E10-5 Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets, Hurdle Rate on Each [LO 10-4, 10-5]

Solano Company has sales of $520,000, cost of goods sold of $380,000, other operating expenses of $51,000, average invested assets of $1,650,000, and a hurdle rate of 8 percent.


Required:
1. Determine Solano’s return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin percentage answer to the nearest 2 decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Investment Turnover answer to 4 decimal places.)

     

2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario’s impact on Solano’s ROI and residual income. (Note: Treat each scenario independently.) (Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))

   a. Company sales and cost of goods sold increase by 40 percent.      

         
       
    b. Operating expenses decrease by $10,500.        
      
                

   c. Operating expenses increase by 20 percent.

                

    d. Average invested assets increase by $310,000.

                

    e. Solano changes its hurdle rate to 14 percent.

        

Often, planned tasks and their duration may change during project execution. It is important to analyze the effect of these changes on your project to ensure that the project still executes as expected. In this assignment, you will learn how to monitor your project for any effect of changes to planned tasks.

Revisit Chapter 6, "Project Time Management" in your textbook. Assume that there are six tasks to be completed in a project. Their duration and predecessors are specified in the following table:

Perform the following tasks:

1. Create a network diagram for this project.

2. Calculate the critical path and slack times for all tasks.

3. Assume that during project execution, you need to change the duration for Task 3 to 5 days, and Task 2 is finished 1 day early. How would these changes affect your project? What problems would have arisen if you were not monitoring the project?

4. Submit the network diagram as an embedded image in a 3- to 4-page document that also contains the calculations for the critical path and slack times and responses to the questions.

Submit your answers in the online classroom by Day 6.

Submit your answers by Day 6.

If you don’t repay a loan, and a lot of time passes, the debt can grow to unmanageable proportions, as happened to an unfortunate borrower in Melbourne. A grandmother has been forced to put her house up for sale after she ended up owing a massive $83 000 —on a $15 000 loan. Andrea lane, 57, borrowed the money in 2002 to pay for her father’s funeral and to buy a new oven for her Clayton home. But she could not meet the cost of the loan and 18 years later, the amount she owed had grown to $83 000 … Andrea said: ‘I borrowed the money when I was grieving for my father. I just signed the papers.’

a) Based on original loan of $15000, calculate the monthly repayments to be repaid over 5 years. Assume an interest rate of 25% p.a.

Andrea can afford to pay $600 per month into the loan, and she has been able to negotiate a new interest rate of 8% p.a.

b) How long would it take Andrea to repay the loan?

c) If she cannot afford to increase her current repayments, and is unable to negotiate a better interest rate, recommend a strategy to reduce the total length of time to repay the loan? Based on this strategy, how much interest would she save?

Mussel settlment patterns on algae. Mussel larvae are in great abundance in the drift material that washes up on Ninety Mile Beach in New Zealand. These larvae tend to settle on algae. Environmentalists at the University of Auckland investigated the impact of algae type on the abundance of mussel larvae in drift material (Malacologia, February 8, 2002). Drift material from three different wash-up events on Ninety Mile Beach were collected;for each wash-up,the algae was separated into four strata: coarse-branching, medium-branching, fine-branching, and hydroid algae. Two samples were randomly selected for each of the3×4=12event/strata combinations, and the mussel density (percent per square centimeter) was measured for each. The data was analyzed as a complete 3×4 factorial design. The ANOVA summary table is shown below. (a) Identify the factors (and levels) in this experiment. (b) How many treatments are included in the experiment? (c) How many replications are included in the experiment? (d) What is the total sample size for the experiment? (e) What is the response variable measured? (f) Which ANOVA F-test should be conducted first? Conduct this test(atα = .05)and interpret the results. (g) If appropriate, conduct the F-tests (at α = .05)for the main effects .Interpret the results.

A second course in statistics Regression Analysis 7th addition

If you don’t repay a loan, and a lot of time passes, the debt can grow to unmanageable proportions, as happened to an unfortunate borrower in Melbourne. A grandmother has been forced to put her house up for sale after she ended up owing a massive $83 000 —on a $15 000 loan. Andrea lane, 57, borrowed the money in 2002 to pay for her father’s funeral and to buy a new oven for her Clayton home. But she could not meet the cost of the loan and 18 years later, the amount she owed had grown to $83 000 … Andrea said: ‘I borrowed the money when I was grieving for my father. I just signed the papers.’

a) Based on original loan of $15000, calculate the monthly repayments to be repaid over 5 years. Assume an interest rate of 25% p.a.

Andrea can afford to pay $600 per month into the loan, and she has been able to negotiate a new interest rate of 8% p.a.

b) How long would it take Andrea to repay the loan?

c) If she cannot afford to increase her current repayments, and is unable to negotiate a better interest rate, recommend a strategy to reduce the total length of time to repay the loan? Based on this strategy, how much interest would she save?

The management of Kiboko Ltd. want to establish the amount of financial needs for the next two years. The balance sheet of the firm as at 31 December 2001 is as follows:

For the year ended 31 December 2001, sales amounted to Sh.240, 000,000. The firm projects that the sales will increase by 15% in year 2002 and 20% in year 2003.

