Create a presentation that includes a capital budget analysis, an interpretation of the analysis, and your recommended strategy for the Deluxe Corporation.

Deluxe Corporation is a large chain of retail stores operating in the USA. It sells top-of the- range, expensive clothes to a wealthy clientele throughout the country. Currently, Deluxe only operates in the USA. Its current market capitalization is $760 million and the current market value of debt is $350 million.

At last month’s management meeting the marketing director explained that sales volume had increased slightly in the previous year, largely due to heavy discounting in most of its stores. The finance director expressed concern that such a strategy might damage the image of the company and reduce profits over the longer term.

An alternative strategy to increase sales volume has recently been proposed by the marketing department. This would involve introducing a new range of clothing specifically aimed at the middle-income market. The new range of clothing would be expected to be attractive to consumers in Canada and Europe.

Assume your represent the financial management of Deluxe and have been asked to evaluate the marketing department’s proposal to introduce a new range of clothing. An initial investigation into the potential markets has been undertaken by a firm of consultants at a cost of $100,000 but this amount has not yet been paid. It is intended to settle the amount due in three months’ time. With the help of a small multi-department team of staff you have estimated the following cash flows for the proposed project:

• The initial investment required would be $46 million: This comprises $30 million for fixed assets and $16 million for net current assets (working capital).

• For accounting purposes, fixed assets are depreciated on a straight line basis over three (3) years after allowing for a residual value of 10%.

• The value of net current assets at the end of the evaluation period can be assumed to be the same as at the start of the period.

• Earnings before taxes are forecast to be $14 million in 2018, $17million in 2019 and $22 million in 2020.

The following information is also relevant:

The proposed project is to be evaluated over a three-year time horizon. The firm uses Net Present Value and Internal Rate of Return methods to evaluate projects.

Deluxe usually evaluates its investments using an after-tax discount rate of 8%. The proposed project is considered to be riskier than average and so a risk-adjusted rate of 9% will be used for this project.

Corporate tax is 25%.

Ignore inflation.

Prepare a Sensitivity Risk Analysis with the following variables: Earnings Before Taxes, Project Discount Rate, and Tax Rate. Your margins of variance are plus/ minus 10%, 20%, 30%. Your Sensitivity work should include a graph analysis.

What would you recommend provide capital budget analysis, risk analysis, SWOT analysis, as part of your evaluation.

A capital budget analysis, an interpretation of the analysis and your recommended strategy for the Deluxe Corporation.

Deluxe Corporation is a large chain of retail stores operating in the USA. It sells top-of the-range, expensive clothes to a wealthy clientele throughout the country. Currently, Deluxe only operates in the USA. Its current market capitalization is $760 million and the current market value of debt is $350 million.

At last month’s management meeting the marketing director explained that sales volume had increased slightly in the previous year, largely due to heavy discounting in most of its stores. The finance director expressed concern that such a strategy might damage the image of the company and reduce profits over the longer term.

An alternative strategy to increase sales volume has recently been proposed by the marketing department. This would involve introducing a new range of clothing specifically aimed at the middle-income market. The new range of clothing would be expected to be attractive to consumers in Canada and Europe.

Assume your represent the financial management of Deluxe and have been asked to evaluate the marketing department’s proposal to introduce a new range of clothing. An initial investigation into the potential markets has been undertaken by a firm of consultants at a cost of $100,000 but this amount has not yet been paid. It is intended to settle the amount due in three months’ time. With the help of a small multi-department team of staff you have estimated the following cash flows for the proposed project:

•The initial investment required would be $46 million: This comprises $30 million for fixed assets and $16 million for net current assets (working capital).

•For accounting purposes, fixed assets are depreciated on a straight line basis over three (3) years after allowing for a residual value of 10%.

•The value of net current assets at the end of the evaluation period can be assumed to be the same as at the start of the period.

•Earnings before taxes are forecast to be $14 million in 2018, $17million in 2019 and $22 million in 2020.

The following information is also relevant:

•The proposed project is to be evaluated over a three-year time horizon. The firm uses Net Present Value and Internal Rate of Return methods to evaluate projects.

•Deluxe usually evaluates its investments using an after-tax discount rate of 8%. The proposed project is considered to be riskier than average and so a risk-adjusted rate of 9% will be used for this project.

•Corporate tax is 25%.

•Ignore inflation.

•Prepare a Sensitivity Risk Analysis with the following variables: Earnings Before Taxes, Project Discount Rate, and Tax Rate. Your margins of variance are plus/minus 10%, 20%, 30%. Your Sensitivity work should include a graph analysis.

•What would you recommend provide capita budget analysis, risk analysis, SWOT analysis, as part of your evaluation.

The marketing department of Metroline Manufacturing estimates that its sales in

20202020

will be

$ 1.51$1.51

million. Interest expense is expected to remain unchanged at

$ 36 comma 000$36,000​,

and the firm plans to pay

$ 66 comma 000$66,000

in cash dividends during

20202020.

Metroline​ Manufacturing's income statement for the year ended December​ 31,

20192019​,

is given

​,

along with a breakdown of the​ firm's cost of goods sold and operating expenses into their fixed and variable components.

a. Use the ​percent-of-sales method to prepare a pro forma income statement for the year ended December​ 31,

20202020.

b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December​ 31,

20202020.

c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of

20202020

​income? Explain why.

a. Use the ​percent-of-sales method to prepare a pro forma income statement for the year ended December​ 31,

20202020.

