Bank A is offering a 1-year CD at a nominal compound interest rate of 5.59% with an APY of 5.75%. Bank B is offering a 1-year CD at a nominal compound interest rate of 5.67% with an APY of 5.75%. Showing your computations, explain in some detail how each of these banks is evidently employing one of the standard compounding frequencies (semi-annually, quarterly, monthly, weekly, or daily) to legally advertise identical APY’s even though each bank uses a different nominal compound interest rate in computing the actual interest on its CD.

At the end of every year you deposit $2,000 into an account that earns 8% interest per year. What will be the balance in your account immediately after the 30th deposit?

Waterways Corporation is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. The company has gathered information from its managers in preparation of the budgeting process.

Waterways likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2019, totaled $185,400.

Direct Materials

Direct materials cost 80 cents per pound. Two pounds of direct materials are required to produce each unit.

Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Raw Materials on December 31, 2019, totaled 11,370 pounds. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2019, totaled $104,580.

Other Information

The Cash balance on December 31, 2019, totaled $102,000, but management has decided it would like to maintain a cash balance of at least $700,000 beginning on January 31, 2020. Dividends are paid each month at the rate of $2.60 per share for 5,280 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 9% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $490,000 equipment purchase is planned for February.

Question:

For the first quarter of 2020, prepare a direct materials budget. (Round cost per pound to 2 decimal places, e.g. 0.25 and all other answers to 0 decimal places, e.g. 2,520.)

24.09%

25.36%

26.63%

25.87%

24.85%

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.

The following information relates to the Quilt Division of TDS Corporation for last year:

Assume that Quilt was being evaluated solely on the basis of residual income. Which of the following investment opportunities would Quilt want to invest in?

Option A

Option C

Option D

Option B

An investor invests $500. The investment pays $100 at the end of year 2, $200 at the end of year 3 and $300 at the end of year 4.

Calculate the net present value (NPV) of the investment using interest preference rate of 5.7%.

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I got

v = 1/1.12

So would it just be NPV = -500 + 100(v)^2 + 200v^3 + 300v^4?

Ausel’s is considering a ten-year project that will require $850,000 for new fixed assets that will be depreciated straight-line to a zero book value over the ten years. At the end of the project, the fixed assets can be sold for 15 percent of their original cost. The project is expected to generate annual sales of $928,000 and costs of $721,000. The tax rate is 35 percent and the required rate of return is 14.6 percent. What is the net present value of the project?

An investment costs $2,921 today and provides cash flows at the end of each year for 21 years. The investments expected return is 8.5%. The projected cash flows for Years 1, 2, and 3 are $101, $277, and $372, respectively. What is the annual cash flow received for each of Years 4 through 21 (i.e., 18 years)? Assume the same payment for each of these years. (Round answer to 2 decimal places. Do not round intermediate calculations).

Project A is as follows: $100,000 upfront cost and annual cash flows of $25,000 a year for seven years.

Project B is as follows: $100,000 upfront cost and cash flow of $20,000 per year for 8 years.

Project A Payback Period is 4 years and Project B is 5 years.

using that data calculate NPV for projects A and B using a 10% discount rate.

which project do you pick if they are mutually exclusive? Which do you pick if they are independent and the company has enough funds to do all projects?