Morrissey Technologies Inc.'s 2019 financial statements are shown here. Morrissey Technologies Inc.: Balance Sheet as of December 31, 2019 Cash $180,000 Accounts payable $360,000 Receivables 360,000 Notes payable 56,000 Inventories 720,000 Accrued liabilities 180,000 Total current assets $1,260,000 Total current liabilities $596,000 Long-term debt 100,000 Fixed assets 1,440,000 Common stock 1,800,000 Retained earnings 204,000 Total assets $2,700,000 Total liabilities and equity $2,700,000 Morrissey Technologies Inc.: Income Statement for December 31, 2019 Sales $3,600,000 Operating costs including depreciation 3,279,720 EBIT $320,280 Interest 20,280 EBT $300,000 Taxes (25%) 75,000 Net Income $225,000 Per Share Data: Common stock price $45.00 Earnings per share (EPS) $2.25 Dividends per share (DPS) $1.35 Suppose that in 2020, sales increase by 20% over 2019 sales. The firm currently has 100,000 shares outstanding. It expects to maintain its 2019 dividend payout ratio and believes that its assets should grow at the same rate as sales. The firm has no excess capacity. However, the firm would like to reduce its operating costs/sales ratio to 90% and increase its total liabilities-to-assets ratio to 30%. (It believes its liabilities-to-assets ratio currently is too low relative to the industry average.) The firm will raise 30% of the 2020 forecasted interest-bearing debt as notes payable, and it will issue long-term bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short- and long-term debt) is 12%. Assume that any common stock issuances or repurchases can be made at the firm's current stock price of $45. Construct the forecasted financial statements assuming that these changes are made. What are the firm's forecasted notes payable and long-term debt balances? What is the forecasted addition to retained earnings? Do not round intermediate calculations. Round your answers to the nearest cent. Morrissey Technologies Inc. Pro Forma Income Statement December 31, 2020 2019 2020 Sales $3,600,000 $ 4320000 Operating costs (includes depreciation) 3,279,720 3888000 EBIT $320,280 $ 432000 Interest expense 20,280 61920 EBT $300,000 $ Taxes (25%) 75,000 Net Income $225,000 $ Dividends (60%) $ $ Addition to retained earnings $ $ Morrissey Technologies Inc. Pro Forma Balance Statement December 31, 2020 2019 2020 Assets Cash $180,000 $ Accounts receivable 360,000 Inventories 720,000 Fixed assets 1,440,000 Total assets $2,700,000 $ Liabilities and Equity Payables + accruals $540,000 $ Short-term bank loans 56,000 Total current liabilities $596,000 $ Long-term bonds 100,000 Total liabilities $696,000 $ Common stock 1,800,000 Retained earnings 204,000 Total common equity $2,004,000 $ Total liabilities and equity $2,700,000 $ If the profit margin remains at 6.25% and the dividend payout ratio remains at 60%, at what growth rate in sales will the additional financing requirements be exactly zero? In other words, what is the firm's sustainable growth rate? (Hint: Set AFN equal to zero and solve for g.) Do not round intermediate calculations. Round your answer to two decimal places.
In: Accounting
30. Catarina’s Appliances teams up with Locality Credit Union for appliance sales events. Every three or four months, Payne’s brings overstocked or discontinued model appliances to Locality. Customers can purchase an appliance on the spot, and Locality has employees on hand to arrange the financing. Duke has been thinking about replacing his family’s existing washing machine for some time when he sees the event at Locality. He picks out a machine, arranges the financing in his name, and brings it home. When he shows the car to his wife Patsy, she tells him that their youngest son needs orthodontia, and they can’t afford a washing machine right now. Patsy tells Duke to cancel the sale. Can Duke cancel the sale?
a. No, because there is no right to cancel a sale unless the seller agrees.
b. Yes, the sale can be cancelled since it did not take place at Payne’s usual place of business.
c. Yes, because Duke needed to get Patsy’s signature on the application for financing.
d. No, because there was nothing fraudulent or misleading about the transaction.
31. Under the Magnuson-Moss Warranty Act, what must a seller do if a defective product cannot be fixed after a reasonable number of attempts?
a. The seller must refund the purchase price.
b. Nothing. The seller is not bound to go beyond reasonable efforts.
c. The seller must replace the product.
d. The seller must either refund the purchase price or replace the product.
