Draft an Auditor’s report to the shareholders of Oman Methanol Company LLC, MUSCAT for the year 2019,
incorporating any five qualifications from your point of view with example.

A firm is evaluating a new project which would start next year and is expected to have a life of 5 years. All of the following are related to the project. Which of the following should be included into the Free Cash Flow when computing the NPV of the project?

1. Operating Cash Flows (OCF) from this project derived from an Income Statement Pro-Forma, where all project related revenues and costs (including taxes but not interest) are accounted for every year of the project. OCF does not account for depreciation of the project-specific equipment per se but takes into account the depreciation tax shield.
2. Half of the $100,000 cost of the quality check equipment which will be used for this project. The quality check equipment is currently owned by the firm and has idle capacity for the full duration of the new project.
3. $3mln paid for the land (the payment was made when the land was purchased 10 years ago) on which the project will be located.
4. $5mln current market value of the land on which the project will be located and $6mln future expected market value of the project’s land in 5 years
5. The change in Inventories due to an increase in sales associated with the project.
6. An evaluation of the project’s viability by an outside consultant which was completed a month ago. The consultant was paid $15,000 at that time.
7. Proceeds from the sale of equipment related to the project in the project’s terminal year.

You are the manager of a firm that receives revenues of $20,000 per year from product X and $70,000 per year from product Y. The own price elasticity of demand for product X is -2, and the cross-price elasticity of demand between product Y and X is -1.5.

How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 1 percent?

DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations.

Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months:

Required:

1-a. Compute the throughput time for each month.

1-b. Compute the delivery cycle time for each month.

1-c. Compute the manufacturing cycle efficiency (MCE) for each month.

2. Evaluate the company’s performance over the last four months.

3-a. Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE.

3-b. Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE.

Fortune Company is considering a 3-year project with an initial cost of $594,000. The project will not directly produce any sales but will reduce operating costs by $153,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $288,000. The tax rate is 25 percent and the required return is 12 percent. An extra $44,500 of inventory will be required for the life of the project. What is the total cash flow for Year 3?

You are the manager of a firm that receives revenues of $50,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -3, and the cross-price elasticity of demand between product Y and X is 1.8.

How much will your firm's total revenues (revenues from both products) change if you increase the price of good X by 2 percent?

Instructions: Enter your response rounded to the nearest dollar. Use a negative sign (-) if applicable.

A company had the following information available for the year: Beginning inventory of goods in process (40% complete, $1,100), ending inventory of goods in process (80% complete) 400 units, total units started during the year 3,200 units. What is the number of units transferred to finished goods during the year? b)FIFO equivalent units of production for the year are?

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $99 per unit, and variable expenses are $69 per unit. Fixed expenses are $837,600 per year. The present annual sales volume (at the $99 selling price) is 25,200 units.

Required:

1. What is the present yearly net operating income or loss?

2. What is the present break-even point in unit sales and in dollar sales?

3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

• Break-even point in units 41,880 Break-even point in dollar sales $3,727,320

Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has prepared the following summary of its budgeted cash flows:

The company’s beginning cash balance for the upcoming fiscal year will be $25,000. The company requires a minimum cash balance of $10,000 and may borrow any amount needed from a local bank at a quarterly interest rate of 3%. The company may borrow any amount at the beginning of any quarter and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments are due on any principal at the time it is repaid. For simplicity, assume that interest is not compounded.

Required:

Prepare the company’s cash budget for the upcoming fiscal year. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

1. Draw time lines for (a) a $2000 lump sum cash flow at the end of year 4, (b) an ordinary annuity of $1000 per year for 5 years, and (c) an uneven cash flow stream of -$450, $1000, $650, $850 and $500 at the end of years 0 through 4.
2. What is the future value of an initial $1000 after 5 years if it is invested in an account paying 5% annual interest?
3. What is the present value of $1000 to be received in 4 years if the appropriate interest rate is 5%?
4. We sometimes need to find out how long it will take a sum of money (or anything else) to grow to some specified amount. For example, if a company's sales for 2020 is $1000 and expected to grow at a rate of 10% per year, how long will it take sales to double?
5. If you invested $10,000 in an investment account and you expect it to double in 4 years, what interest rate must it earn?
6. What is the future value of a 5-year ordinary annuity of $1000 if the appropriate interest rate is 5%? What is the present value of the annuity?
7. What is the future value of $1000 after 4 years under 10% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding
8. What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 5%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
9. Construct an amortization schedule for a $1,000, 12% annual rate loan with 4 equal installments. What is the annual interest expense for the borrower, and the annual interest income for the lender, during Year 2?
10. Suppose on January 1 you deposit $1000 in an account that pays a nominal, or quoted, interest rate of 12%, with interest added (compounded) daily. How much will you have in your account on October 1, or 9 months later?
11. You want to buy a car, and a local bank will lend you $10,000. The loan would be fully amortized over 6 years (72 months), and the nominal interest rate would be 10%, with interest paid monthly. What is the monthly loan payment?
12. While Mary Corens was a student at the University of Tennessee, she borrowed $20,000 in student loans at an annual interest rate of 5%. If Mary repays $200 per year, then how long (to the nearest year) will it take her to repay the loan?