V & T Faces, Inc., would like to open a retail store in Miami. The initial investment to purchase the building is $420,000, and an additional $50,000 in working capital is required. Since this store will be operating for many years, the working capital will not be returned in the near future. V & T Faces expects to remodel the store at the end of 3 years at a cost of $100,000. Annual net cash receipts from daily operations (cash receipts minus cash payments) are expected to be as follows:

Year 1 $80,000

Year 2 $115,000

Year 3 $118,000

Year 4 $140,000

Year 5 $155,000

Year 6 $167,000

Year 7 $175,000

The company’s required rate of return is 13 percent.

Assume management decided to limit the analysis to 7 years.

Questions:

1) What is the weakness of using the payback period method to evaluate long-term investments?

2)Assume the manager of the company wanted to live in Miami and intentionally inflated the projected annual cash receipts so that the proposal would be accepted. The proposal would otherwise have been rejected. Explain how the company’s use of a post audit would help to prevent this type of unethical behavior.

1. A cafe specializes in short order meals; and, morning and afternoon snack breaks. It is open from 9:00 am until 4:00 pm. An office manager in a nearby high rise office building offers the owner a contract to provide her 50 employees with afternoon snack breaks for $2.00 each. Each employee would receive a drink and a snack item. The shop has an hourly capacity of 50 customers. The owner estimates that the variable costs of the afternoon breaks would be $1.20 each. Currently the afternoon service, starting at 2:00, is running at only 50 percent capacity, although the morning and noon activities are near capacity. At the present level of operations each meal/snack served is allocated a fixed cost of $0.25.

Required:

a. What nonfinancial factors should be considered by the owner?

b. Given your concerns listed in part a. and quantitative analysis, should the offer be accepted? Why or why not?

2. Doggie Dinner, Inc., currently manufactures three different types of scientifically balanced dog food. The firm is considering eliminating one of the three products. What factors should be taken into account in making this decision?

3. Explain the differences between short-run pricing decisions and long-run pricing decisions.

Variables typically included in a multivariate supply function (other than the price and quantity of the item the supply function represents) are prices of other goods that use similar input resources for production, the number of suppliers, techniques of production, taxes and subsidies, prices of input resources, weather, and expectations. Please answer the following questions about the affect changes in other variables might have on the supply of the item. These changes will either cause supply to increase (shift right) or decrease (shift left). Use either word as applicable, for the short answer.

1. If the market price of gasoline returns to the near $4.00 per gallon level then demand for gas-gulping large autos is likely to decrease and manufacturers of these autos are likely to _____________ their supply:

2. A relative increase in the productivity of the technology used to produce the item being considered is likely to _____________________ its supply.

3. Hailstorms have pelted south central Texas grape vineyards, spoiling acres of grapes. This is likely to ______________ the supply of grapes for Texas wine.

4. A manufacturer, operating with a fixed production budget, discovers that the cost of input resources is increasing. The manufacturer is likely to ___________________ the quantity of the product produced.

5. The six-spotted evil weevil has attacked California’s broccoli crops. Their supply of broccoli is thus likely to:

In Year 1, Goodnight Sleep Company began to receive complaints from physicians that patients were experiencing unexpected side effects from the company’s sleep apnea drug. The company took the drug off the Market near the end of Year 1. During Year 2, the company was sued by 800 customers who had a severe allergic reaction to the company’s drug and required hospitalization. At the end of Year 2, the company’s attorneys estimated a 62% chance the company would need to make payments in the range of $2,500 to $7,000 to settle each claim, with all amounts in that range being equally likely. At the end of Year 3, while none of the cases had been resolved, the company’s attorney now estimated an 80% probability the company would be required to make payments in the range of $3,000 to $10,000 to settle each claim with all amounts in that range being equally likely. In Year 400 claims were settled at a total cost of $2.5 million. Based on this experience, the company believes 30% of the remaining cases will be settled at $5,500 each, 50% will be settled for $6,000 each and 20% will be settled for $6,200 each. Required: Prepare the journal entry (in good format) for Years 1 – 4 related to this litigation.