32. In the early 1980s. Raoul ran a business that sold stamps for collectors. On occasion, he applied carbon tetrachloride, a hazardous chemical, to stamps in order to reveal watermarks. Raoul closed his business in 1983. He did not know how dangerous carbon tetrachloride could be, so he just dumped the small amount he had left in back of the building his business was in. After he closed his business, Raoul sold the building to Julio, and recently, Julio has sold the business to a developer. The developer tested the soil, and found carbon tetrachloride. The developer is trying to find Raoul, to make him pay for at least part of the clean-up. Is Raoul responsible for any part of the clean-up costs?
a. Yes. CERCLA makes anyone who is potentially responsible for contamination liable for clean-up costs.
b. No. Raoul’s activities took place too many years ago.
c. No. There have been other owners of the property since Raoul.
d. Maybe. Raoul may be liable unless there are other parties who did more to contaminate the land.
In: Operations Management
QualSupport Corporation manufactures seats for automobiles, vans, trucks, and various recreational vehicles. The company has a number of plants around the world, including the Denver Cover Plant, which makes seat covers.
Ted Vosilo is the plant manager of the Denver Cover Plant but also serves as the regional production manager for the company. His budget as the regional manager is charged to the Denver Cover Plant.
Vosilo has just heard that QualSupport has received a bid from an outside vendor to supply the equivalent of the entire annual output of the Denver Cover Plant for $35 million. Vosilo was astonished at the low outside bid because the budget for the Denver Cover Plant’s operating costs for the upcoming year was set at $52 million. If this bid is accepted, the Denver Cover Plant will be closed down.
The budget for Denver Cover’s operating costs for the coming year is presented below.
|
Denver Cover Plant |
||
| Materials | $ 14,000,000 | |
| Labor: | ||
| Direct | $13,100,000 | |
| Supervision | 900,000 | |
| Indirect plant | 4,000,000 | 18,000,000 |
| Overhead: | ||
| Depreciation—equipment | 3,200,000 | |
| Depreciation—building | 7,000,000 | |
| Pension expense | 5,000,000 | |
| Plant manager and staff | 800,000 | |
| Corporate expenses* | 4,000,000 | 20,000,000 |
| Total budgeted costs | $52,000,000 | |
*Fixed corporate expenses allocated to plants and other operating units based on total budgeted wage and salary costs. |
||
Additional facts regarding the plant’s operations are as follows:
Due to Denver Cover’s commitment to use high-quality fabrics in all of its products, the Purchasing Department was instructed to place blanket purchase orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders are canceled as a consequence of the plant closing, termination charges would amount to 20% of the cost of direct materials.
Approximately 400 plant employees will lose their jobs if the plant is closed. This includes all of the direct laborers and supervisors as well as the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some would be able to find new jobs while many others would have difficulty. All employees would have difficulty matching Denver Cover’s base pay of $18.80 per hour, which is the highest in the area. A clause in Denver Cover’s contract with the union may help some employees; the company must provide employment assistance to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be $1.5 million for the year.
Some employees would probably choose early retirement because QualSupport has an excellent pension plan. In fact, $3 million of the annual pension expense would continue whether Denver Cover is open or not.
Vosilo and his staff would not be affected by the closing of Denver Cover. They would still be responsible for administering three other area plants.
If the Denver Cover Plant were closed, the company would realize about $3.2 million salvage value for the equipment and building. If the plant remains open, there are no plans to make any significant investments in new equipment or buildings. The old equipment is adequate and should last indefinitely.
Without regard to costs, identify the advantages to QualSupport Corporation of continuing to obtain covers from its own Denver Cover Plant.
QualSupport Corporation plans to prepare a financial analysis that will be used in deciding whether or not to close the Denver Cover Plant. Management has asked you to identify:
The annual budgeted costs that are relevant to the decision regarding closing the plant (show the dollar amounts).
The annual budgeted costs that are irrelevant to the decision regarding closing the plant and explain why they are irrelevant (again show the dollar amounts).
Any nonrecurring costs that would arise due to the closing of the plant, and explain how they would affect the decision (again show any dollar amounts).
Looking at the data you have prepared in (2) above, what is the financial advantage (disadvantage) of closing the plant? Show computations and explain your answer.
