(Spreadsheet Problem)

You run a manufacturing facility. Last year your facility manufactured 21 products with the following characteristics:

Activity-Based Costing (ABC)

In addition, the following data is known about last year:

- 1.1 million labor hours were used to build the 21 products (note, “labor hours” and “fabrication hours” are not the same)

- $37/hour labor rate

- Assume there is no inflation

You are considering manufacturing the following 3 new products:

Use ABC to determine how much you should quote customers for each of the products (assume no profit in the quotes). Your answer should be based on last year’s history (do not assume that products A, B, and C have or are necessarily going to be built)

Hints:

1)You will need to figure out the number of engineering hours and fabrication hours needed for the three new products

2)You can figure out the labor hours associated with each new product from last year’s ratio of labor hours to fabrication hours.

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $209.71 million, and the expected cash inflows would be $70 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $74.99 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%.

1. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   NPV $   million
   IRR  %

   Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
   NPV $   million
   IRR  %

2. How should the environmental effects be dealt with when evaluating this project?
   1. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis.
   2. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur.
   3. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis.
   4. The environmental effects should be ignored since the plant is legal without mitigation.
   5. The environmental effects should be treated as a sunk cost and therefore ignored.
   
   
3. Should this project be undertaken?
   1. The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions.
   2. The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions.
   3. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken.
   4. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts.
   5. The project should be undertaken only under the "mitigation" assumption.
   
   

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $270.46 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $94.46 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%.

1. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   NPV $   million
   IRR  %

   Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
   NPV $   million
   IRR  %

2. How should the environmental effects be dealt with when evaluating this project?
   1. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis.
   2. The environmental effects should be ignored since the plant is legal without mitigation.
   3. The environmental effects should be treated as a sunk cost and therefore ignored.
   4. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis.
   5. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur.
   
   
3. Should this project be undertaken?
   1. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken.
   2. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts.
   3. The project should be undertaken only under the "mitigation" assumption.
   4. The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions.
   5. The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions.

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $270.58 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $94.15 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 16%.

1. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   NPV $ ____ million
   IRR _____ %

   Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
   NPV $ ____ million
   IRR ____ %

2. How should the environmental effects be dealt with when evaluating this project?
   1. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis.
   2. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur.
   3. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis.
   4. The environmental effects should be ignored since the plant is legal without mitigation.
   5. The environmental effects should be treated as a sunk cost and therefore ignored.
3. Should this project be undertaken?
   1. The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions.
   2. The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions.
   3. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken.
   4. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts.
   5. The project should be undertaken only under the "mitigation" assumption.

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $269.75 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $93.06 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 18%.

1. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   NPV $   million
   IRR  %

   Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
   NPV $   million
   IRR  %

2. How should the environmental effects be dealt with when evaluating this project?
   1. The environmental effects should be ignored since the plant is legal without mitigation.
   2. The environmental effects should be treated as a sunk cost and therefore ignored.
   3. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis.
   4. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur.
   5. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis.
3. Should this project be undertaken?
   1. The project should be undertaken only under the "mitigation" assumption.
   2. The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions.
   3. The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions.
   4. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken.
   5. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts.

16. An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $210.08 million, and the expected cash inflows would be $70 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $76.02 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign. NPV $ million IRR % Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. NPV $ million IRR % How should the environmental effects be dealt with when evaluating this project? The environmental effects should be treated as a sunk cost and therefore ignored. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis. The environmental effects should be ignored since the plant is legal without mitigation. Should this project be undertaken? The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts. The project should be undertaken only under the "mitigation" assumption. The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions.

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $209.80 million, and the expected cash inflows would be $70 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $75.83 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 16%.

1. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   NPV $   million
   IRR %

   Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
   NPV $   million
   IRR %

2. How should the environmental effects be dealt with when evaluating this project?
   1. The environmental effects should be ignored since the plant is legal without mitigation.
   2. The environmental effects should be treated as a sunk cost and therefore ignored.
   3. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis.
   4. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur.
   5. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis.
   
   -Select-IIIIIIIVV
3. Should this project be undertaken?
   1. The project should be undertaken only under the "mitigation" assumption.
   2. The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions.
   3. The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions.
   4. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken.
   5. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts.
   
   -Select-IIIIIIIVV

8.  Problem 11.09 (Capital Budgeting Criteria: Ethical Considerations)

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $270.70 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $94.23 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%.

1. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to two decimal places.
   NPV: $   million
   IRR:   %

   Calculate the NPV and IRR without mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to two decimal places.
   NPV: $   million
   IRR:   %

2. How should the environmental effects be dealt with when evaluating this project?
   1. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis.
   2. The environmental effects should be ignored since the plant is legal without mitigation.
   3. The environmental effects should be treated as a sunk cost and therefore ignored.
   4. If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis.
   5. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur.
   
   -Select-IIIIIIIVVItem 5
3. Should this project be undertaken?
   1. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken.
   2. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts.
   3. The project should be undertaken only under the "mitigation" assumption.
   4. The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions.
   5. The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions.
   
   -Select-IIIIIIIVVItem 6

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $269.63 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $93.42 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 18%. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign. NPV $ million IRR % Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. NPV $ million IRR % How should the environmental effects be dealt with when evaluating this project? If the utility mitigates for the environmental effects, the project is not acceptable. However, before the company chooses to do the project without mitigation, it needs to make sure that any costs of "ill will" for not mitigating for the environmental effects have been considered in the original analysis. The environmental effects should be treated as a remote possibility and should only be considered at the time in which they actually occur. The environmental effects if not mitigated would result in additional cash flows. Therefore, since the plant is legal without mitigation, there are no benefits to performing a "no mitigation" analysis. The environmental effects should be ignored since the plant is legal without mitigation. The environmental effects should be treated as a sunk cost and therefore ignored. Should this project be undertaken? The project should be undertaken since the IRR is positive under both the "mitigation" and "no mitigation" assumptions. The project should be undertaken since the NPV is positive under both the "mitigation" and "no mitigation" assumptions. Even when no mitigation is considered the project has a negative NPV, so it should not be undertaken. The project should be undertaken only if they do not mitigate for the environmental effects. However, they want to make sure that they've done the analysis properly due to any "ill will" and additional "costs" that might result from undertaking the project without concern for the environmental impacts. The project should be undertaken only under the "mitigation" assumption.