In: Finance
The president of ABC made this statement in the company’s annual report: “ABC’s primary goal is to increase the value of our common stockholders’ equity. Later in the report, the following announcements were made:
a) The company contributed $1 million to the symphony orchestra in Chicago, IL, its headquarters city.
b) The company is spending $800 million to open a new plant and expand operations in South Vietnam. No profits will be produced by the Vietnamese operation for four years, so earnings will be depressed during this period versus what they would have been had the decision not been made to expand in South Vietnam?
c) The company holds about half of its assets in the form of U.S. Treasury bonds, and it keeps these funds available for use in emergencies. In the future, though, ABC plans to shift its emergency funds from Treasury bonds to common stocks.
Discuss how ABC’s stockholders might view each of these actions and how the actions might affect the stock price.
In: Finance
Mill Company is evaluating the proposed acquisition of a new
milling machine. The machine's base price
is $140,000, and has a terminal value of $17,000. The company's
cost of capital is 6%. The project has a
life-time of 3 years. The operating cash flows are as follows:
| YEAR 1 | YEAR 2 | YEAR 3 | |
|---|---|---|---|
| After-tax Savings | $28,000 | $25,500 | $25,000 |
| Depreciation tax savings | $12,000 | $15.500 | $10,200 |
| Net cash flow | $40,000 | $41,000 | $35,200 |
(a) Find the net present value of this project (NPV). Should it be
accepted?
Suppose Mill Company wishes to expand its operations in the
UK. The exchange rate at the time of
investment is £1= $1.6.
(b) Use the PPP to find the exchange rate 1 year from now, 2 years
from now and 3 years from now. The
inflation rate in the U.S. (?$) is 3 percent and in the UK 2
percent (?£)
(c) Find the NPV in pounds. Should Mill Company invest in the
UK?
In: Finance
In: Statistics and Probability
Scenario 1 – Contracts
Greg, a consumer in Tennessee, sent a purchase order to Campbell
Manufacturing, a U.S. company, for a 4000 PSI gas pressure washer
valued at $1275. Greg needed a new pressure washer for his part
time business of washing houses. The order did not specify how
disputes between the parties would be settled. Campbell returned a
definite, unconditional acceptance that contained one additional
term which stated that disputes must be submitted to arbitration.
Greg received the acceptance; however, he never agreed or objected
to the additional term.
Campbell orally contracted to sell 15 pressure washers to London
Painting Company a large commercial painting company in France.
Explain the status of the contract between Greg and Campbell.
If a contract was formed, did the additional term in the acceptance become part of the contract?
Is the contract between Campbell and London legally enforceable? (Additional research outside of the textbook may be necessary).
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 44 | |
| Variable costs per unit | $ | 16 | |
| Fixed costs per unit (based on capacity) | $ | 7 | |
| Capacity in units | 64,000 | ||
Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 9,000 speakers per year. It has received a quote of $29 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.
Required:
1. Assume that the Audio Division is now selling only 55,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest
acceptable transfer price for speakers sold to the Hi-Fi
Division?
|
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
Transfer price=
c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
| No | |
| Yes |
d. From the standpoint of the entire company, should the transfer
take place?
| Transfer should take place. | |
| Transfer should not take place. |
2. Assume that the Audio Division is selling all of the speakers it
can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest
acceptable transfer price for speakers sold to the Hi-Fi
Division?
|
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
Transfer price=
c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
| Yes | |
| No |
d. From the standpoint of the entire company, should the transfer
take place?
| Transfer should not take place. | |
| Transfer should take place. |
In: Accounting
xercise 11A-1 Transfer Pricing Basics [LO11-5]
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 46 |
| Variable costs per unit | $ | 18 |
| Fixed costs per unit (based on capacity) | $ | 8 |
| Capacity in units | 62,000 | |
Sako Company has a Hi-Fi Division that could use this speaker in
one of its products. The Hi-Fi Division will need 9,000 speakers
per year. It has received a quote of $31 per speaker from another
manufacturer. Sako Company evaluates division managers on the basis
of divisional profits.
Required:
1. Assume the Audio Division is now selling only 53,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
Q1: Using what you know from Chapter 9 about economic growth, how do you think remote work is affecting/will affect the Real GDP growth rate in the U.S.?
Q2: How do you think this is affecting/will affect the distribution of income in the U.S.?
In: Economics
Suppose the U.S. dollar-euro exchange rate is 1.1 dollars per euro, and the U.S. dollar-Mexican peso rate is 0.1 dollars per peso. What is the euro-peso rate?
____ euros per Mexican peso. (Enter your response rounded to three decimal places.)
In: Economics
The real exchange rate between the U.S. dollar and the Canadian dollar will remain constant if an increase in the value of the U.S. dollar against the Canadian dollar is offset by: A) inflation in the United States. B) inflation in Canada. C) worldwide deflation. D) inflation in the United States and in Canada.
Please explain
In: Economics