Identify any revenues or costs not specifically mentioned in the problem that QualSupport should consider before making a decision.
In: Advanced Math
| The company
produces seats for auto, vans, trucks, and boats. The company has
several plants, including the New Jersey plant, which makes car covers. Goodman is the plant manager at the New Jersey plant but also serves as the production manager. Goodman has just heard that Rutgers company has received a bid from an outside vendor to offer the same amount of the entire annual output of the New Jersey plant for $21 million. Goodman was surprised at the low outside bid due to that the budget for the New Jersey Plant's operating costs for the coming year was set at $24.3 million. if this bid is accepted by the plant, the New Jersey plant will go out of bankruptcy. The budget for the New Jersy plant's operating costs for the next year is below. Additional information is given as follows. |
||
| 1. Due to
the New Jersey plant prefer high-quality for all products, the
purchasing department prefers to place orders of good materials for the coming year. If these orders are canceled as consequence of the plant closing, termination fees would amount to 25% of the cost of direct materials. |
||
| 2. Around
350 employees will become unemployed if the plant is closed, which
contain all of the direct laborers and supervisors, management and
staff, and the plumbers, electricians, and other skilled workers
classified as indirect plant workers. Some of the workers would have difficulty finding new jobs. Nearly all the production labors would have difficulty matching the New Jersey plant at $12.5 per hour, which is the highest. Rutgers Company should provide some assistance and job training to its former employees for 12 months after closing a plant. The estimated fees for this service would be $0.8 million. |
||
| 3. Some
employees might choose early retirement because Rutgers Company has
a good pension plan. Actually, $0.7 million of the annual pension expense would continue whether the New Jersey plant is open or not |
||
| 4. Goodman and his coworkers would not be affected by the closing of the New Jersey plant, they would still be responsible for three other area plants | ||
| 5. If the New Jersey plant were closed, Rutgers Company would realize about $2 million salvage value for the equipment in the plant. If the plant remains open, there are no plans to make any significant investments in new equipment or buildings. The old equipment is adequate for the job and should last indefinitely. | ||
| New Jersey Plant | ||
| The annual budget for costs | ||
| Materials | $80,000,000.00 | |
| Labor: | ||
| Direct | $6,700,000.00 | |
| Supervison | $400,000.00 | |
| Indirect Plant | $1,900,000.00 | $9,000,000.00 |
| MOH: | ||
| Deprecation for equipments | $1,300,000.00 | |
| Deprecation for buildings | $2,100,000.00 | |
| Pension expense | $1,600,000.00 | |
| Plant manager and staff | $600,000.00 | |
| Corporate expense | $1,700,000.00 | $7,300,000.00 |
| Total | $24,300,000.00 | |
| *Fixed expenses are allocated to plants and other operating units based on total budgeted wage and salary costs. | ||
| Questions: | ||
| 1.Without regard to costs, find the merits to Rutgers Company of continuing to obtain products from the New Jersey plant. | ||
| 2. Company
is about to prepare a financial analysis that will be used in deciding whether or not to close the New Jersey Plant. CEO has asked you to pay attention to items: a.Show the annual budgeted costs to make the decision about the closing of the New Jersey plant. b.Present the annual budgeted costs that are not relevant to the decision regarding the closing of New Jersey the plant and explain why they are not relevant. c.There are nonrecurring costs that would arise due to the closing of the plant and please explain how they would affect the decision. |
||
| 3.Please
refer to the data you have prepared in (2) above, do you think the
New Jersey plant be closed? Show computations and please explain your answer. |
||
| 4.Please find any sales revenues or costs not specifically provided in the information that Rutgers Compnay should consider before making a decision. | ||
| 5.What suggestions do you think about reducing the costs? | ||
In: Accounting
Suppose the investment is very sensitive to the interest rate.That is, the function I(r), used to derive the IS curve, is very steep.
Graphically derive the IS curve in the closed economy. What can you say about the steepness IS curve?
In this context, which policy do you think is likely to be more effective? Fiscal policy or monetary policy?
In: Economics
6. A certain contaminant was studied in the laboratory by measuring over time the concentration in a sample placed in a closed container. The values of the observed concentrations are given below. Determine the reaction order and the decay rate for this contaminant.
|
Time (hrs) |
0 |
1 |
3.5 |
6.5 |
10 |
|
Conc (mg/L) |
100 |
80 |
50 |
26 |
10 |
In: Civil Engineering
An insulated, rigid vessel is initially empty (evacuated). However, it is connected to a steam line that is maintained at 200 psia and 745 ∘ ∘ F. The valve is opened until the flow into the tank slows and stops (which occurs when the pressure in the tank is equal to the pressure in the steam line), at which point the valve is closed. What is the temperature within the vessel?
In: Mechanical Engineering
Explain why government budget deficits crowd out private investment spending in a closed economy, but crowd out net exports in a small open economy. Assume prices are flexible and that factors of production are fully employed in both economies. Use the basic version of the open-economy model that abstracts from foreign debt accumulation.
In: Economics
An organ pipe is 151cm\; cm long. The speed of sound in air is 343 m/s. Part A: What are the fundamental and first three audible overtones if the pipe is closed at one end? What are the fundamental and first three audible overtones if the pipe is open at both ends? Express awnsers to 3 signiicant figures seperated by commas
In: Physics
what are the skills, knowledge and chnge behaviour of the
ARTIFACT 1
Case 1: Metrobus Strike
The amalgamated Transit Union (ATU) represents about 100 workers (e.g., drivers, mechanics, administrative staff) employed with Metrobus, a city-wide transit authority. On November 3, after the parties failed to negotiate a settlement, the union conducted a vote. In an overwhelming majority, 97 percent voted to reject the contract offer and go on strike. On November 4, picket lines were assembled at the worksite and all bus services were suspended.
The main reason for the strike appears to centre on the cost of benefits. While the employer has offered to increase wages by 15.5 percent over four years, management Is asking that all newly hired workers pay for 50 percent of their benefit plan costs. The employer feels that this 50/50 cost sharing of benefits is reasonable and consistent with other collective agreements. For example, numerous public-sector employees such as city employees, firefighters, and regional water employees all pay 50 percent of their benefit costs. The union, on the other hand, feels that this benefit sharing is unacceptable and unfair.
As a result of the strike, many potentially vulnerable citizens, such as students, seniors, and lower-income earners who cannot afford their own vehicles, are left with few transportation options during the winter. They now have to rely on getting rides with others, paying the high cost of cabs, or even not showing up to work or school. Students of the university even set up a ride-sharing website where they could attempt to coordinate rides during the strike.
Six weeks into the strike, the level of frustration has mounted. The mayor of the city, Dennis O’Keefe, has publicly urged both sides to settle the dispute and other councillors seem hopeful the that the government-appointed mediator will help resolve the issue. There have even been public protests and petitions asking the provincial government to legislate an end to the strike. Despite the frustration, the strike remains in full force with no foreseeable end.
ARTIFACT 1
Case 1: Metrobus Strike
The amalgamated Transit Union (ATU) represents about 100 workers (e.g., drivers, mechanics, administrative staff) employed with Metrobus, a city-wide transit authority. On November 3, after the parties failed to negotiate a settlement, the union conducted a vote. In an overwhelming majority, 97 percent voted to reject the contract offer and go on strike. On November 4, picket lines were assembled at the worksite and all bus services were suspended.
The main reason for the strike appears to centre on the cost of benefits. While the employer has offered to increase wages by 15.5 percent over four years, management Is asking that all newly hired workers pay for 50 percent of their benefit plan costs. The employer feels that this 50/50 cost sharing of benefits is reasonable and consistent with other collective agreements. For example, numerous public-sector employees such as city employees, firefighters, and regional water employees all pay 50 percent of their benefit costs. The union, on the other hand, feels that this benefit sharing is unacceptable and unfair.
As a result of the strike, many potentially vulnerable citizens, such as students, seniors, and lower-income earners who cannot afford their own vehicles, are left with few transportation options during the winter. They now have to rely on getting rides with others, paying the high cost of cabs, or even not showing up to work or school. Students of the university even set up a ride-sharing website where they could attempt to coordinate rides during the strike.
Six weeks into the strike, the level of frustration has mounted. The mayor of the city, Dennis O’Keefe, has publicly urged both sides to settle the dispute and other councillors seem hopeful the that the government-appointed mediator will help resolve the issue. There have even been public protests and petitions asking the provincial government to legislate an end to the strike. Despite the frustration, the strike remains in full force with no foreseeable end.
In: Operations Management