Cost Benefit Analysis over 10 years

Do a cost benefit analysis to decide wheteher to switch from a gas car to an electric car.

HINT: Make cash flow table for 10 years reflecting the total savings of switching from gas car to electric car

The government is offering an incentive of $11,000 for trading your gas car in and buying an electric vehicle

Assume that cost of gas will increase by 5% each year

You must include NPV and IRR for both comparisons in excel AND make a reccommendation

Interest rate = 4.50%

(you are free to make any other assumtions or rates you make, but be sure to clearly list them)

Cost of Production Report: Average Cost Method

Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:

Required:

Prepare a cost of production report, using the average cost method, and identify the missing amounts for Work in Process—Roasting Department. If required, round your cost per equivalent unit answer to two decimal places.

4) Cost per equivalent unit of direct materials and conversion

Swedish Takeout

In this mini-case, IKEA is expanding internationally via franchising and other means. This case focuses on efforts in the United States, Europe, and Russia.

Expanding markets around the world have increased competition for all levels of international marketing. Cost containment, customer satisfaction, and a greater number of players mean that every opportunity to refine international business practices must be examined in light of company goals. Collaborative relationships, strategic international alliances, strategic planning, and alternative market-entry strategies are important avenues to global marketing that must be implemented in the planning and organization of global management.

Here we focus on a variety of alternative market-entry strategies, including exporting, licensing, franchising, strategic alliances, and direct foreign investments.

Read the case below and answer the questions that follow.

Fifty years ago in the woods of southern Sweden, a minor revolution took place that has since changed the concept of retailing and created a mass market in a category where none previously existed. The catalyst of the change was and is IKEA, the Swedish furniture retailer and distributor that virtually invented the idea of self-service, takeout furniture. IKEA sells reasonably priced and innovatively designed furniture and home furnishings for a global marketplace.

The name was registered in Agunnaryd, Sweden, in 1943 by Ingvar Kamprad—the IK in the company’s name. He entered the furniture market in 1950, and the first catalog was published in 1951. The first store didn’t open until 1958 in Almhult. It became so incredibly popular that a year later the store had to add a restaurant for people who were traveling long distances to get there.

IKEA entered the United States in 1985. Although IKEA is global, most of the action takes place in Europe, more than 70 percent of the firm’s $36 billion in sales. Nearly one-fourth of that comes from stores in Germany. This level compares with only about $5 billion in NAFTA countries. The firm has stores in more than 40 countries around the world.

One reason for the relatively slow growth in the United States is that its stores are franchised by Netherlands-based Inter IKEA Systems, which carefully scrutinizes potential franchisees—individuals or companies—for strong financial backing and a proven record in retailing. The IKEA Group, based in Denmark, is a group of private companies owned by a charitable foundation in the Netherlands; it operates more than 350 stores. The Group also develops, purchases, distributes, and sells IKEA products, which are available only in company stores.

1. The fact that IKEA has stores in more than 40 countries around the world and sells to many markets likely means that the company experiences benefits of global marketing? List four benefits and explain.

2. The fact that Ikea strives to lower costs, minimizes materials and packing, and has catalogs that are completely recyclable shows what type of company commitment?

Whether coal fired power stations are economically viable and has requested that you analyse and report on the economic viability of a new ultra super critical (USC) coal fired power station to be built . Specific details of the task are provided below.

Task:

You are to provide a detailed financial analysis of an USC coal fired power station under two scenarios used in the Finkel Review (2017). The scenarios are:

Detailed information on the life, capital outlay, revenues, expenses and related information is provided in the ‘USC Information.xlsx’ file. The financial analysis is to be completed in Excel with the file being easily adjustable for different scenarios

Case Study: Nutrition & Metabolism

Worldwide, the incidence of obesity, defined as have too much body fat, has more than doubled since 1980. The United States has the largest rate of obesity with nearly 36% of American being obese. Obese is defined as having a body mass index greater than or equal to 30. Obesity greatly increases risks for a number of diseases such as type 2 Diabetes Mellitus, cardiovascular diseases, bone and joint issues, and even some cancers. Many obese patients struggle with weight loss using diet and exercise. For many of these patients, bariatric surgery can assist with the weight loss process.

There are 4 main types of bariatric surgery.

Laparoscopic Adjustable Gastric Band (LAGB or lap-band)

In what is called a lap-band (laparoscopic adjustable gastric banding or LAGB) surgery, a silicone band is placed around the upper part of the stomach. Squeezed by the silicone band, the stomach becomes a pouch with about an inch-wide outlet. After banding, the stomach can only hold about an ounce of food. No removal of GI tissue or re-routing of the GI tract happens in this procedure. This procedure has the least side effects, but also is associated with less weight loss.

Gastric By-Pass

The most common form of weight loss surgery is the gastric by-pass (Roux-en-Y or RYGB). In gastric bypass, the stomach is made smaller by surgically creating a small pouch of the top of the stomach and separating the rest of the stomach into a larger pouch not connected to the esophagus. The smaller stomach is connected directly to the middle portion of the small intestine, bypassing the rest of the stomach and the upper portion of the small intestine. The upper portion of the small intestine is then connected to the upper part of the small intestine.

