A company has a choice between taking a $231k loan or accepting a cash discount terms 2.78/18, net 76. A creditor will loan the money for 2 years at an interest cost of $12.4k. The creditor requires a 21% compensating balance. However, the company ordinarily maintains 50% of that requirement. If the company takes the loan, it must provide monthly payments to retire the obligation. Note: The term “k” is used to represent thousands (× $1,000). Required: What is the absolute percentage difference in the effective rate of interest (ERI) between the two alternatives? Answer % Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).
In: Finance
A company has a choice between taking a $231k loan or accepting a cash discount terms 2.78/18, net 76. A creditor will loan the money for 2 years at an interest cost of $12.4k. The creditor requires a 21% compensating balance. However, the company ordinarily maintains 50% of that requirement. If the company takes the loan, it must provide monthly payments to retire the obligation. Note: The term “k” is used to represent thousands (× $1,000). Required: What is the absolute percentage difference in the effective rate of interest (ERI) between the two alternatives? Answer % Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%).
In: Finance
"A corporation is considering purchasing a vertical drill machine. The machine will cost $66,000 and will have a 2-year service life. The selling price of the machine at the end of 2 years is expected to be $43,000 in today's dollars. The machine will generate annual revenues of $62,000 (today's dollars), but the company expects to have annual expenses (excluding depreciation) of $12000 (today's dollars). The asset is classified as a 7-year MACRS property. The tax rate for the firm is 44%. The general inflation rate is 4% and will impact the annual revenue, annual expenses, and salvage value. What is the real (inflation-free) rate of return for this machine? Express your answer as a percentage between 0 and 100."
In: Finance
Idea has planned to launch itself in Pakistan with multiple stores throughout the country in next 6 years. The company is planning to launch in Lahore and Islamabad in first three years and expecting a growth rate of 12%. Next it would expand itself to Karachi and Multan and expects 6% growth through 4th to 6th years. Then company plans to have constant earnings (0% growth) till forever. Currently company has issued dividend of $2(see table) on its shares which are trading in market at a market value of $25. Estimate cost of equity of Idea.
Given dividend is 2.2 and discounting percentage is 8%. Feel free to choose the other value of discounting.
In: Finance
Given the demand function for a particular product is q(p)=(10-p^2)e^-p+3 for price p in thousands of dollars. Suppose the cost of producing q units of this particular product is In(q).
a) Find the profit function in terms of p, pie(p). Use log properties to simplify the function.
b) Show there exists a solution p where pie(p)=0. (Cite any theorems used and do not solve for p)
c) Suppose we are current charging $3000 and we want to increase profit by 1%. Approximately how much percentage should we change the price of the product? (P is in thousands dollars)
In: Economics
Questions:
5) What are the advantages and disadvantages to countries that promote frontier tourism?
6) Discuss how nations can create a competitive advantage in attracting tourists.
Roughing It: Tourists Are Boldly Going Into African Trouble Spots
A conservationist in oil-rich Gabon leads the way in promoting tiny nation’s sur ing hippopotamuses and other natural attractions, as part of a regional push for tourism amid instability
By Alexandra Wexler
Oct. 19, 2018 5 30 a.m. ET
WONGA WONGUE, Gabon—For the past decade, an energetic conservationist has been building the foundations for a tourism industry in Gabon, where rare forest elephants stroll down the beach, hippopotamuses surf in the ocean waves and blue-faced mandrills march by the thousands through the jungle.
The challenges for Gabon’s national parks authority and its head, Lee White, include transporting clients to remote camps in a country with little infrastructure, recruiting pygmy trackers from deep within the jungle and training antipoaching units who have to battle armed hunters and illegal gold miners in one of the world’s most pristine stretches of wilderness.
Over the past decade, with the support of government and overseas philanthropists, Mr. White has transformed Gabon’s parks authority from a group with just 100 staff with a budget of $500,000 to a $30 million operation with 800 employees, 175 cars, 35 boats and a number of aircraft, including a helicopter. Tourists have begun to arrive, with visitors up by a third this year through July compared with the average over the same period in 2017 at the country’s most-popular national park for international tourists.
