The marketing department of Deer Park has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Budgeted unit sales | 11,900 | 12,900 | 14,900 | 13,900 |
The selling price of the company’s product is $18 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $72,000.
The company expects to start the first quarter with 1,785 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,985 units.
Required:
1. Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.
2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.
3. Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.
In: Accounting
You work for the National Park Service testing a small cannon used to prevent avalanches by shooting down snow overhanging the sides of mountains. In order to determine the range of the cannon, it is necessary to know the speed with which the projectile leaves the cannon (muzzle speed), relative to the ground. The cannon you are testing has a weight of 500 lbs. and shoots a 20-lb. projectile. During lab tests where the cannon is held and cannot move, the muzzle speed is 400 m/s. You want to calculate the projectile's muzzle speed with respect to the ground under field conditions when the cannon is mounted so that it is free to move (recoil) when fired. You take the case where the cannon is fired horizontally using the same shells as in the laboratory.
In: Physics
Jensen Company owns a building in a suburban industrial park. It purchased the building four years ago for $3 million. It is now deciding whether to lease the building or to use it as a distribution center. It could be rented immediately. Given today’s market conditions, rental income of $120,000 per year would be expected. To convert the building to make it useful as a distribution center would require an immediate expenditure of $400,000. Having the distribution center at this location would provide Jensen with $140,000 per year in cost savings, at today’s prices. The cash flows associated with this decision are not very risky, so a real discount rate of just 3% per year is required. For simplicity, assume that: (i) there are no taxes, (ii) the building could be rented or used as a distribution center forever, (iii) ongoing cash flows, including rents and distribution cost savings, would increase with the overall inflation rate, and (iv) all cash flows except the initial $400,000 would occur at year end. (the last assumption implies that one year of inflation would affect the first lease payment and distribution cost saving)
(a) The inflation rate is forecast to be 4% per year. What nominal discount rate is appropriate for this project?
(b) Provide a NPV analysis and a recommendation of how the building should be used.
(c) Is the outcome of your NPV analysis sensitive to changes in the assumed inflation rate? (An intuitive answer without numbers is OK).
(d) Based on the information provided, is it possible to estimate the current market value of the building? If so, provide an estimate.
In: Finance
Water World
is considering purchasing a water park in Atlanta, Georgia, for
$1,950,000.
The new facility will generate annual net cash inflows of
$481,000
for
eighteight
years. Engineers estimate that the facility will remain useful for
eighteight
years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of
1010%
on investments of this nature.
LOADING...
(Click the icon to view the Present Value of $1 table.)
LOADING...
(Click the icon to view Present Value of Ordinary Annuity of $1 table.)
LOADING...
(Click the icon to view Future Value of $1 table.)
LOADING...
(Click the icon to view Future Value of Ordinary Annuity of $1 table.)Read the requirements
LOADING...
.
Requirement 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment.
First, determine the formula and calculate payback. (Round your answer to one decimal place, X.X.)
|
Amount invested |
/ |
Expected annual net cash inflow |
= |
Payback |
|
|
$1,950,000 |
/ |
$481,000 |
= |
4.1 |
years |
Next, determine the formula and calculate the accounting rate of return (ARR). (Round the percentage to the nearest tenth percent, X.X%.)
|
Average annual operating income |
/ |
Average amount invested |
= |
ARR |
|
|
$237,250 |
/ |
$975,000 (how did they get this?) |
= |
24.3 |
% |
Calculate the net present value (NPV). (Enter any factor amounts to three decimal places, X.XXX.)
|
Net Cash |
Annuity PV Factor |
Present |
||
|
Years |
Inflow |
(i=10%, n=8) |
Value |
|
|
1 - 8 |
Present value of annuity |
|||
|
0 |
Investment |
|||
|
Net present value of the investment |
||||
In: Accounting
A random sample of 17 police officers in Oak Park has a mean annual income of $35,800 and a standard deviation of $7,800. In Homewood, a random sample of 18 police officers has a mean annual income of $35,100 and a standard deviation of $7,375. Test the claim at α = 0.01 that the mean annual incomes in the two cities are not the same. Assume the population variances are equal.
a. Write down the type of test you will conduct.
b. Write down the null and alternative hypotheses.
c. Construct the test statistic.
d. Conduct the test.
e. What do you conclude?
In: Statistics and Probability
Water WorldWater World
is considering purchasing a water park in Atlanta, Georgia, for
$1,950,000.
