lobo make at the end of 2020? Why? Hint: What kind of change is this?