Sleeve Gastrectomy

The laparoscopic sleeve gastrectomy, often called the sleeve, is performed by removing approximately 80 percent of the stomach. The remaining stomach is a tubular pouch that resembles a banana.

Biliopancreatic Diversion with duodenal switch (BPD/DS)

The Biliopancreatic Diversion with Duodenal Switch (BPD/DS) is a procedure with two components. First, a smaller, tubular stomach pouch is created by removing a portion of the stomach, very similar to the sleeve gastrectomy. Next, a large portion of the small intestine is bypassed. The duodenum, or the first portion of the small intestine, is divided just past the outlet of the stomach. A segment of the distal (last portion) small intestine is then brought up and connected to the outlet of the newly created stomach, so that when the patient eats, the food goes through a newly created tubular stomach pouch and empties directly into the last segment of the small intestine. Roughly three-fourths of the small intestine is bypassed by the food stream.

The bypassed small intestine, which carries the bile and pancreatic enzymes that are necessary for the breakdown and absorption of protein and fat, is reconnected to the last portion of the small intestine so that they can eventually mix with the food stream. Similar to the other surgeries described above, the BPD/DS initially helps to reduce the amount of food that is consumed; however, over time this effect lessens and patients are able to eventually consume near “normal” amounts of food. Unlike the other procedures, there is a significant amount of small bowel that is bypassed by the food stream.

1.Compare and contrast the effects of Lap-band (LAGB) vs BPD/DS on protein digestion and absorption.

2.How would a decrease in caloric intake alter metabolism: Would blood glucose levels be high, low or normal? Would glycogen stores be built or degraded, ditto with fat stores and proteins? Does the metabolic rate change?

Below is a list of examples of benefits that ecosystems provide to people. Match each benefit with the correct category of ecosystem services.

You have always been told that the cost of capital for Clark Upholstery is 9%, so you started to evaluate the two alternatives (renew or replace) using the 9% cost of capital. However, it occurred to you that you have never calculated the cost of capital and you are not sure the last time some else may have calculated the cost of capital. Therefore, before you go any further in the process of evaluating the two alternatives you decide to calculate the cost of capital using the firm’s current capital structure and current yields on long term debt and equity. To make the calculation you know you need the balance sheet to determine the capital structure. Clark Upholstery’s current balance sheet is as follows:

Current Assets $75,000 Current Liabilities $25,000

Fixed Assets Long Term Debt (12%) $150,000

Land $100,000 Equity

Equipment 150,000 Common Stock $50,000

Total Fixed Assets $250,000 Retained Earnings 100,000

Total Equity $150,000

Total Assets $325,000 Total Liab & Equity $325,000

You will use the balance sheet to determine the relative weight of debt vs equity in your long-term capital structure. You also know that you must determine the current yield/value on your debt and equity in order to determine the after-tax cost of both debt and equity. Having both the relative weights of your capital structure and after-tax rates you can then determine your Weighted Average Cost of Capital (WACC), which you will use to evaluate the two alternatives (renew vs replace).

Your outstanding long-term bonds have a 12% coupon rate, but are selling at a discount on the publicly traded market. The current price is $88, that is $880 for a $1,000 face value bond. You need to determine the current yield/value of the current long-term debt. You are considering selling more bonds in the public market to finance the cost of the renewal or replacement. If you do this your investment banker is telling you that a 20-year bond would need a coupon rate of 13.6%, and to be sold Clark Upholstery would incur a $45 per bond discount and flotation costs of $32 per bond. Using this information, you calculate the cost of your current long-term bonds and also the cost if you sell $100,000 additional long-term bonds to finance the investment.

The other portion of your capital structure is your equity, which is comprised of Common Stock and Retained Earnings. Your stock is not publicly traded, so you decide to use the Capital Asset Pricing Model

(CAPM) to determine the cost of equity. To calculate the CAPM you need risk free rate (which you determine to be 4%) and also the markets expected return for the stock of companies like Clark (15%). Using historical information about Clark and also about the furniture Upholstery industry you determine that the firm’s beta is 0.88. You use this information to determine the equity cost of both Common Stock and Retained earnings.

Finally, you combine the debt and equity cost with the weights of debt and equity to determine Weighted Average Cost of Capital (WACC) assuming that Clark will finance the investment using the current mix of debt and use retained earnings (so no new equity is sold). You will also calculate the WACC assuming that Clark will finance $100,000 of the investment by issuing new bonds. Your Investment Banker advises you that taking on $100,000 of new long-term bonds will increase your Beta from 0.88 to 1.1.

You now have two WACC, one for the current capital structure and one that assumes the investment is financed by $100,000 of new long-term bonds and the balance being funded by Retained Earnings. You will use both WACC to evaluate the two investment alternative (renew or replace).

