On January 1, 2020, Nivtop Corp. leased a machine from Nosnah
Inc. The lease agreement calls for
Nivtop to make four annual lease payments of $559,113 each January
1, with the first payment to be
made on January 1, 2020. Nivtop’s incremental borrowing rate is 8%;
this is the same rate Nosnah
used to calculate the lease payments. The fair market value of the
machine is $2,000,000 and its
expected useful life is 5 years. This is a non-specialized
machine.
Nosnah purchased the machine from a vendor on December 31, 2019 for
$1,573,000.
Required
a. List the 5 criteria used to determine whether a lease qualifies
as finance/sales-type or
operating. Review each criterion to determine which (if any) this
lease meets.
b. What type of lease is this for Nivtop?
c. What type of lease is this for Nosnah?
d. Show all of Nivtop’s journal entries relative to this lease
at
1) January 1, 2020
2) December 31, 2020
3) January 1, 2021
e. Show all of Nosnah’s journal entries relative to this lease
at
1) January 1, 2020
2) December 31, 2020
3) January 1, 2021
In: Accounting
a) Assume that yesterday (April 22, 2020) the interest rate on dollar deposits in the U.S. was 0.02 (2%) per year and the interest rate on euro deposits was 0.02 (2%) per year. Investors yesterday expected that the exchange rate in one year (April 22, 2021) will be 2.02 dollars for one euro.
What was the current exchange rate in terms of dollars per euro yesterday (April 22, 2020)?
Illustrate your answer, using a graph with the rates of return (in dollars terms) on the horizontal axis, and the exchange rate on the vertical axis.
b) Now, assume that today (April 23, 2020) the Federal Reserve lowers the interest rate on dollar deposits to 0.01 (1%), and the European Central Bank lowers the interest rate on euro deposits to zero (0%). There is no change in the expected exchange rate a year from now - that is, on April 23, 2020 investors expect that the exchange rate on April 23, 2021 will be 2.02 dollars for a euro.
What is the current exchange rate today (April 23, 2020), right after the reductions in the interest rates? Has the dollar depreciated or appreciated between April 22 and April 23? Why? Is your answer consistent with the textbook’s claim that a reduction in the interest rate on dollar deposits should cause a depreciation of the dollar?
Illustrate your answer, using a new graph with the rates of return (in dollars terms) on the horizontal axis, and the exchange rate on the vertical axis.
c) What is the effect of the change in the exchange rate above (from April 22 to April 23, 2020) on exports of American goods to Europe? And on exports of European goods to the United States? Explain. (You don’t need to provide numbers, only the general direction of the changes: going up or going down). Who will benefit and who will lose from these changes in the United States?
d) Now, assume American exporters successfully lobby the Federal Reserve, and convince it to adopt a new monetary policy that will boost American exports. Thus, on April 24 the Federal Reserve decides to change the interest rate on dollar deposit once again, with the objective to cause a 1% depreciation of the dollar with respect to the euro (that is, a 1% increase in the amount of dollars required to buy a euro). Assume that the European Central Bank does not react to the new actions by the Federal Reserve, and that investors’ expectations about the future value of the euro remain unchanged (that is, they expect that the exchange rate on April 24, 2021 will be 2.02 dollars for a euro). What interest rate should the Federal Reserve select in order to achieve its objective? Explain.
Illustrate your answer, using a new graph with the rates of return (in dollars terms as usual) on the horizontal axis, and the exchange rate on the vertical axis.
e) Now assume that, unlike in part d), investors, when they hear that the Federal Reserve intends to devaluate the dollar today, also adjust their expectations about the future: now, they expect that the exchange rate on April 24, 2021 will be 2.0402 rather than 2.02. What interest rate should the Federal Reserve select now, on April 24, 2020, in order to achieve its goal of depreciating the dollar by 1% from April 23 to April 24? Explain (no need to illustrate this answer graphically, just give the answer in words).
In: Economics
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are
$ 4.93$4.93
million. The product is expected to generate profits of
$ 1.17$1.17
million per year for ten years. The company will have to provide product support expected to cost
$ 94 comma 000$94,000
per year in perpetuity. Assume all profits and expenses occur at the end of the year.a. What is the NPV of this investment if the cost of capital is
6.4 %6.4%?