Mr. White’s Gabonese gambit is at the leading edge of a trend attracting a growing list of African economies: frontier-tourism products in places that visitors often more-closely associate with conflict or instability.
In recent years, a small but swelling segment of the tourism market has been drawn to places like Chad, the Democratic Republic of Congo’s Virunga National Park, which was recently closed after two British tourists were kidnapped and their ranger killed, and war-torn Central African Republic. Tour operator Thomas Cook Group PLC recently sent a delegation to Sierra Leone, which has struggled with civil war and more recently an Ebola epidemic, to discuss offering package tours.
“There is a trend recently of interest in ‘unexplored’ places,” said André Rodrigues Aquino, a senior natural-resources management specialist at the World Bank, who advises African
governments on their tourism sector. “It’s very linked to nature, places that have pristine unspoiled nature.”
The numbers are small compared with sub-Saharan Africa’s broader tourism market of $43.7 billion in 2017, according to the World Travel & Tourism Council. But countries with the strongest growth in international arrivals in 2016 compared with a year earlier were Sierra Leone, Nigeria, Eritrea and Togo, according to the African Development Bank.
“A lot of people who have traveled previously, particularly in Africa, are looking for different experiences in different places,” said Peter Fearnhead, chief executive of African Parks, a nongovernmental organization that manages 15 national parks in partnership with governments across Africa. “The fact that [these places are] so edgy, we’re finding that there’s an increasing interest.”
The niche but expanding market for frontier tourism in fractious security environments has governments and companies seeking to balance revenue potential against the investments and know-how needed to ensure safety.
Oil-rich Gabon, a sparsely-populated country the size of Colorado on Africa’s Atlantic seaboard, has one of the highest per-capita incomes in sub-Saharan Africa and is one of the more stable countries in the continent’s central region. But when Mr. White took the reins of the country’s newly created national-parks agency in 2009, the vast nature reserves that cover about 20% of the country existed essentially only on paper.
= “The first priority when I was appointed was to manage the parks and when necessary, defend them,” Mr. White said. He created antipoaching units and armed rapid-response teams to push, with much success, ivory poachers out of the parks.
There are exceptions. Parks officers have had two gunbattles with illegal gold miners in a park called Birougou in the past six months, Mr. White said.
At Zakouma, a national park in the desert nation of Chad, poachers had massacred about 90% of the park’s elephants by the time African Parks took over its management in 2010. Since then, the group has transformed the region into a haven for one of Africa’s largest single herds, now about 560 elephants strong. By establishing flights to link the park with Chad’s capital city— and joining with a group of private guides as part of the marketing strategy—the park’s revenue is expected to be just under a $1 million this year, up from about $50,000 in 2015.
The mobile-tented safari experience that African Parks offers is booked about 18 months in advance, but it takes a maximum of just eight guests at a time and is limited to the dry season.
“It’s not a sustainable solution for the park,” said Stuart Slabbert, head of conservation-led economic development for African Parks.
Experts say national parks across the continent will struggle to expand their tourism revenue without a cooperative and supportive government.
In Gabon, Mr. White’s plans have been aided by his close relationship with current President Ali Bongo Ondimba, established while his father, Omar Bongo Ondimba, was still in power. Though Gabon is
theoretically a democracy, the elder Mr. Bongo ruled for 42 years and the current president, who took over when he died in 2009, won close, tense elections in 2016 marred by accusations of fraud that ignited countrywide rioting.
This year, Mr. White began actively marketing safari-type trips to the parks for the first time. Possible sightings include sea turtles hatching on the country’s beaches, humpback whales breaching in the surf and Western lowland gorillas lazing while their babies climb and swing around trees: a literal jungle gym.
“It’s not savanna tourism. You have to work to see this stuff,“ said Michael Nichols, a photographer who took a picture of Gabon’s surfing hippos that Time magazine calls one of the 100 most influential images of all time. “That doesn’t preclude that it’s frigging unbelievable. It could be like the Amazon.”
In: Operations Management
|
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 25% each of the last three years. He has computed the cost and revenue estimates for each product as follows |
| Product A | Product B | ||||
| Initial investment: | |||||
| Cost of equipment (zero salvage value) | $ | 370,000 | $ | 530,000 | |
| Annual revenues and costs: | |||||
| Sales revenues | $ | 400,000 | $ | 510,000 | |
| Variable expenses | $ | 180,000 | $ | 250,000 | |
| Depreciation expense | $ | 49,000 | $ | 91,000 | |
| Fixed out-of-pocket operating costs | $ | 85,000 | $ | 72,000 | |
| The company’s discount rate is 19%. |
| 1. |
Calculate the payback period for each product. (Round your answers to 2 decimal places.) |
| 2. |
Calculate the net present value for each product. (Round discount factor(s) to 3 decimal places.) |
| 3. |
Calculate the internal rate of return for each product. (Round percentage answer to 1 decimal place. i.e. 0.1234 should be considered as 12.3% and Round discount factor(s) to 3 decimal places.) |
| 4. |
Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your answers to 2 decimal places.) |
| 5. |
Calculate the simple rate of return for each product. (Round percentage answer to 1 decimal place. i.e. 0.1234 should be considered as 12.3%.) |
| 6a. |
For each measure, identify whether Product A or Product B is preferred. |
| 6b. |
Based on the simple rate of return, Lou Barlow would likely: |
|
In: Accounting
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 20% each of the last three years. He has computed the cost and revenue estimates for each product as follows:
| Product A | Product B | ||||
| Initial investment: | |||||
| Cost of equipment (zero salvage value) | $ | 260,000 | $ | 470,000 | |
| Annual revenues and costs: | |||||
| Sales revenues | $ | 310,000 | $ | 410,000 | |
| Variable expenses | $ | 144,000 | $ | 194,000 | |
| Depreciation expense | $ | 52,000 | $ | 94,000 | |
| Fixed out-of-pocket operating costs | $ | 76,000 | $ | 56,000 | |
The company’s discount rate is 18%.
Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor using tables.
Required:
1. Calculate the payback period for each product. (Round your answers to 2 decimal places.)
2. Calculate the net present value for each product. (Round discount factor(s) to 3 decimal places.)
3. Calculate the internal rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3% and round discount factor(s) to 3 decimal places.)
4. Calculate the project profitability index for each product. (Round discount factor(s) to 3 decimal places. Round your answers to 2 decimal places.)
5. Calculate the simple rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3%.)
In: Finance
4. Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows:
| Product A | Product B | ||||
| Initial investment: | |||||
| Cost of equipment (zero salvage value) | $ | 170,000 | $ | 380,000 | |
| Annual revenues and costs: | |||||
| Sales revenues | $ | 250,000 | $ | 350,000 | |
| Variable expenses | $ | 120,000 | $ | 170,000 | |
| Depreciation expense | $ | 34,000 | $ | 76,000 | |
| Fixed out-of-pocket operating costs | $ | 70,000 | $ | 50,000 | |
The company’s discount rate is 16%.
Required:
A. Calculate the payback period for each product. (Round your answers to 2 decimal places.)
B. Calculate the net present value for each product. (Round discount factor(s) to three decimal places.)
C. Calculate the internal rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3% and round discount factor(s) to 3 decimal places.)
D. Calculate the project profitability index for each product. (Round discount factor(s) to three decimal places. Round your answers to 2 decimal places.)
E. Calculate the simple rate of return for each product. (Round percentage answers to 1 decimal place. i.e. 0.1234 should be considered as 12.3%.)
F. For each measure, identify whether Product A or Product B is preferred.
G. Based on the simple rate of return, Lou Barlow would likely:
In: Accounting
In: Finance