The U.S. Census Bureau publishes data on factory orders for all manufacturing, durable goods, and nondurable goods industries. Shown below are factory orders in the United States over a 13- year period ($ billion). First, use the data to develop forecasts for years 6 through 13 using a 5-year moving average. Then, use the data to develop forecasts for years 6 through 13 using a 5-year weighted moving average. Weight the most recent year by 6, the previous year by 4, the year before that by 2, and the other years by 1. Answer the following questions: a) What is the forecast for year 13 based on the 5-year moving average? b) What is the forecast for year 13 based on the 5-year weighted moving average? c) What is the MAD for the moving average forecast? d) What is the MAD for the weighted moving average forecast? e) Which forecasting model is better? Year Factory orders 1 2,512.70 2 2,739.20 3 2,874.90 4 2,934.10 5 2,865.70 6 2,978.50 7 3,092.40 8 3,052.60 9 3,145.20 10 3,114.10 11 3,257.40 12 3,654.00 13

The U.S. Census Bureau publishes data on factory orders for all manufacturing, durable goods, and nondurable goods industries. Shown below are factory orders in the United States over a 13- year period ($ billion). First, use the data to develop forecasts for years 6 through 13 using a 5-year moving average. Then, use the data to develop forecasts for years 6 through 13 using a 5-year weighted moving average. Weight the most recent year by 6, the previous year by 4, the year before that by 2, and the other years by 1. Answer the following questions: a) What is the forecast for year 13 based on the 5-year moving average? b) What is the forecast for year 13 based on the 5-year weighted moving average? c) What is the MAD for the moving average forecast? d) What is the MAD for the weighted moving average forecast? e) Which forecasting model is better? Year Factory orders 1 2,512.70 2 2,739.20 3 2,874.90 4 2,934.10 5 2,865.70 6 2,978.50 7 3,092.40 8 3,052.60 9 3,145.20 10 3,114.10 11 3,257.40 12 3,654.00 13

Assume the company that you work for is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5 million. If the project is undertaken, the company that you work for would terminate the project after four years. The company that you work for has a cost of capital is 13 percent, and the project has the same risk as other existing projects. In addition, the project has a salvage value of NOK 5,000,000 at the end of year 4, while the book value of the project at the end of year 4 is NOK 3,000,000. Assume Norwegian tax rate is 21%, which is the same as in the US. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 Year 2 Year 3 Year 4 NOK10,000,000 NOK15,000,000 NOK17,000,000 NOK17,000,000 The current exchange rate of the Norwegian kroner is $.135. You forecast exchange rate for the Norwegian kroner over the project's lifetime are listed below: Year 1 Year 2 Year 3 Year 4 $.13 $.14 $.12 $.15 What is the net present value of the Norwegian project?.

The scenic company is about to launch a new product. The test market results indicate that potential customers like the new product. Based on extensive research the following estimates have been developed for the first 3 years. These estimates are for the market as a whole. During year 1 you will be the only firm in the market:

                  Year 1                Year 2                Year 3

Price          Volume               Volume               Volume

$10            30,000                50,000                80,000

$14            20,000                35,000                50,000

$18            10,000                15,000                20,000      

$22            5,000                 10,000                15,000

Assume that the estimated direct cost of building the first unit is $12 and that a 95% experience rate will occur. If you set the price at $10, competition will not enter until year 3 and will take 30,000 units in that year. If you price at $14, competition will enter in year 2 and take away 5,000 units in year 2 and 25,000 units in year 3. If you set the price at $18 or $22 competition will enter in year 2 and they will take away half of the units in each of those years. What would be the total contribution to profits over the 3 year period for each of these pricing options. Show all of your work.

CONCEPT CHECK for DEPRECIATION Depreciation Methods — Year 1 Cost of machine (purchased Jan 1) 83,000 Salvage value 3,000 Useful life in years 5 Useful life in machine hours 100,000 A. Using the information provided above, calculate this truck’s depreciation for Year 1 and Year 2 using the following methods: Year 1 Year 2 1. Straight-line ________________ _______________ 2. Double-declining balance ________________ _______________ 3. Units of activity ________________ _______________ (Year 1 actual hours is 25,000 hrs) (Year 2 actual hrs is 19,000 hrs) B. Using the Units of activity method (as in (3) above), Calculate the BOOK VALUE of the machine at the end of YEAR 2 _______________. What is the _____________ if the machine is sold at the end of Year 2 for $38,000 ? $ ___________ Gain or Loss C. If the straight-line method was used and the machine had been purchased on October 1 instead of January 1, how much depreciation would have been taken in year 1? $_____________ D. An asset is purchased on May 1, 2007 for $38,000 with a salvage value of $2,000. What will be the depreciation for the first year using straight-line deprecation if the useful life is estimated to be 4 years? _________________ What will be the book value at the end of 2008? _____________

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $320,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,700,000. The cost of the machine will decline by $106,000 per year until it reaches $1,170,000, where it will remain.

If your required return is 13 percent, calculate the NPV if you purchase the machine today. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

NPV          $  

If your required return is 13 percent, calculate the NPV if you wait to purchase the machine until the indicated year. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
  

Should you purchase the machine?

• Yes

• No

If so, when should you purchase it?

• Today

• One year from now

• Two years from now

Problem 9-5 Option to Wait

MULTIPLE CHOICE PLEASE ANSWER ASAP. THANK YOU.

8. A company with working capital of $375,551 and a current ratio of 3.2 pays a $82,906 short-term liability. The amount of working capital immediately after payment is

a.$551,149

b.$463,350

c.$375,551

d.$87,799

11. Assume the following sales data for a company:

What is the percentage increase in sales from the preceding year to the current year (rounded to one decimal place)?

a.31.4%

b.14.4%

c.77.1%

d.45.8%

12. Cash dividends of $72,881 were declared during the year. Cash dividends payable were $10,358 at the beginning of the year and $15,733 at the end of the year. The amount of cash for the payment of dividends during the year is

a.$67,506

b.$72,881

c.$83,239

d.$98,972

15. Accounts receivable from sales transactions were $49,594 at the beginning of the year and $67,778 at the end of the year. Net income reported on the income statement for the year was $143,428. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method would be

a.$143,428

b.$18,184

c.$125,244

d.$161,612

P9-11 (Algo) Computing Present Values LO9-7, 9-8

[The following information applies to the questions displayed below.]

On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

1. Promised to pay a fixed amount of $7,700 at the end of each year for eight years and a one-time payment of $118,400 at the end of the 8th year.
2. Established a plant remodeling fund of $492,550 to be available at the end of Year 9. A single sum that will grow to $492,550 will be deposited on January 1 of this year.
3. Agreed to pay a severance package to a discharged employee. The company will pay $76,700 at the end of the first year, $114,200 at the end of the second year, and $151,700 at the end of the third year.
4. Purchased a $178,500 machine on January 1 of this year for $35,700 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year.

Required:

1. In transactions (1-4), determine the present value of the debt. (Round your answer to nearest whole dollar.)