WeHaul Trucking is planning its truck purchases for the coming year. It allocated $600,000 for the purchase of additional trucks, of which three sizes are available. A large truck costs $150,000 and will return the equivalent of $15,000 per year to profit. A medium-sized truck costs $90,000 and will return the equivalent of $12,000 per year. A small truck costs $50,000 and will return the equivalent of $9,000 per year. WeHaul has maintenance capacity to service either four large trucks, five medium-sized trucks, or eight small trucks, or some equivalent combination. WeHaul believes that it will be able to hire a maximum of seven new drivers for these added trucks. The company cannot spend more than one/half of the total funds it actually spends to purchase medium-sized trucks. (Hint: this is not necessarily one half of the total funds it has allocated for the purchase of additional trucks).

a) Formulate a linear programming model to be used for determining how many of each size of truck to purchase if the company wants to maximize its profit. Ignore the time value of money. Provide the linear programming variables, the objective function, and the constraints for the problem.

b) At optimality, how much profit will result and what is the optimal combination of trucks?

c) Using your sensitivity analysis output, provide two sensitivity analysis interpretations. One must be for the objective function and one must be for one of the constraints

d) Now suppose that there is a requirement that WeHaul must purchase at least one of each size truck. Also, the number of larger trucks cannot be greater than the number of medium trucks. Write the constraint(s) for this requirement.  

2. An investment of $200,000 in a new machine will generate income of $40,000 per year for 4 years after which the machine is to be sold for an estimated $75,000. Pick the correct equation to determine the unknown rate of return

3. A machine has an initial cost of $25,000, annual operating cost of $4,500 and a salvage value of $5,000. The machine has a recovery period of 5 years. If Straight Line depreciation is used, what fraction of the initial $25,000 will be cumulatively depreciated by the end of year 3? Pick the choice closest to your answer

4. A machine has an initial cost of $25,000, annual operating cost of $4,500 and a salvage value of $5,000. The machine has a recovery period of 5 years. If Double Declining Balance depreciation is used, what is the Book Value at the end of year 2?

5. A machine has an initial cost of $25,000, annual operating cost of $4,500 and a salvage value of $5,000. The machine has a recovery period of 5 years. Using MACRS depreciation, what is the depreciation in year 3?

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $98 per unit, and variable expenses are $68 per unit. Fixed expenses are $838,200 per year. The present annual sales volume (at the $98 selling price) is 25,500 units. Required: 1. What is the present yearly net operating income or loss? 2. What is the present break-even point in unit sales and in dollar sales? 3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit? 4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

A 5-year project requires a $300,000 investment in a machine that is expected to worth $50,000 when the project ends. Operating expenses are expected to be $75,000 in the first year and are expected to increase 3% per year over the life of the project. The appropriate discount rate is 8%, the company’s tax rate is 20%, and the CCA rate is 30%. What is the after-tax present value of the annual operating expenses? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)

The net income reported on the income statement for the current year was $323,000. Depreciation recorded on equipment and a building amounted to $90,060 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

Required:

A U.S. company has a ¥750 million payable due in one year to a bank in Japan. The current spot rate S($/¥) = $0.0086/¥ and the one-year forward rate F360($/¥) = $0.0092/¥. The annual interest rate is 3 percent in Japan and 6 percent in the United States.

a. How to implement a hedge using a forward contract? Compute the guaranteed dollar payment in one year using the forward hedge.

b. How to implement a money market hedge? Compute the guaranteed dollar payment in one year using money market hedge.

c. If the U.S company decides to hedge using call option on yen, what would be the dollar payment in one year? Assume that the spot exchange rate S($/¥) = $0.0092/¥ in one year. Also suppose that a one-year call option on yen has an exercise price of $0.0086/¥ and a premium of $0.00012/¥.

A stock is expected to pay the following dividends: $1.0 in 1 year, $1.5 in 2 years, and $2.0 in 3 years, followed by growth in the dividend of 5% per year forever after that point. The stock's required return is 12%. The stock's current price (Price at year 0) should be $____________.

Imagine you are a first year graduate student at an institution in the US. You have decided to hold a "friendsgiving" feast the weekend before Thanksgiving, including some of your classmates and friends from other departments. One of your guests, who is studying physics, asks you what the biological differences between "dark" meat and "white" meat are. Identify three differences between dark and white meat, and explain the biological significance or implication of each in 1 sentence.

1. At the beginning of its fiscal year 2019, an analyst made the following forecast for KMG, Inc. (in millions of dollars):

Suppose these numbers were given to you at the end of 2018, as forecasts, when the book value per share was $8.75, as indicated and market price of the stock was $10.50 per share. Use a required return of 9 percent for calculations below. You have to fill in the table below to show your working process.

a. Calculate residual earnings (RE) and return of common equity (ROCE) for each year, 2019–2023.                                                                                                                                       

                           [5 marks]

b. Value the firm at the end of 2018 under the assumption that the ROCE in 2023 will continue at the same level subsequently.                                                                         

[3 mark]

c. Based on your estimate, should investors buy the share of this company?    

[2 mark]

At the end of its fiscal year 2019, an analyst made the following forecast for ABC, Inc. (in millions of dollars):

ABC has a net debt of $823. Assume that free cash flow will grow at 4 percent per year after 2023. ABC had 300 million shares outstanding at the end of 2019, trading at $75 per share. Using a required return of 10 percent, calculate the following for ABC at the end of 2019 (You have to fill in the table below to show your working process):

1. The enterprise value                                                                          

[5 marks]

2. Equity value                                                                                       

[2 marks]

3. Equity value per share                                                                                   

[2 marks]

4. Based on your estimate, should investors buy the share of this company?

[1 mark]