A new product is being evaluated. Market research has surveyed the potential market for this product and believes that it will generate a total demand of 50,000 units at average price of $280. Total sots for the various value-chain functions using existing process technology are:

Management has a target profit percentage of 40% of sales. Production engineering indicates that a new process technology can reduce the manufacturing cost by 40% but it will cost $150,000.

1. Assuming the existing process technology is used, should the new product be releases to production?

The unit target cost is $X. The expected average unit cost if the new product is release to production would be $X. The new product Should/Should not be released to production because the expected average unity cost is greater than/less than the unit target cost.

2. Assuming the new process technology is purchased, should the new product be released to production?

First calculate the total cost savings if the new process technology is purchased.

The total cost savings will be $X.

If the new process technology is purchased, the expected average unity cost will be $X. The new product should/should not be released to production because the expected average unit cost is greater than/less than the unit target cost.

The input is broken into chunks of consecutive lines, where each pair of consecutive chunks is separated by a line containing "----snip----". Read the entire input and break it into chunks C1,…,Ck. Then output the chunks in reverse order Ck,…,C1 but preserving the order of the lines within each chunk.

import java.io.BufferedReader;
import java.io.FileReader;
import java.io.FileWriter;
import java.io.IOException;
import java.io.InputStreamReader;
import java.io.PrintWriter;

public class Part7 {
   
   /**
    * Your code goes here - see Part0 for an example
    * @param r the reader to read from
    * @param w the writer to write to
    * @throws IOException
    */
   public static void doIt(BufferedReader r, PrintWriter w) throws IOException {
      // Your code goes here - see Part0 for an example
   }

   /**
    * The driver.  Open a BufferedReader and a PrintWriter, either from System.in
    * and System.out or from filenames specified on the command line, then call doIt.
    * @param args
    */
   public static void main(String[] args) {
      try {
         BufferedReader r;
         PrintWriter w;
         if (args.length == 0) {
            r = new BufferedReader(new InputStreamReader(System.in));
            w = new PrintWriter(System.out);
         } else if (args.length == 1) {
            r = new BufferedReader(new FileReader(args[0]));
            w = new PrintWriter(System.out);            
         } else {
            r = new BufferedReader(new FileReader(args[0]));
            w = new PrintWriter(new FileWriter(args[1]));
         }
         long start = System.nanoTime();
         doIt(r, w);
         w.flush();
         long stop = System.nanoTime();
         System.out.println("Execution time: " + 1e-9 * (stop-start));
      } catch (IOException e) {
         System.err.println(e);
         System.exit(-1);
      }
   }
}

Expand Your Critical Thinking 7-1

Aurora Company is considering the purchase of a new machine. The invoice price of the machine is $115,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value of the new equipment is expected to be zero after a useful life of 5 years. Existing equipment could be retained and used for an additional 5 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would have to be scrapped. Aurora’s accountant, Lisah Huang, has accumulated the following data regarding annual sales and expenses with and without the new machine.

Prepare an incremental analysis for the 5 years. (Ignore income tax effects.) (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Should Aurora keep the existing machine or buy the new machine?

Decision-Making Across the Organization CT25.1 Luang Company is considering the purchase of a new machine. Its invoice price is $122,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value of the new machine is expected to be zero after a useful life of 4 years. Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would be scrapped. Luang's accountant, Lisa Hsung, has accumulated the following data regarding annual sales and expenses with and without the new machine.

1. Without the new machine, Luang can sell 10,000 units of product annually at a per unit selling price of $100. If the new unit is purchased, the number of units produced and sold would increase by 25%, and the selling price would remain the same.

2. The new machine is faster than the old machine, and it is more efficient in its usage of materials. With the old machine the gross profit rate will be 28.5% of sales, whereas the rate will be 30% of sales with the new machine. (Note: These gross profit rates do not include depreciation on the machines. For purposes of determining net income, treat depreciation expense as a separate line item.)

3. Annual selling expenses are $160,000 with the current equipment. Because the new equipment would produce a greater number of units to be sold, annual selling expenses are expected to increase by 10% if it is purchased.