Complete the pro forma income statement for the year ended December​ 31,

20202020

​below:  ​(Round the percentage of sales to four decimal places and the pro forma income statement amounts to the nearest​ dollar.)

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $410 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

2018  

Costs incurred during the year $ 50

Estimated costs to complete as of December 31 $200

2019  Costs incurred during the year $ 150

Estimated costs to complete as of December 31 $50

2020 Costs incurred during the year $ 45

Estimated costs to complete  —

Required:

1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.

2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.

3. Suppose the estimated costs to complete at the end of 2019 are $200 million instead of $50 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.

Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time. (Enter your answers in millions. Loss amounts should be indicated with a minus sign.)

Suppose the estimated costs to complete at the end of 2019 are $200 million instead of $50 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.  (Enter your answers in millions. Use percentages as calculated and rounded in the table below to arrive at your final answer.)

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $260 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $110 million instead of $60 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.

Required 1

Required 2

Required 3

Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion. (Enter your answers in millions. Loss amounts should be indicated with a minus sign. Use percentages as calculated and rounded in the table below to arrive at your final answer.)

2.

Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time. (Enter your answers in millions. Loss amounts should be indicated with a minus sign.)

3.

Suppose the estimated costs to complete at the end of 2019 are $110 million instead of $60 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method. (Enter your answers in millions. Use percentages as calculated and rounded in the table below to arrive at your final answer.)

Sally’s Swing Company produces and sells a single high-priced swing and in fiscal year 20XX the company produced and sold 30,000 units. Sally’s Swing Company Income Statement For Fiscal Year 20XX Sales $1,800,000 Variable Costs $1,350,000 Contribution Margin 450,000 Fixed Costs $240,000 Income Before Taxes 210,000 Tax Expenses 63,000 Income After Taxes 147,000 *Total sales and production is 30,000 units

1. Calculate the per unit figures for each item from the Income Statement.

2. Compute the breakeven point in units for fiscal 20XX.

3. Determine the company’s margin of safety in units for fiscal 20XX.

4. Determine the company’s degree of operating leverage at the current level of operations. If the company’s sales in units were to increase 30%, how much would profits before taxes increase in percentage terms?

5. Compute the sales level required in units to achieve a level of profits before taxes of $270,000.

6. Based on the original data above, determine the sales level required if the company desires a profit after taxes of $210,000. It is believed that the tax rate will remain at current levels

7. Assume the company is expecting to experience a shortage of its raw materials. This situation is expected to result in an increase in the manufacturing costs of $3 per unit. Under this circumstance, and assuming that the company does not believe that it can increase its selling price, determine the company’s break even point and new safety margin.

8. Management has decided to raise the price of its product to $65 per unit. It also will spend an additional $102,000 per year for advertising. Although it has never paid commissions before, the company has decided to begin paying sales personnel $1 per unit for every unit sold. Determine the new breakeven point. Determine the margin of safety of the company under this plan if sales only reach 27,000 units. Note: Solve this question starting at the original data.

I would need a cash flow statement ONLY for the period ending December 31 2010 PLEASE!

Income Statements

(1) Should be 15, 13 is due to the cumulative rounding

Balance Sheets (year end)

Portland is an economy comprised of only of a restaurant named Gloria’s Kitchen (GK) owned and run by Gloria. In one year, the yearly sale revenue of GK is $1,000,000. GK pays $600,000 to its employees, who pay $140,000 in taxes on this income. GK’s equipment depreciates in value by $125,000. GK pays $50,000 in corporate income taxes and pays Gloria a dividend of $150,000. Gloria pays taxes of $60,000 on this dividend income. GK retains $75,000 of earnings in the business to finance future expansion.

1. How much does this economic activity contribute to each of the following?

GDP, NNP ( net national product), National income, Compensation of employees, Proprietors’ income, Corporate profits, Personal income, and Disposable personal income.

2. Now consider an economy that produces and consumes coconuts and apples. In the following table are data for two different years.

Using 2010 as the base year, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as the CPI.

c- Now suppose, Gloria consumes only apples. In year 1 (2010) red apples cost $1 each and green apples cost $2 each, and she buys 10 red apples. In year 2 (2015), red apples cost $2, and green apples cost 1$ each, and she buys 10 green apples. Compute a consumer price index for apples for each year. Assume that year 1 is the base year in which the consumer basket is fixed. How does your index change from year 1 to year 2? Compute the deflator for each year. How does the deflator change from year 1 to year 2?

The TQM Corporation is located in a country where there are perfect capital markets and no taxes.... The TQM Corporation is located in a country where there are perfect capital markets and no taxes. The corporation currently has $120 million in equity and $60 million in risk free debt. The return on equity, rS, is 18% and the cost of debt, rB, is 9%. Suppose TQM decides to issue additional equity to repurchase the $60 million in debt so that it will have an all-equity capital structure.

1. If TQM did this, what would the total value of the firm be after the refinancing?

2. What would the return on equity, rS, be after the refinancing?

3. Before the refinancing, a shareholder, Sheila, holds $1 million of TQM stock and $2 million of risk free debt. What is her holding of TQM stock and risk free debt after the refinancing, if she wants to keep the same level of risk in her portfolio?

4. After the refinancing, suppose the firm announces a project costing $5 million with an NPV of $2 million. Investors do not anticipate the project. The project is to be financed entirely by debt. What is the total value of the firm's equity after the debt for the project has been raised?