NEW PROJECT ANALYSIS

You must evaluate a proposal to buy a new milling machine. The base price is $186,000, and shipping and installation costs would add another $18,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,100. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $7,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $40,000 per year. The marginal tax rate is 35%, and the WACC is 11%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.

1. How should the $5,000 spent last year be handled?
   1. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay.
   2. Last year's expenditure is considered as an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   3. Last year's expenditure is considered as a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.
   4. The cost of research is an incremental cash flow and should be included in the analysis.
   5. Only the tax effect of the research expenses should be included in the analysis.
   
   -Select-IIIIIIIVVItem 1

2. What is the initial investment outlay for the machine for capital budgeting purposes, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent.
   $

3. What are the project's annual cash flows during Years 1, 2, and 3? Round your answer to the nearest cent. Do not round your intermediate calculations.

   Year 1 $

   Year 2 $

   Year 3 $

4. Should the machine be purchased?
   -Select-YesNoItem 6

Both Government and Opposition in New Zealand acknowledge that New Zealand needs to reduce its greenhouse gas emissions. To guide purchasing decisions of New Zealanders, government proposed to subsidise the price of imported electric and hybrid vehicles by up to NZ$8,000 and tax the import of vehicles with the highest greenhouse gas emission by up to NZ$3,000.[1]

Julie-Anne Genter says, “These policies are about making cleaner vehicles a realistic option for more New Zealand households and businesses.”[2]

Lawrence Yule responds “National supports incentivising people to buy electric vehicles, providing their lifestyle can accommodate them. From the surface this looks like a concept that is worth exploring, I have found however after investigation that it is unlikely to work.”[3]

The Ministry of Transport notes that, “New Zealand is well placed to benefit from electric vehicles. More than 80 percent of electricity is generated from renewable sources and there is enough supply for widespread adoption of EVs. Even if every light vehicle was electric, there is sufficient generation capacity to charge these provided the majority are charged at off-peak times.”[4]

Given what you understand about price elasticity of demand and supply, explain why electric vehicle prices continue to be so high in New Zealand. Use a suitable diagram to illustrate your answer.

Given what you understand about price elasticity of demand and supply, explain how the proposed "feebate" policy will affect consumer purchasing decisions of electric vehicles and vehicles with high greenhouse gas emissions ("gas guzzlers"). Use a suitable diagram to illustrate your answer.

Either using the same diagram, or a new one, explain the impact of the feebate policy on price in the two market segments. Explain how the benefit of the subsidy and the burden of the tax is likely to be shared between the consumers and vehicle importers. What impact would you expect the feebate policy to have on the price and quantity demanded of electric vehicles and gas guzzlers? What are the advantages to society of lowering the price of electric vehicles and increasing that of gas guzzlers? What are the disadvantages?

Based on your discussion, do you think the government’s intervening in the market of imported vehicles will be beneficial for society?

Suppose that new machines cost $504. The marginal benefit from new machines is: MB = 246 – 6K, where K is the number of machines purchased. The depreciation rate is 12%, the dividend yield is 6%, and the corporate tax rate is 35%. What would be the marginal cost of each dollar of machinery investment in the following situations?

a. Firms are allowed to expense the machine, and there is no tax credit

b. Firms are allowed to depreciate the machine over 5 years and use the dividend yield (6%) to discount depreciation allowances. Firms are also allowed an 8% investment tax credit (i.e. 8% of the amount invested).

ANALYSIS An Australian manufacturing company is keen to develop new products and develop new product line of shoes so that the company can expand into Asian markets more than before. The data have been collected for 99 products from the market. The data are in an excel file named “SHOES”. The file includes: PRICE: Price of the shoes in dollars. GENDER: 1 for Female product and 2 for Male product. COUNTRY: the country in which the shoes is produced: 1 made in Thailand, 2 made in Singapore and 3 made in China. COST: Production cost of the shoes in dollars.

questions:

QUESTIONS Part 1: 1. Construct a pie chart for numbers of men and women shoes. Construct a pie chart for numbers for the three countries- Thailand, Singapore and China. Present your findings.

2. Construct a cross-classification table of frequencies between gender and country. Plot a vertical bar chart of frequency (Y variable) and gender (X variable), then group the bar charts of genders for three countries and comment on the relationship between gender and country

3. Determine if average prices for female shoes is less than average prices for male shoes. Compare the result with part 2 question

1. Does the result confirm your previous findings? (Follow the hypothesis testing steps, 0.05 level of significance, assuming “equal variances” of populations).

4. Using a scatter graph of price (Y variable on vertical axis) and production cost (X variable, horizontal axis), comment on the relationship between price and cost.