4. Annual administrative expenses are expected to be $100,000 with the old machine, and $112,000 with the new machine.

5. The current book value of the existing machine is $40,000. Luang uses straight-line depreciation.

6. Luang's management has a required rate of return of 15% on its investment and a cash payback period of no more than 3 years.

a. Calculate the annual rate of return for the new machine. (Round to two decimals.)

b. Compute the cash payback period for the new machine. (Round to two decimals.)

c. Compute the net present value of the new machine. (Round to the nearest dollar.)

d. On the basis of the foregoing data, would you recommend that Luang buy the machine?

Many entrepreneurial ventures raise money from venture capitalists. Getting venture capital funding is a complex process of finding one or more partners to commit to back the company on its journey. The relationship between entrepreneurs and venture capitalists is important – it can be very positive and help a venture succeed, or it can be stressful and have negative implications. We will spend quite a bit of time trying to understand what venture capitalists do and how they structure deals with entrepreneurial ventures. The big question – Can venture capitalists help you and your venture succeed? Venture capitalists are professionals who specialize in investing in high growth potential ventures. They typically raise funds from institutional investors, corporations or individuals and form partnerships that deploy capital over a period of up to ten years. The venture capitalists act as General Partners and the investors are Limited Partners. Venture capital firms have two income streams. They charge a management fee based on the amount in the fund and they take a share of the profits – that share is called the carried interest. For most funds, the management fee is under 2% per year and the carried interest percentage is between 15 and 30%. Most venture capital firms have several partners and invest in multiple companies, often in separate rounds of financing for each company. Venture capital firms tend to specialize in geography, stage of investment, and/or industry. At one end of the spectrum, some funds only invest in early-stage companies. Other firms invest in more established companies to fund growth. The professional venture capital industry has existed since the 1940s though the industry remained small until the mid-1990s as the Internet revolution took hold. Total capital deployed in the industry is under $300 billion. There are several hundred active venture capital funds in the United States and around the world. Venture capital is a “hits” business. Even the best investors lose money or make modest returns on a majority of the companies they back. A few great successes generate most of the value, as was true with companies like Intel, Genentech, Apple, Amazon, Google, Facebook and more recent companies like Uber and Airbnb. A small number of venture capital firms consistently back big winners. In recent years, Sequoia, Benchmark, Accel, and Greylock have had a disproportionate number of “Unicorn” hits – these are companies that attain valuations of $1 billion or more. There is enormous variety in the industry. Some funds are small – from $10 million up to $100 million. These firms are willing to back new companies and write initial checks of several hundred thousand up to a few million dollars. Most venture funds reserve capital to make follow-on investments in companies that are doing well. Larger funds – those up to $1 billion in capital – will only invest in companies that might need tens of millions of dollars over the life of the fund. Venture capitalists are active investors. They often insist on a seat on the board of directors and they negotiate for certain control rights such as the right to replace the CEO or to approve any large capital expenditure or corporate action. Venture capitalists almost always use a standard investment vehicle – convertible preferred stock – though the exact terms depend on many factors. Some venture capitalists have been successful entrepreneurs while others have experience in large companies or finance.

What do you think about raising money from venture capital firms? How do you decide whether you should do so?

This assignment concerns the idea of "private equity," a notion that is very important to the financial strategy of firms. We had a brief discussion on Blackrock, which is a private equity firm. Many companies have recently been bought by private equity, including Dell. Private equity firms argue that they can re-engineer the firm without shareholders breathing down their neck.

But private equity can be a very dangerous thing. Private operators buy companies by borrowing money, then load the debt on the companies books, strip it of all value, and leave it to go bankrupt. A particularly egregious case involved the Simmons mattress company, and the same might be unfolding at Toys R Us.

In his 2014 letter to investors, Warren Buffet had warned about the ethics of this phenomenon:

Families that own successful businesses have multiple options when they contemplate sale. Frequently, the best decision is to do nothing. There are worse things in life than having a prosperous business that one understands well. But sitting tight is seldom recommended by Wall Street. (Don’t ask the barber whether you need a haircut.)

When one part of a family wishes to sell while others wish to continue, a public offering often makes sense. But, when owners wish to cash out entirely, they usually consider one of two paths.