Now that you have all the calculations of incremental after-tax cash flow and WACC you are ready to evaluate the alternatives. To do this you decide to calculate all the classic evaluation methods, Payback Period, PV and its related Profitability Index and Internal Rate of Return. You have also heard about Modified Internal Rate of Return (MIRR) and aren’t sure if you will need/use it, but you will calculate it just in case. The company is concerned about an economic downturn in the near future which could throw off the revenue projections, and therefore has established a 4-year payback period as a pre-qualification for any new investments. You will now complete your project evaluation and do an accept/reject determination and a ranking for the two alternatives at both WACC.

Alt 1 Alt 2

26300   50100
36000   65200
35980   39420
43460   16340
33460   15940
1800   2200

CASE STUDY - Western Power

In response to the steady growth in southern California, Western Power decided to build an innovative $ 1 billion power plant near San Diego, as this new plant will not only generate high levels of clean electrical energy using new technology, but rather the energy generated by some cities will suffice. Nearby, enough energy could also be generated to sell to other utility companies in the rest of southern California and parts of neighboring states.

Therefore, the executive management of Western Power was keen to complete the project as soon as possible due to the large returns expected from these additional sales.

Nevertheless, as soon as news of the proposed power plant construction began to spread, the company found great opposition, especially from residents near the construction site of that station. Once construction began, many proceeded to institute several lawsuits in an attempt to halt construction, and the "Western Power" was only adopting an intensive campaign to build public relations through which the local population could be persuaded of the benefits of this project.

After several months of delay, work on the project continued and the marketing department of the company began contacting other public utility companies so that contracts could be signed to sell energy to them. Then it became clear that the returns resulting from electricity sales would not be as large as expected, and therefore the administration asked Rob Hedge, the project manager, to find ways to reduce the construction budget so that the expected level of profitability from that new plant could be maintained.

Unfortunately, Rob was unable to find different ways in which to reduce construction costs due to the presence of strict regulations from environmental protection organizations and many other government agencies regarding the foundations of building power plants, so he was only asked by architects and designers to suggest some changes in designs Through which construction costs can be reduced, the designers made a number of suggestions that would reduce costs significantly, but unfortunately construction engineers were unable to make the proposed changes due to the advanced technology used to generate power at that plant. In spite of this, they finally agreed to make some changes, which were implemented immediately. Rob called on architects and construction engineers to be present on the construction site permanently so that other ways to adjust design can be sought to reduce costs.

After one year of a five-year project, the head of the construction company requested an urgent meeting with the head of the "Western Power" company, where he complained about the numerous design changes that caused severe confusion to the workers as well as overtime. He explained that the building engineers make changes during construction on the site without informing the design engineers so that they can update the plans. Also, construction managers are often unaware of these changes, which means that some tasks were sometimes done in error. In addition, design engineers have made some inappropriate design changes without consulting construction engineers, causing them to be re-worked more than once.

Also, after extensive investigations, the Western Power administration received notifications from government oversight agencies that two essential parts of the first phase of the project did not meet government standards and had to be rebuilt. When the administration also learned that the project was six months behind schedule, and there was an additional 10% cost to the budget, it fired the project manager.

If you are appointed as a new project manager. What actions will you take to better address problems and control this project?

You are a manager at Marée Rouge Cosmetics International for five years now. When you first began at Marée Rouge, there was a marked lack of communication between the product development and marketing departments, and a good bit of distrust or actual hostility between members of these departments. Why these problems existed was not clear, and often even people in long-standing feuds seemed to have forgotten the original causes of these disputes. While these conflicts did not prohibit professional working relationships, it was obvious that they were hurting the overall operational effectiveness of two departments that needed to work closely together. About three years ago, Marée Rouge leased a new building and was able to house the two departments on the same floor while also giving all areas greater office space. (In the old building, the departments had been housed on separate floors.) Largely due to the greater physical interactions between the departments, you have seen a marked improvement in the communications and work relationships between departmental members. Now there is a strong working relationship between the two areas, and this relationship has lead to faster product development and deployment as well as the initiation of several innovative (and strong selling) new products. However, partly due to this improved firm performance and revenues, Marée Rouge has increased its workforce and needs to find new office space. Currently, the company is looking at a small office park location where each of the major areas can be housed in separate facilities. The office park is beautiful, is located more centrally to most workers’ homes, will be far more comfortable than the existing location, and provides easy access to major suppliers and customers. However, you worry that physically separating the two divisions will destroy their current strong working relationship and may even lead to the same problems that existed before between the divisions. While you know that the move has already been decided on by top management, you feel sure that they will be willing to listen to well thought out suggestions for maintaining the good relationship between the divisions. In order to develop such relationships, you have asked some of your colleagues to help you draft an overview of the situation and suggested methods for avoiding problems. Instructions: Develop a presentation to detail your desired goals for the move, what potential problems you see the new physical location creating, and suggestions for preventing (or reducing) these potential problems. Use all appropriate chapter concepts in developing this presentation. Also, due to the nature of the link between organizational design and organizational behavior, you should draw upon appropriate concepts from other chapters for your answer as well. Questions: What new links did you see between organizational design and organizational behavior? What organizational behavior principles could be used to overcome problems with a given organizational design? What organizational design principles could be used to improve organizational behavior problems? Could communication technology be used to help overcome the expected organizational design problems? Why or why not?