E

ANALYSIS An Australian manufacturing company is keen to develop new products and develop new product line of shoes so that the company can expand into Asian markets more than before. The data have been collected for 99 products from the market. The data are in an excel file named “SHOES”. The file includes: PRICE: Price of the shoes in dollars. GENDER: 1 for Female product and 2 for Male product. COUNTRY: the country in which the shoes is produced: 1 made in Thailand, 2 made in Singapore and 3 made in China. COST: Production cost of the shoes in dollars.

questions:

1. Calculate the Mean, Median, Mode, Standard Deviation and Coefficient of Variation, for

prices for men and women shoes, separately. Compare the figures and explain that what

conclusions you can draw from these analyses? Draw a box and Whisker plot for men and

female shoes prices and comment on the shape of the graph.

2. Calculate the Mean, Median, Mode, Standard Deviation and Coefficient of Variation for

prices for the three countries – Thailand, Singapore and China, separately. Compare the figures

and explain what conclusions you can draw from these analyses? Draws a Box and Whisker

plot for each country and comment on the shape of the graph.

ANALYSIS An Australian manufacturing company is keen to develop new products and develop new product line of shoes so that the company can expand into Asian markets more than before. The data have been collected for 99 products from the market. The data are in an excel file named “SHOES”. The file includes: PRICE: Price of the shoes in dollars. GENDER: 1 for Female product and 2 for Male product. COUNTRY: the country in which the shoes is produced: 1 made in Thailand, 2 made in Singapore and 3 made in China. COST: Production cost of the shoes in dollars.

questions:

EXCEL Instructions Activation of Data Analysis:

1. Click on File, then click Options.

2. Click Add-Ins, and then in the Manage box, select Excel Add-ins.

3. Click Go.

4. In the Add-Ins available box, select the Analysis ToolPak check box, and then click OK.

5. After you load the Analysis ToolPak, the Data Analysis command is available in the Analysis group on the Data tab.

Filter numbers: Highlight the column of data/ Data tab/Sort/expand the selection / A/Z Graphs:

1. Highlight all data including labels

2. Insert Tab/ choose the chart. Summary statistics From Menu, Data Tab, Data analysis, Descriptive statistics (highlight data for input range), tick summary statistics and confidence interval, OK Two sample hypothesis testing:

Excel/Data/Data Analysis/ t test, two sample assuming equal variances (or unequal)/ highlight data for variable 1 and 2/ insert the value for Hypothesized difference equal zero and level of significance 0.05.

*if you have highlighted the labels tick (the relevant box. Anova: From Menu, Data Tab, Data analysis, Anova single factor highlight data for input range), insert the value for alpha, OK Regression From Menu, Data Tab, Data analysis, Regression, highlight data for Input Y range and Input X range, tick Residuals Plots boxes, OK

1. Zeebo company is considering investing $425,000 for new equipment. The new equipment is much more efficient than the current machine Zeebo is using. The machine will save $105,000/year in labor and other costs but will require annual maintenance costs of $13,000/year. The machine is expected to last 6 years and will have no salvage value. Estimate the project's Internal Rate of Return and Payback Period.

You live right on the border between Massachusetts and New Hampshire. In New Hampshire, wine costs $10 per bottle. In Massachusetts, wine also costs $10 per bottle, but Massachusetts adds a tax of $5 per bottle. No matter where you buy wine from, you like 5 parts food for every 1 part wine, implying that your utility function is U=min(F,5W). Food costs $1 per unit in both New Hampshire and Massachusetts and is not taxed in either state. You have $90 per week to spend on food and wine.

(a)  What's the equation for the budget constraint in New Hampshire

(b)  If you buy all of your wine in New Hampshire, how much wine and food will you buy

(c)  Make a graph showing your budget constraint, utility maximizing bundle, and your utility maximizing indifference curve

(d)  What is the equation for the budget constraint in Massachusetts

(e)  At first, you buy all of your wine in Massachusetts until you find in store you like in NH. Then you buy all of your wine in NH because it's cheaper. Given your utility function, will this price change generate both an income and a substitution effect? Explain

(f)   Eventually, you decide to buy some of your wine in Massachusetts and some in NH. The wine store in Massachusetts is closer to your home than the store in NH so you usually buy your first 2 bottles of wine in Massachusetts but drive to NH for any bottle of wine after the first. Graph this budget constraint for food and wine.

You are assisting a new patient, Jeffrey, age 23, with completing the new patient assessment form. He is not very talkative and you have a hunch that he is not going to openly share his personal information with you. You know that honest answers are necessary to provide him the best care possible.

1. Describe how you would attempt to build a rapport with Jeffrey that will earn his trust so that he is comfortable revealing the private information in his health history.
2. Provide 2 example open ended questions that you could ask Jeffery to provoke a more open response.
3. Explain how other communication barriers could prevent the medical professional from gathering patient information, using examples.