The new facility will generate annual net cash inflows of
$481,000
for
eight
years. Engineers estimate that the facility will remain useful for
eight
years and have no residual value. The company uses straight-line depreciation, and its stockholders demand an annual return of
10%
on investments of this nature.
LOADING...
(Click the icon to view the Present Value of $1 table.)
LOADING...
(Click the icon to view Present Value of Ordinary Annuity of $1 table.)
LOADING...
(Click the icon to view Future Value of $1 table.)
LOADING...
(Click the icon to view Future Value of Ordinary Annuity of $1 table.)Read the requirements
LOADING...
.
Requirement 1. Compute the payback, the ARR, the NPV, the IRR, and the profitability index of this investment.
First, determine the formula and calculate payback. (Round your answer to one decimal place, X.X.)
|
Amount invested |
/ |
Expected annual net cash inflow |
= |
Payback |
|
|
/ |
= |
years |
|||
In: Accounting
Question 1
A company is building an amusement park and has the following projected cashflows. Costs consist of building costs and staff salaries:
|
Year |
Building costs (assume as being paid at start of each respective year) |
|
1 |
$100,000 |
|
2 |
$50,000 |
|
3 |
$30,000 |
|
4 |
$45,000 |
5 $0 for year 5 and all future years for building costs
Staff salaries
$4,000 for year 1, increasing by a discrete step of $100 at the start of each future year, but paid continuously throughout each year, every year into the future
Revenue consists of ticket sales, merchandise sales, and food and beverage sales: Food and beverages
For all 30 years,
Tickets: $2000 per month for all years. Assume as paid at end of each month.
Merchandise: Equal to 1/3 of ticket sales
Food and beverages: $4250 per year, increasing by $50 per year in each future year. Assume the amount in each year is earned (paid) in the middle of each year.
Investors in the amusement park want to know what the Net Present Value (NPV) of this project is, assuming:
a risk discount rate (effective yield) of 14% per annum; and
a 30-year time horizon (i.e. all costs and revenues cease after 30 years).
(a) Calculate the present value of costs. Show all workings. [4 marks]
(a) Calculate the present value of revenue. Show all workings. [4 marks]
(b) Hence, calculate the NPV of the overall project. [1 mark]
In: Finance
In: Accounting
Preparation of financial statements
The commissioners of the Regents Park Commission Special Revenue Fund approved the following budget for calendar year 2019. Assume that the fund balance (Restricted) at the beginning of the year was $10,000. Also, assume that no encumbrances were outstanding and no supplies were on hand at the beginning or the end of the year. Prepare a statement of revenues, expenditures, and changes in fund balance. In addition, prepare a budgetary comparison schedule, assuming the originally approved budget and the final budget are identical.
| Estimated Revenues | |||
| Property taxes | $300,000 | ||
| Concession rentals | 100,000 | ||
| Fees and user charges | 200,000 | $600,000 | |
| Appropriations | |||
| Wages and salaries | $200,000 | ||
| Capital equipment | 240,000 | ||
| Transfer to Debt Service Fund | 60,000 | ||
| Supplies | 50,000 | 550,000 | |
| Budgeted Increase in Fund Balance | $50,000 | ||
| During the year, actual revenues were as follows: | |||
| Property taxes | $300,000 | ||
| Concession rentals | 120,000 | ||
| Fees and user charges | 185,000 | ||
| Actual expenditures were as follows: | |||
| Wages and salaries | $199,000 | ||
| Capital equipment | 236,000 | ||
| Transfer to Debt Service Fund | 60,000 | ||
| Supplies | 48,000 |
In: Finance
A nearby park is comprised of 15% pine, 20% elm, 30% alder and 35% cedar. In the spring, the surrounding city is flooded with pollen. You wonder whether these four tree species contribute proportionally to the total pollen count.
Using air traps, you collect pollen samples. After mixing them, you separate out 1000 pollen granules and identify them by species. Here are the data:
| pine | 211 |
| elm | 148 |
| alder | 299 |
| cedar | 342 |
The question of interest is whether the tree species contribute proportionally to pollen count.
Step 2: State the null hypothesis.
Step 3: State the alternative hypothesis.
Step 4: What is the correct level of alpha?
Step 5: Which statistical test are you using?
Step 6: What is the value of the test statistic?
Step 6 continued: How many degrees of freedom in this test?
Step 7: What is the critical value for the test statistic?
Step 8: How does the test statistic compare to the critical value?
Step 9: Based on this comparison, do you accept or reject your null hypothesis?
Step 10: What do you conclude from this analysis?
In: Statistics and Probability