The after tax profit on sales has been 11% but the management is pessimistic about future operating costs and intends to use an after-tax profit on sales rate of 8% per annum.

The firm intends to maintain its dividend payout ratio of 80%. Assets are expected to vary directly with sales while trade creditors and accrued expenses form the spontaneous sources of financing. Any external financing will be affected through the use of commercial paper.

(a)        Determine the amount of external financial requirements for the next two years.   

(b)        (i)         A proforma balance sheet as at 31 December 2003.

(ii)        State the fundamental assumption made in your computations in (a) and b(i) above.

A company’s auditor believes the per diem cost in Darwin rose significantly between 2005 and 2012. To test this belief, the auditor sampled 51 business trips from the company’s records for 2005; the sample average was $190 per day, with a population standard devi- ation of $18.50. The auditor selected a second random sample of 47 business trips from the company’s records for 2012; the sample average was $198 per day, with a population standard deviation of $15.60. If he uses a risk of committing a Type I error of 0.01, does the auditor find that the per diem average expense in Darwin has gone up significantly?

1. H_o: mu2005 - mu2012 (= ; <= ; >=)  0

H_a: mu2005 - mu2012 (< > ; > ; <) 0

2. Statistical test: (z / t)  test for 2 populations

3. Level of significance (be careful as to one-tailed or two-tailed)

4. Set up critical values (Write the value in the box, include "-" sign if negative, if two values, just write the positive one)

5. Gather sample data: xbar2005 =  ; n2005 = 51 ; sigma2005 = 18.5; xbar2012 = 198; n2012 = 47; sigma2012 =

6. Calculate test statistic (write your answer correct to 2 decimal places)

7. Make statistical conclusion: (Reject / Do not reject)  the null hypothesis. There is (sufficient/insufficient)   evidence that the per diem expense has rose significantly from 2002 to 2009 at 1% level of significance.

{Exercise 4.19 (Algorithmic)} The National Sporting Goods Association conducted a survey of persons 7 years of age or older about participation in sports activities (Statistical Abstract of the United States: 2002). The total population in this age group was reported at 248.5 million, with 120.9 million male and 127.6 million female. The number of participants for the top five sports activities appears here. Participants (millions)             Activity                                     Male                                     Female             Bicycle riding                                     20.7                                     22.5             Camping                                     24.1                                     25.8             Exercise walking                                     30.2                                     59.2             Exercising with equipment                                           18.9                                     25.9             Swimming                                     24.9                                     32.9                                     For a randomly selected female, estimate the probability of participation in each of the sports activities (to 2 decimals). Note that the probabilities do not sum to 1 because of participation in more than one sports activity. Bicycle riding Camping Exercise walking Exercising with equipment Swimming For a randomly selected male, estimate the probability of participation in each of the sports activities (to 2 decimals). Note that the probabilities do not sum to 1 because of participation in more than one sports activity. Bicycle riding Camping Exercise walking Exercising with equipment Swimming For a randomly selected person, what is the probability the person participates in exercise walking (to 2 decimals)? Suppose you just happen to see an exercise walker going by. What is the probability the walker is a woman (to 2 decimals)? What is the probability the walker is a man (to 2 decimals)?

The following table repeats the annual total returns on the MSCI Germany Index previously given and also gives the annual total returns on the JP Morgan Germany five- to seven-year government bond index (JPM 5–7 Year GBI, for short). During the period given in the table, the International Monetary Fund Germany Money Market Index (IMF Germany MMI, for short) had a mean annual total return of 4.33 percent. Use that information and the information in the table to answer the following questions.

a) Using the IMF Germany MMI as a proxy for the risk-free return, calculate the Sharpe ratio for:

(i) the 60/40 equity/bond portfolio described in Problem 12.

(ii) the MSCI Germany Index.

(iii) the JPM Germany 5–7 Year GBI.

b) Contrast the risk-adjusted performance of the 60/40 equity/bond portfolio, the MSCI Germany Index, and the JPM Germany 5–7 Year GBI, as measured by the Sharpe ratio.

1) The Code of Professional Ethics prohibits CFEs from expressing opinions regarding the guilt or innocence of any person or party. This means that a CFE who serves as an expert witness may NOT answer questions about whether the defendant committed the offense.

True

False

2) Anything that is perceptible by the five senses legally presented at trial to prove a contention and induce a belief in the mind of the jury is called:

3) Black, a Certified Fraud Examiner, obtained a document in 2001 in connection with a fraud examination. In 2002, the document was introduced at trial. The defense objected because Black had not dated or initialed the document when it was obtained. The defense is objecting on the basis of:

4) When testifying in court, the use of notes by expert witnesses should be limited as much as possible so that the witness can maintain eye contact with the jury.

True

False

5)

The notes and materials of an expert, hired to testify on behalf of a client, are generally privileged from discovery.

True

False

6)

Able, a Certified Fraud Examiner, has just finished testifying on direct examination. During cross-examination, the opposing counsel tries to imply that Able has examined only one area of the case and that his investigation was limited in extent or scope. The technique that the opposing counsel is using is called: