We are evaluating a project that costs $843,617, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 56,500 units per year. Price per unit is $41, variable cost per unit is $17, and fixed costs are $417,515 per year. The tax rate is 35%, and we require a return of 22% on this project.

In percentage terms, what is the sensitivity of NPV to changes in the units sold projection?

(Round answer to 2 decimal places. Do not round intermediate calculations)

"A firm is considering purchasing a computer system. The following data has been collected.
- Cost of the system: $180,000
- Project life: 6 years
- Salvage value at the end of year 6: $14,000
- Depreciation method: five-year MACRS
- Tax rate: 21%
- Annual revenue from project: $148,000
- Annual expenses (not including depreciation): $93,000
The firm will borrow the entire $180,000 at 6.4% interest to be repaid in 2 annual payments.
The firm's MARR is 15%. Determine the IRR for the computer system. Enter your answer as a percentage rounded to the nearest tenth of a percent."

Each year, Florida's Best Salad Dressing, Inc. (FBSD) purchases 50,000 gallons of extra virgin

olive oil. Ordering costs are $95.00 per order, and the carrying cost, as a percentage of inventory

value is 80 percent. The purchase price to FBSD is $0.50 per gallon. FBSD’s management currently

orders the EOQ each time an order is placed. No safety stock is carried. The supplier is now offering a

quantity discount of $0.03 per gallon if FBSD orders 10,000 gallons at a time. What is the net benefit

in dollars if FBSD takes the discount?

I just want some ideas on how to write this essay, for instance, explanation of the case and what are some possible solution. thanks

“What Should I do, my friend?”

A former classmate of yours, Liz Theranos, has landed an internship position in the accounting department at Brompton Travels, a small closely held company. She tells you at one of your regular get-togethers at the local coffee shop, that she is excited and anxious to make a good impression as an accounting intern with the company because she wants to be offered a fulltime job at this company when she completes her internship.

The company’s operations are all related to tourism, and it has, as its principal asset, a large ocean front hotel. The company is primarily owned by the two directors who are brothers. Both of the brothers are actively engaged in the day-to-day running of the business. Liz gets along well with the directors and the small accounting staff even though she is only employed as an intern. Liz also is aware that the company had faced some serious cash flow difficulties shortly before she was appointed as an accounting intern. However, since Liz Theranos started working with the head accountant a remortgaging arrangement has, apparently, eased the financial pressure.

Recently, one of the managing brothers comes to Liz with a company check for $5,040 made payable to a design company, which he has already signed. Since the head accountant is currently on vacation for the next two weeks, and the internal policy requires that checks over $2,500 be signed by the head accountant and a director, he asks for Liz’s counter-signature. He explains that it is the deposit for the design work and furnishings for some of the hotel bedrooms. There is a formal invoice from a design studio, but you are still surprised as the head accountant before leaving on vacation had not made you aware that any such outlays had been planned. Nevertheless, given the explanation by the director and the supporting invoice, you counter-sign the check.

Later that day, out of curiosity, Liz decides to do some research into the design studio. She finds that the design company that has had a high level of indebtedness in the past. Liz also sees that the company secretary appears to be the daughter of one of the directors for whom she works. Two days later, the same managing director comes to you with another check, this time for $26,500, again needing only your counter-signature. There is a supporting invoice from the same design studio. You are hesitant, and the managing director seeing your hesitancy, explains that he is only asking you to counter-sign the check because the head accountant is still on vacation. He says that it is important to submit the check promptly so that it may be banked before April 15th. You ask why there is such urgency, particularly as there is no evidence of any design work having started. The managing director laughs and replies that the money should be 4/18 back in the hotel’s bank account by June 1 st . He further adds that the checks are needed urgently to settle some outstanding directors’ loan accounts at the design studio. Once again he asks you to not worry because the money should be returned to the hotel company account soon. Liz, once again reluctantly countersigns the check

Liz Theranos, your friend, whom you recall as always having high principles and Integrity, calls you to meet for coffee because she needs to speak confidentially with a good friend about something at work that’s bothering her. You agree to meet Liz for coffee.

Over coffee Liz shares with you the situation described above. Both you and Liz, recall Prof. Woods’ ethics class that you took in college and continue discussing how one can act honestly with regard to the dilemma posed by the recent director’s request and accounting functions at Liz Theranos’ employer? You immediately suggest to Liz that she should immediately quit. Liz tells you that she has seriously thought about quitting. However, besides needing the income, she has decided to stay because she really wants to get a full-time position with the company. The hotel/travel industry is the industry she really wants to work in as an accountant and after a couple of year’s full-time employment with Brompton Travel she would be in an ideal position to move on by getting a job with one of the major hotel chains. After a long stare, you tell her you understand and will help her structure a response that deals with the dilemma

Required:

? Help your friend Liz Theranos, who is just an intern at the company, deal with this ethical issue.

