Door2DoorCo are a large courier company who have just received a shipment of X new vans. They wish to lock in a tyre supply contract to keep these vans well shod over the Y months that they intend to keep the vans. The vans come with low quality tyres that will need to be replaced in 2 months. Two suppliers, ThriftyTread and WiserWheels have expressed interest at supplying tyres at a fixed price for the duration. The offers are summarised below:
Number of Vans, X – 120
Corporate Discount rate – J1=12.68% p.a.
Initial Tyre Life – 2 months
Keep vans for (Y) – 50 months
ThriftyTread
WiserWheels
a) For each of the two potential suppliers, illustrate Door2DoorCO’s tyre expenditure for the new vans as a fully labelled timeline diagram. (Remember that there are X new vans, and assume each van has 4 tyres.)
b) Determine the value in period 2 dollars of the expenditure stream if Door2DoorCo decide to go with ThriftyTreads. [Hint, you will firstly need to find the j3 rate equivalent to the corporate discount rate, you will then need to find the PV of the expenditure stream in period 2 dollars]
c) Thus determine the present value of the expenditure stream if Door2DoorCo decide to go with ThriftyTreads. [NB this is a bit tricky and is aimed at stronger students]
d) Determine the value in period 2 dollars of the expenditure stream if Door2DoorCo decide to go with WiserWheels.
e) Thus determine the present value of the expenditure stream if Door2DoorCo decide to go with WiserWheels [NB this is a bit tricky and is aimed at stronger students]
f) Comparing your answers for part (b) with part (d), OR part (c) with part (e), explain which tyre supplier Door2DoorCo should choose.
g) Suggest three legitimate business considerations which a manager may take into account that might influence or even change the recommendation from part (f). NB “These tyres are prettier”, “This company will bribe me with a kickback”, or “My wife works for that company” are NOT legitimate business reasons. (Write around 20~30 words explaining/justifying each consideration.)
In: Accounting
In: Biology
25. please answer all questions round to 4 decimal places
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,455.00 to install, $5,130.00 to operate per year for 7 years at which time it will be sold for $6,941.00. The second, RayCool 8, costs $41,330.00 to install, $2,082.00 to operate per year for 5 years at which time it will be sold for $8,917.00. The firm’s cost of capital is 6.16%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,548.00 to install, $5,135.00 to operate per year for 7 years at which time it will be sold for $6,971.00. The second, RayCool 8, costs $41,800.00 to install, $2,115.00 to operate per year for 5 years at which time it will be sold for $9,029.00. The firm’s cost of capital is 5.06%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,232.00 per year for 8 years and costs $104,695.00. The UGA-3000 produces incremental cash flows of $27,599.00 per year for 9 years and cost $126,254.00. The firm’s WACC is 9.79%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.
A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,825.00 per year for 8 years and costs $103,756.00. The UGA-3000 produces incremental cash flows of $27,104.00 per year for 9 years and cost $126,558.00. The firm’s WACC is 9.57%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.
In: Finance
25. please answer all questions round to 4 decimal places
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,455.00 to install, $5,130.00 to operate per year for 7 years at which time it will be sold for $6,941.00. The second, RayCool 8, costs $41,330.00 to install, $2,082.00 to operate per year for 5 years at which time it will be sold for $8,917.00. The firm’s cost of capital is 6.16%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,548.00 to install, $5,135.00 to operate per year for 7 years at which time it will be sold for $6,971.00. The second, RayCool 8, costs $41,800.00 to install, $2,115.00 to operate per year for 5 years at which time it will be sold for $9,029.00. The firm’s cost of capital is 5.06%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,232.00 per year for 8 years and costs $104,695.00. The UGA-3000 produces incremental cash flows of $27,599.00 per year for 9 years and cost $126,254.00. The firm’s WACC is 9.79%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.
A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,825.00 per year for 8 years and costs $103,756.00. The UGA-3000 produces incremental cash flows of $27,104.00 per year for 9 years and cost $126,558.00. The firm’s WACC is 9.57%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.
In: Finance
25. please answer all questions round to 4 decimal places
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,455.00 to install, $5,130.00 to operate per year for 7 years at which time it will be sold for $6,941.00. The second, RayCool 8, costs $41,330.00 to install, $2,082.00 to operate per year for 5 years at which time it will be sold for $8,917.00. The firm’s cost of capital is 6.16%. What is the equivalent annual cost of the AC360? Assume that there are no taxes.
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,548.00 to install, $5,135.00 to operate per year for 7 years at which time it will be sold for $6,971.00. The second, RayCool 8, costs $41,800.00 to install, $2,115.00 to operate per year for 5 years at which time it will be sold for $9,029.00. The firm’s cost of capital is 5.06%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,232.00 per year for 8 years and costs $104,695.00. The UGA-3000 produces incremental cash flows of $27,599.00 per year for 9 years and cost $126,254.00. The firm’s WACC is 9.79%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.
A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $25,825.00 per year for 8 years and costs $103,756.00. The UGA-3000 produces incremental cash flows of $27,104.00 per year for 9 years and cost $126,558.00. The firm’s WACC is 9.57%. What is the equivalent annual annuity of the UGA-3000? Assume that there are no taxes.
