Williams Company, located in southern Wisconsin, manufactures a variety of industrial valves and pipe fittings that are sold to customers in nearby states. Currently, the company is operating at about 70% capacity and is earning a satisfactory return on investment. Glasgow Industries Ltd. of Scotland has approached management with an offer to buy 120,000 units of a pressure valve. Glasgow Industries manufactures a valve that is almost identical to Williams’ pressure valve; however, a fire in Glasgow Industries’ valve plant has shut down its manufacturing operations. Glasgow needs the 120,000 valves over the next 4 months to meet commitments to its regular customers; the company is prepared to pay $21 each for the valves. Williams’s product cost for the pressure valve, based on current attainable standards, follows: Direct materials $ 6 Direct labor (0.5 hour per valve) 8 Manufacturing overhead (1/3 variable) 9 Total manufacturing cost $ 23 Additional costs incurred in connection with sales of the pressure valve are sales commissions of 5% and freight expense of $1 per unit. However, the company does not pay sales commissions on special orders that come directly to management. Freight expense will be paid by Glasgow. In determining selling prices, Williams adds a 40% markup to product cost. This provides a $32 suggested selling price for the pressure valve, rounded to the nearest whole dollar. The marketing department, however, has set the current selling price at $30 to maintain market share. Production management believes that it can handle the Glasgow Industries order without disrupting its scheduled production. The order would, however, require additional fixed factory overhead of $12,000 per month in the form of supervision and clerical costs. If management accepts the order, Williams will manufacture and ship 30,000 pressure valves to Glasgow Industries each month for the next 4 months. Shipments will be made in weekly consignments, FOB shipping point. Required: 1. Determine how many additional direct labor hours (DLHs) will be required each month to fill the Glasgow order. 2. Prepare an analysis showing the impact on operating income of accepting the Glasgow order. 3. Calculate the minimum unit price that Williams’ management could accept for the Glasgow order without reducing operating income. 4. To prove your answer to Requirement 3, use the Goal Seek function in Excel to calculate the minimum unit selling price for the special sales order. 5. Suppose now that if the Glasgow order were accepted, sales of 5,000 units per month to regular customers would be precluded (at a selling price of $30 per unit). All other facts are as given in this problem. What is the revised breakeven selling price per unit for the Glasgow special sales order?

Activity-Based Costing for a Service Company

Bounce Back Insurance Company carries three major lines of insurance: auto, workers' compensation, and homeowners. The company has prepared the following report:

Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows:

Activity-base usage data for each line of insurance were retrieved from the corporate records as follows:

a. Complete the product profitability report through the administrative activities. Determine the operating income as a percent of premium revenue. Rounded to the nearest whole percent.

Question from chapter 2 -3rtDa

In 2006 the State of Indiana in the USA sold a 75-year concession to operate and maintain the East-West Toll Road. Before doing so, it commissioned a consulting report that estimated the value of the concession.

Q: Calculate the present value of the concession using a discount rate of 6%. Cash flows are reported in Table 1 for each ten-year block up until 2066–2075 with the last block as five years (2076–2081). Assume in your calculations that cash flows are spread evenly during those blocks.

Calculate:

1) Covariance

2) Expected return on a portfolio XY

2) Risk on a portfolio XY

Weight of each asset is 50%.

Average annual return:

asset X: 11.74%

asset Y: 11.14%

Standard deviation:

asset X: 8.9

asset Y: 2.78

On July 31, 2017, Wildhorse Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Wildhorse issued a $328,800, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $232,800 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Wildhorse made a final $96,000 payment to Minsk. Other than the note to Netherlands, Wildhorse’s only outstanding liability at December 31, 2017, is a $28,600, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31. Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017. Interest revenue $ Weighted-average accumulated expenditures $ Avoidable interest $ Interest capitalized $ Prepare the journal entries needed on the books of Wildhorse Company at each of the following dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (1) July 31, 2017. (2) November 1, 2017. (3) December 31, 2017. Date Account Titles and Explanation Debit Credit (To record the note.) (To record the payment to Minsk.) (To record the proceeds from the investment.) (To record the payment to Minsk.) 12/31 Click if you would like to Show Work for this question: Open Show Work

1. An oil company was evaluating the economic performance of one of its recompleted wells to decide whether to abandon it. The company uses 10% MARR or hurdle rate. The well is expected to produce for another 5 years. Year 1 post recompletion revenue was $500,000. Annual revenues are anticipated to drop by $50,000 each year starting in year 2.

a) What is the forecast revenue for year 4?

b) What is the equivalent annual worth of the revenue for the five year period?

2. A large building HVAC system has an estimated life expectancy of 12 more years. Replacement at that time is expected to cost $350,000. The building engineer is considering a plan to set aside equal annual deposits into a fund bearing 8 percent annual interest so that $350,000 will be on hand in 12 years. If he is ready to make a deposit right now, what equal amounts should he deposit now and for each of the next twelve years?

Suppose Hornsby Ltd. just issued a dividend of $2.55 per share on its common stock. The company paid dividends of $2.05, $2.12, $2.29, and $2.39 per share in the last four years.

What was the dividend growth rate for each year? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

What were the arithmetic and geometric dividend growth rates over the past four years? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

If the stock currently sells for $74, what is your best estimate of the company’s cost of equity capital using arithmetic and geometric growth rates? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Problem 14-8 Calculating Cost of Debt [LO2]

a) total book value?

b) total market value?

c) cost of debt?

please help