Assume Jinan University and an American Professor signed a contract for a summer business arrangement. In the contract, the professor promised to teach for the summer in Guangzhou, and in return, Jinan University promised to pay the professor $1 million. In preparation for the arrival of the professor, Jinan paid $20,000 for a fancy Guangzhou apartment for the professor. Jinan also bought $2,000 plane tickets, $500 in weekend tours, and $200 in equipment for the professor.

In addition, Jinan spent $12,000 in advertising, showing possible students that the professor was coming to teach. 500 students saw the advertising. Each paid $20,000 to Jinan to enroll. The students gave up the opportunity to attend a different program in Guangzhou. The other program would have cost each student $30,000.

All of the students fly to Guangzhou, spending $2,500 on airfare. Each also paid $10,000 for excellent apartments near the university. The university was ready to go.

Then the night before classes start, the professor calls and says he decided not to come. In the above story, who can sue whom? What will each party argue in each case? What legal concepts are involved from our class? Discuss how much (if anything) different parties would pay. Explain. Be thorough. Please also be specific.

Assume Jinan University and an American Professor signed a contract for a summer business arrangement. In the contract, the professor promised to teach for the summer in Guangzhou, and in return, Jinan University promised to pay the professor $1 million. In preparation for the arrival of the professor, Jinan paid $20,000 for a fancy Guangzhou apartment for the professor. Jinan also bought $2,000 plane tickets, $500 in weekend tours, and $200 in equipment for the professor.

In addition, Jinan spent $12,000 in advertising, showing possible students that the professor was coming to teach. 500 students saw the advertising. Each paid $20,000 to Jinan to enroll. The students gave up the opportunity to attend a different program in Guangzhou. The other program would have cost each student $30,000.

All of the students fly to Guangzhou, spending $2,500 on airfare. Each also paid $10,000 for excellent apartments near the university. The university was ready to go. Then the night before classes start, the professor calls and says he decided not to come.

In the above story, who can sue whom? What will each party argue in each case? What legal concepts are involved from our class? Explain. Be thorough.

Please be specific on bold font questions !!

Arnold Inc. is considering a proposal to manufacture high-end protein bars used as food supplements by body builders. The project requires use of an existing warehouse, which the firm acquired three years ago for £1 million and which it currently rents out for £120,000 per year. Rental rates are not expected to change in the near future. In addition to using the warehouse, the project requires an up-front investment into machines and other equipment of £1.4m. This investment can be fully depreciated straight-line over the next 10 years for tax purposes. However, Arnold Inc. expects to terminate the project at the end of eight years and to sell the machines and equipment for £500,000. Finally, the project requires an initial investment into net working capital equal to 10% of predicted first-year sales. Subsequently, net working capital is 10% of the predicted sales over the following year. Sales of protein bars are expected to be £4.8 million in the first year and to stay constant for eight years. Total manufacturing costs and operating expenses (excluding depreciation) are 80% of sales, and profits are taxed at 30%.

i. What are the free cash flows of the project? ii. If the cost of capital is 15%, what is the NPV of the project?

The base year is 2012. Real GDP in 2012 was? $15 trillion. The GDP price index in 2015 was? 105, and real GDP in 2015 was? $16 trillion. ?? ?? Calculate nominal GDP in 2012 and in 2015 and the percentage increase in nominal GDP from 2012 to 2015.

Nominal GDP in 2012 is ?$ _ trillion. And percentage increase in production 2012-2015 is _

In a recent presidential election, 611 voters were surveyed and 308 of them said that they voted for the candidate who won. a) Find the point estimate of the percentage of voters who said that they voted for the candidate who won. b) Find a 98% confidence interval estimate of the percentage of voters who said that they voted for the candidate who won.

A new fertilizer was applied to the soil of 283 bean plants. 21% showed increased growth.

Find the margin of error and 95% confidence interval for the percentage of all bean plants which show increased growth after application of the fertilizer. Round all answers to 2 decimal places.

Margin of Error (as a percentage): _______
Confidence Interval: _______% to _______%