The first is sale to a competitor who is salivating at the possibility of wringing “synergies” from the combining of the two companies. This buyer invariably contemplates getting rid of large numbers of the seller’s associates, the very people who have helped the owner build his business. A caring owner, however – and there are plenty of them – usually does not want to leave his long-time associates sadly singing the old country song: “She got the goldmine, I got the shaft.”

The second choice for sellers is the Wall Street buyer. For some years, these purchasers accurately called themselves “leveraged buyout firms.” When that term got a bad name in the early 1990s – remember RJR and Barbarians at the Gate? – these buyers hastily relabeled themselves “private-equity.”

The name may have changed but that was all: Equity is dramatically reduced and debt is piled on in virtually all private-equity purchases. Indeed, the amount that a private-equity purchaser offers to the seller is in part determined by the buyer assessing the maximum amount of debt that can be placed on the acquired company.

Later, if things go well and equity begins to build, leveraged buy-out shops will often seek to re-leverage with new borrowings. They then typically use part of the proceeds to pay a huge dividend that drives equity sharply downward, sometimes even to a negative figure.

In truth, “equity” is a dirty word for many private-equity buyers; what they love is debt. And, because debt is currently so inexpensive, these buyers can frequently pay top dollar. Later, the business will be resold, often to another leveraged buyer. In effect, the business becomes a piece of merchandise.

So workers and customers suffer, while financiers make money.

***In this assignment, please write a 500-word analysis of private equity. Give your essay an original title. You can be pro-private equity or anti. I want you demonstrate how well you understand this concept. would you please elaborate and elucidate it thanks.

Review the provisions of the Sarbanes-Oxley Act of 2002 to address the accounting scandals in the late 1990s and early 2000s (Enron, WorldCom, etc.)BELOW:

Identify the provisions that you believe made the most significant impact. What other provisions could have been included in the Act to strengthen the responsible stewardship and integrity of the accounting profession? Conversely, what existing provisions in the Act do you believe (if any) are unnecessary or over-regulate the profession?

As a result of corporate accounting scandals, such as those at Enron and WorldCom, the U.S. Congress enacted the Sarbanes-Oxley Act of 2002 (SOX). The purpose of SOX is to restore trust in publicly traded corporations, their management, their financial statements, and their auditors. SOX enhances internal control and financial reporting requirements and establishes new regulatory requirements for publicly traded companies and their independent auditors. Publicly traded companies have spent millions of dollars upgrading their internal controls and accounting systems to comply with SOX regulations.

As shown in Exhibit 1-10, SOX requires the company’s CEO and CFO to assume responsibility for their company’s financial statements and disclosures. The CEO and CFO must certify that the financial statements and disclosures fairly present, in all material respects, the operations and financial condition of the company. Additionally, they must accept responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting. The company must have its internal controls and financial reporting procedures assessed annually.

Some Important Features of SOX

SOX also requires audit committee members to be independent; that is, they may not receive any consulting or advisory fees from the company other than for their service on the board of directors. In addition, at least one of the members should be a financial expert. The audit committee oversees not only the internal audit function but also the company’s audit by independent CPAs.

To ensure that CPA firms maintain independence from their client company, SOX does not allow CPA firms to provide certain nonaudit services (such as bookkeeping and financial information systems design) to companies during the same period of time in which they are providing audit services. If a company wants to obtain such services from a CPA firm, it must hire a different firm to do the nonaudit work. Tax services may be provided by the same CPA firm if pre-approved by the audit committee. The audit partner must rotate off the audit engagement every five years, and the audit firm must undergo quality reviews every one to three years.

SOX also increases the penalties for white-collar crimes such as corporate fraud. These penalties include both monetary fines and substantial imprisonment. For example, knowingly destroying or creating documents to “impede, obstruct, or influence” any federal investigation can result in up to 20 years of imprisonment.

SOX also contains a “clawback” provision in which previously paid CEO’s and CFO’s incentive-based compensation can be recovered if the financial statements were misstated due to misconduct. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 further strengthens the clawback rules, such that firms must recover all incentive compensation paid to any current or former executive, in the three years preceding the restatement, if that compensation would not have been paid under the restated financial statements. In other words, executives will not be allowed to profit from misstated financial statements, even if the misstatement was not due to misconduct.