The firm Lando expects cash flows in one year’s time of $90 million if the economy is in a good state or $40 million if it is in a bad state. Both states are equally likely.
The firm also has debt with face value $65 million due in one year.

Lando is considering a new project that would require an investment of $30 million today and would result in a cash flow in one year’s time of $47 million in the good state of the economy or $32 million in the bad state.

Investors are all risk neutral and the risk free rate is zero.
(a) What are the expected values of the firm's equity and debt without the new project?

Lando can finance the project by issuing new debt of $30 million. If the firm goes bankrupt the new debt will have a lower priority for repayment than the firm’s existing debt.

(b) If the new project is accepted, what will be the value of the firm’s cash flow in each state after paying the original debtholders? What payment must Lando promise to the new debtholders in the good state of the economy?

(c) What will be the expected value of Lando’s equity? Will Lando’s managers choose to accept the project? Why/why not?

Alternatively, Lando can issue new equity of $30 million to finance the project.

(d) What proportion of its equity must Lando give to the new equityholders? Will Lando’s managers choose to accept the project now? Why/why not?

The firm Tehbye expects cash flows in one year’s time of $90 million if the economy is in a good state or $40 million if it is in a bad state. Both states are equally likely. The firm also has debt with face value $65 million due in one year.   

Tehbye is considering a new project that would require an investment of $30 million today and would result in a cash flow in one year’s time of $47 million in the good state of the economy or $32 million in the bad state.

Investors are all risk neutral and the risk free rate is zero.

(a) What are the expected values of the firm's equity and debt without the new project?   

Tehbye can finance the project by issuing new debt of $30 million. If the firm goes bankrupt the new debt will have a lower priority for repayment than the firm’s existing debt.   

(b) If the new project is accepted, what will be the value of the firm’s cash flow in each state after paying the original debtholders? What payment must Tehbye promise to the new debtholders in the good state of the economy?

(c) What will be the expected value of Tehbye's equity? Will Tehbye's managers choose to accept the project? Why/why not?   

Alternatively, Tehbye can issue new equity of $30 million to finance the project.   

(d) What proportion of its equity must Tehbye give to the new equityholders? Will Tehbye's managers choose to accept the project now? Why/why not?

We have created an ArrayList of Person class. write a method called push that pushes all the people with the even length last name to the end of the ArrayList

Content of the ArrayList before push

[alex Bus, Mary Phillips, Nik Lambard, Rose Rodd, Esa khan, Jose Martinex, Nik Patte]

content of the ArrayList after the push method
[alex Bus, Nik Lambard, Nik Patte, Mary Phillips, Rose Rodd, Esa khan, Jose Martinex]

import java.util.*;
class Person
{
   private String name;
   private String last;
   public Person(String name, String last)
   {
     this.name = name;
     this.last = last;
   }
   public String getLast()
   {
     return last;
   }
   public String getFirst()
   {
     return name;
   }
   public String toString()
   {
     return name + " " + last;
   }
}

public class ArrayList
{
  public static void main(String[] args)
  {
    ArrayList<Person> list = new ArrayList<Person>();
     list.add(new Person ("alex","Bus"));
     list.add(new Person("Mary", "Phillips"));
     list.add(new Person("Nik", "Lambard") );
     list.add(new Person("Rose","Rodd"));
     list.add(new Person("Esa","khan"));
     list.add(new Person("Jose","Martinex"));
     list.add(new Person("Nik","Patte"));
     System.out.println(list);
     push(list);
     System.out.println(list);

  
  }
//this method pushes all the people with the even length last name to the end of the list
 public static void push(ArrayList<Person> list) {
         
 }
     
   
}

Business Case:

The Managerial Accounting Department at your company has been engaged by the Production Department for assistance in evaluating a purchase decision. The equipment the production department is currently utilizing is outdated and has become costly to maintain. New machines would also provide increased efficiencies leading to increased sales. Due to this, the department is considering replacing all equipment with new machines.

Data:
- Cost of Current Machines: $800,000
- Cost of New Machines: $1,250,000
- Annual Maintenance on Current Machines: $125,000
- Annual Maintenance on New Machines: $54,000
- Salvage Value of Current Machines: $325,000
- Immediate employee training cost on new machines: $15,000 - Working Capital needed for new machines: $50,000

- Would be needed once machines are purchased and working capital released after 5 years
- Increased sales opportunity provided by new machines: $200,000 first year and growing at 5% per year after
- Company’s Required Rate of Return: 10%
- Contribution margin: 47%
- Depreciation and income taxes should be ignored.

Given the financial information listed above, provide the following 2 files:?

An Excel worksheet showing the annual cash flows by line-item and in total for the keep vs. purchase decision, for

8 years.

? Calculate the NPV in excel

? Calculate the IRR in excel

? Should the Department purchase new equipment or maintain the current equipment?