Should the firm undertake the project? Repeat the analysis for discount rates of
1.1 %1.1%
and
17.3 %17.3%,
respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
a. What is the NPV of this investment if the cost of capital is
6.4 %6.4%?
Should the firm undertake the project? Repeat the analysis for discount rates of
1.1 %1.1%
and
17.3 %17.3%,
respectively.If the cost of capital is
6.4 %6.4%,
the NPV will be
$nothing.
(Round to the nearest dollar.)
In: Economics
Please paraphrase the following in your own words.
Technological Innovation
Next to improving methods of fossil fuel production to reduce climate impact, and biofuels, an important area of investment to be mentioned are new offshore wind parks (solar energy has been abandoned as a major R&D area in 2008). An offshore wind farm (108 MWh) has been developed with energy provider Nuon, 10 km west of the Dutch coast at Egmond aan Zee (5). Shells offshore technical knowledge with oil and gas platforms helped ensure 115 tonne turbines to withstand the harshest weather.
New ways of Stakeholder Engagement
Shell has started to develop close relationships with its external stakeholders. Contacts are maintained with the academic world, governmental bodies and NGO’s. The relationships provide two-way information (informing NGOs about latest Shell news and funnelling information of NGO into the Shell organisation). Shell is performing impact assessments and setting up engagementswith NGO’s and local communities to investigate impact of new upstream projects, in order to provide for a sustainable cooperation with local communities. An example is the project in the Arctic region. In cooperation with IUCN and Wetlands International, Shell is studying implications of construction of new upstream projects on tundra and permafrost environments. Traditional knowledge of Eskimos about ice seasons, whale and seal movements is therefore crucial. It helps Shell to plan better its offshore production, not to disturb traditional fishing and hunting.
In: Economics
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are 4.95 million. The product is expected to generate profits of 1.05 million per year for ten years. The company will have to provide product support expected to cost 91,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 5.6%? Should the firm undertake the project? Repeat the analysis for discount rates of 1.5% and 13.8%, respectively. b. What is the IRR of this investment opportunity? c. What does the IRR rule indicate about this investment?
In: Finance
Subject : INNOVATION MANAGEMENT FOR GLOBAL
Assignment
You work as a consultant. Your current assignment is to advise a large, traditional manufacturing firm whose products are facing obsolescence. Your initial audit of the company highlights a failure to innovate over many years.
Briefly outline the reasons why large organisations often struggle to innovate. You have been asked to prepare a presentation to the manufacturing company’s senior management suggesting ways in which the company could become more innovative. Provide a report which explains the points that you would cover in your presentation. Your report should be in continuous prose, using a report format.
In: Accounting
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.94 million. The product is expected to generate profits of $ 1.18 million per year for ten years. The company will have to provide product support expected to cost $ 96000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 6.2 %? Should the firm undertake the project? Repeat the analysis for discount rates of 1.1 % and 17.5 %, respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Economics
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.91 million. The product is expected to generate profits of $ 1.15 million per year for ten years. The company will have to provide product support expected to cost $ 96,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 6.5 %? Should the firm undertake the project? Repeat the analysis for discount rates of 1.2 % and 16.8 %, respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $5,200,000. The product is expected to generate profits of $1,300,000 per year for ten years. The company will have to provide product support expected to cost $93,000 per year in perpetuity. Assume all income and expenses occur at the end of each year.
a. What is the NPV of this investment if the cost of capital is 5.17% Should the firm undertake the project? Repeat the analysis for discount rates of 1.34% and 18.72% respectively.
b. How many IRRs does this investment opportunity have? (Hint: Consider the two alternative discount rates we used in our analysis in part a.)
c. Can the IRR rule be used to evaluate this investment? Explain.
In: Finance
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.94 million. The product is expected to generate profits of $ 1.17 million per year for ten years. The company will have to provide product support expected to cost $ 92000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 5.8 %? Should the firm undertake the project? Repeat the analysis for discount rates of 1.1 % and 17.3 %, respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
In: Finance