? Within a professional, word typed, 11-12 fonts, single-line spaced document

? Explain the ethical issues and how she should respond and, possible ramifications of Liz responding to this issue.

? Your final paper must be between 500-700 words.

Blue Eagle Recycling has a weighted-average cost of capital of 7.27 percent and is evaluating two projects: A and B. Project A involves an initial investment of 5,062 dollars and an expected cash flow of 7,745 dollars in 8 years. Project A is considered more risky than an average-risk project at Blue Eagle Recycling, such that the appropriate discount rate for it is 1.1 percentage points different than the discount rate used for an average-risk project at Blue Eagle Recycling. The internal rate of return for project A is 5.46 percent. Project B involves an initial investment of 5,615 dollars and an expected cash flow of 7,861 dollars in 9 years. Project B is considered less risky than an average-risk project at Blue Eagle Recycling, such that the appropriate discount rate for it is 0.95 percentage points different than the discount rate used for an average-risk project at Blue Eagle Recycling. The internal rate of return for project B is 3.81 percent. What is X if X equals the NPV of project A plus the NPV of project B?

Coolbrook Company has the following information available for the past year:   

   
The company’s hurdle rate is 7.26 percent.

Required:
1. Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.))



2. Recalculate ROI and residual income for each division for each independent situation that follows: (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.))

a. Operating income increases by 11 percent.



b. Operating income decreases by 10 percent.



c. The company invests $241,000 in each division, an amount that generates $117,000 additional income per division.



d. Coolbrook changes its hurdle rate to 5.26 percent.

Dana’s Ribbon World makes award rosettes. Following is information about the company:

Required:

1. Suppose Dana’s would like to generate a profit of $1,020. Determine how many rosettes it must sell to achieve this target profit.

2. If Dana’s sells 1,520 rosettes, compute its margin of safety in units, in sales dollars, and as a percentage of sales.

3. Calculate Dana’s degree of operating leverage if it sells 1,520 rosettes.

4a. Using the degree of operating leverage, calculate the change in Dana’s profit if unit sales drop to 1,140 units.

4b. Prepare a new contribution margin income statement to verify change in dana's profit.

Violet Sky Consulting has a weighted-average cost of capital of 9.46 percent and is evaluating two projects: A and B. Project A involves an initial investment of 6,723 dollars and an expected cash flow of 9,748 dollars in 8 years. Project A is considered more risky than an average-risk project at Violet Sky Consulting, such that the appropriate discount rate for it is 1.21 percentage points different than the discount rate used for an average-risk project at Violet Sky Consulting. The internal rate of return for project A is 4.75 percent. Project B involves an initial investment of 4,242 dollars and an expected cash flow of 7,211 dollars in 9 years. Project B is considered less risky than an average-risk project at Violet Sky Consulting, such that the appropriate discount rate for it is 1.28 percentage points different than the discount rate used for an average-risk project at Violet Sky Consulting. The internal rate of return for project B is 6.07 percent. What is X if X equals the NPV of project A plus the NPV of project B?

Coolbrook Company has the following information available for the past year:   

4. A review of the degree of operating leverage (DOL) It is December 31. Last year, Carter Chemical Co. had sales of $8,000,000, and it forecasts that next year’s sales will be $7,600,000. Its fixed costs have been and are expected to continue to be $4,400,000, and its variable cost ratio is 12.50%. Carter’s capital structure consists of a $13.5 million bank loan, on which it pays an interest rate of 9%, and 250,000 shares of common equity. The company’s profits are taxed at a marginal rate of 40%.

Given this data, complete the following sentences:

• The percentage change in the company’s sales is .

• The percentage change in Carter’s EBIT is .

• The degree of operating leverage (DOL) at $7,600,000 is .

There are several ways to use and interpret a firm’s DOL value. Consider the following statement and indicate whether it accurately reflects the meaning or an appropriate use of a firm’s DOL value. Assume that at a given sales level, a firm’s DOL is 2.5. This means that a 1% change in the firm’s sales will result in a corresponding 2.5% change in the firm’s EBIT. True or False: This statement accurately describes a firm’s DOL. True False