In: Finance
In: Finance
In: Finance
Concentrated solar power is a method of using the Sun's light to produce useful energy on Earth. A large system of mirrors collects light during the day and focuses it on a target which is raised to a high temperature. The energy delivered to the target is then used to generate steam which runs turbines to produce electricity. The mirrors do not have to be circular, and for some designs they focus light along a line rather than to a point .
Concentrated solar power is a practical alternative to direct solar "photovoltaic" electric because the efficiency is high and because the energy collected may be stored, for example in molten salts. However, it has a very significant environmental impact on wildlife because intense converging light may endanger birds and bats. A way to reduce that risk is to lower the temperature by collecting light in long cylindrical troughs.
In the following: a "kilowatt" or "kW" is 1000 watts. A watt is a joule/second. A kilowatt-hour or "kWh" is a kilowatt delivered for an hour. It is a unit of energy, 1000 joules per second times the number of seconds in an hour (3600).
1. Suppose you wanted to collect power sufficient for 10,000 homes, which on average use about 10,000 kilowatt hours a year each. Given a solar constant of 1.4 kW/m2, at a site with 300 clear days a year, how much area would be needed to gather the power required? Assume the turbines have an efficiency of 40% and there are 8 hours a day of useful sunlight. Given that area, if it is covered by mirrors in a square array, what is the size of the square along one side in meters? Explain.
2. To save birds and avoid singed technicians, you design the array to use cylindrically shaped mirrors focusing light to a line on long pipes. In this way the delivered power is distributed over a larger target and the temperature of the target is kept low. What is the ideal shape of the mirror? If approximately that shape were a cylinder with a diameter of 4 meters, where would the pipe have to be above the mirror's surface?
3. The source of the energy collected by this power station is the fusion of hydrogen within the Sun's core where it is converted to helium with a small loss of mass. How much mass does the Sun lose each year to deliver this energy to a solar power system on Earth?
In: Physics
Plato Pharmaceuticals Ltd. has invested $100,000 to date in developing a new type of insect repellent. The repellent is now ready for production and sale, and the marketing manager estimates that the product will sell 150,000 bottles a year for the first two years, 170,000 for year three and 200,000 for the next two years. The selling price of the insect repellent will be $6.00 a bottle and the variable costs are estimated to be $3.00 a bottle for Year one. For the next two years the selling price will be $6.50 with variable cost of $3.15 a bottle, and then selling price will be $7.00 after that with a variable cost of $3.55, and $3.80 per bottle. Fixed costs are expected to be $210,000 a year. The figure is made up of $160,000 additional fixed costs and $50,000 fixed costs relating to the existing business that will be apportioned to the new business. In order to produce the repellent, machinery and equipment costing $520,000 will have to be purchased immediately. The estimated residual (salvage) value of this machinery and equipment in five years’ time is $100,000. The business calculates depreciation following CCA rules. The business has a cost of capital of 12%. CCA 30% (50% rule applicable) of depreciation will be used, and taxes are paid at a rate of 40%. Required:
1. Create a cash flow statement for the project for the next 5 years
2. Calculate the net present value.
3. Calculate the internal rate of return.
4. Undertake sensitivity analysis to show how much the following factors would have to change before the project ceased to be feasible. a. The initial cost of machinery and equipment b. Fixed costs c. Variable costs/per bottle d. Selling Price per bottle of repellent e. The residual value of the machinery and equipment
5. Write a statement to explain which of these factors is the most sensitive one.
In: Accounting
Plato Pharmaceuticals Ltd. has invested $100,000 to date in developing a new type of insect repellent. The repellent is now ready for production and sale, and the marketing manager estimates that the product will sell 150,000 bottles a year for the first two years, 170,000 for year three and 200,000 for the next two years. The selling price of the insect repellent will be $6.00 a bottle and the variable costs are estimated to be $3.00 a bottle for Year one. For the next two years the selling price will be $6.50 with variable cost of $3.15 a bottle, and then selling price will be $7.00 after that with a variable cost of $3.55, and $3.80 per bottle. Fixed costs are expected to be $210,000 a year. The figure is made up of $160,000 additional fixed costs and $50,000 fixed costs relating to the existing business that will be apportioned to the new business. In order to produce the repellent, machinery and equipment costing $520,000 will have to be purchased immediately. The estimated residual (salvage) value of this machinery and equipment in five years’ time is $100,000. The business calculates depreciation following CCA rules. The business has a cost of capital of 12%. CCA 30% (50% rule applicable) of depreciation will be used, and taxes are paid at a rate of 40%. Required:
1. Create a cash flow statement for the project for the next 5 years
2. Calculate the net present value.
3. Calculate the internal rate of return.
4. Undertake sensitivity analysis to show how much the following factors would have to change before the project ceased to be feasible. a. The initial cost of machinery and equipment b. Fixed costs c. Variable costs/per bottle d. Selling Price per bottle of repellent e. The residual value of the machinery and equipment
5. Write a statement to explain which of these factors is the most sensitive one.
In: Finance