X Company is considering a new processor that costs $150,000. Shipping and setup costs for the new processor are estimated to be $15,000. X’s working capital requirement is expected to increase by $17,000 when the new processor begins operation and is expected to be fully recoverable at the end of the project. The new processor’s useful life is expected to be 5 years and its salvage value at that point is estimated to be $60,000. The new processor is being depreciated using a 5-year ACRS life. Assume a tax rate of 35% and a cost of capital of 12%.

Estimated incremental revenues and incremental cash operating expenses for the new processor before tax for each year are shown in the table below.

Q1. What is the cost of the initial outlay?

Q2. Given the initial outlay for the new processor, assume the following yearly incremental after-tax cash flows (below) . Assume a cost of capital of 12%. What is the NPV of the Project?

Q3. Given the initial outlay for the new processor, assume the following yearly incremental cash flows (below). Assume a cost of capital of 12%. What is the IRR of the Project?

Puffy Clouds, a maker of data storage products, is considering adding a new manufacturing facility. The new facility would be housed in an unused building that the firm bought 8 years ago for $5 million; the building is being depreciated over a 20 life to a salvage value of zero. The building can be sold today for $2 million, and the market value of the building is expected to increase at 5% per year going forward. The new facility would require the purchase of $50 million of equipment that would be depreciated straight line to zero over a useful life of 5 years. However, the firm expects this equipment would have a scrap value of $250,000 at the end of its 5-year life. The firm would finance the equipment purchase with a five-year debt issue that would carry an interest rate of 5% p.a. The new facility would add $20 million to annual revenues, which are currently $100 million per year. The higher manufacturing efficiency of the new facility would reduce annual operating costs from 40% of revenues to 35% for both existing and new sales revenues. The new facility would require a $500,000 increase in net working capital, which would be recovered at the end of the project. The firm’s tax rate is 20% and the required rate of return is 8%. Calculate the NPV and IRR for the new facility (25 points)

The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miami and New York. The Miami unit is the original unit of the company and is well established. The New York unit is new, much like a start-up company. The costs of the Personnel Department are allocated to each unit based on the number of employees in order to determine unit profitability. The current rate is $300 per employee. Data for the fiscal year just ended show the following: Miami New York Number of employees 1,900 600 Number of new hires 35 100 Number of employees departing 15 50 Orlando, the manager of the New York unit, is unhappy with the results of the controller’s study. He asks the controller to develop separate rates for fixed and variable costs in the Personnel Department. The controller reports back to Orlando that the rates would be as follows: Allocation based on Variable Rate Fixed Rate Total Rate Employees $ 20 per employee $ 60 per employee $ 80 per employee Transitions $ 750 per transition $ 2,000 per transition $ 2,750 per transition Required: a. Orlando argues that New York should only be allocated the variable costs from this system, because the company would have to pay the fixed costs even if New York did not exist. Compute the cost allocated to each unit using the approach Orlando prefers.

Question 3

a) Enlightened Ltd is investigating the introduction of a new advanced solar light. Forecast revenue from the new light is $1,250,000 per year and variable costs $450, 000 per year. The revenue and variable costs are expected to stay constant for the four years. The new light will require a new production line that will have an initial cost of $2,000,000. For tax purposes you can depreciate the full cost down to zero over the four year life of the project. At the end of four years you expect to be able to sell the production machinery for $350,000. Selling the new fixtures will require additional working capital of $25,000 starting immediately. You expect to recover the working capital investment at the end of the four year project. You have already spent $50,000 in research and development costs to invent the new light. Assume the tax rate is 30% and the required return is 10% APR (compounded annually).

i) What is the annual depreciation of the new production line?

ii) What is the annual Operating Cash Flow for the project?

iii) What are the Project Cash Flows for the project?

iv) What is the NPV for the project? What information does the NPV provide?

v) What is the payback period for the project? What information does the payback period provide?

vi) Should Enlightened Ltd proceed with the new solar light project? Justify your answer.

b) What is sensitivity analysis and how is it used in project evaluation?

Write a 175- to 260-word response to both question 1 and 2

The West End Boutiques company was founded by Libbie Williams in 1990 with a single store in College Station, Texas, and the company now has 21 shops located in the triangle of Dallas, San Antonio, and Austin, Texas. Libbie was an accounting major in college, passed the entire CPA in her first attempt with high scores, and worked for one of the large CPA firms for 11 years prior to opening her first store. Based on her work experience, she fully understands the value of strong internal controls. Further, she recently selected a state-of-the art accounting system that connects all of her stores' financial transactions and reports.

Libbie employs two internal auditors who monitor internal controls and also search for ways to improve operational effectiveness. As part of the monitoring process, the internal auditors take turns conducting periodic reviews of the accounting records. For instance, the company takes a physical inventory at all stores once each year and an internal auditor oversees the process. Chris Domain, the most senior internal auditor, just completed a review of the accounting records and discovered several items of concern. These were:

• Physical inventory counts varied from inventory book amounts by more than 6% at two of the stores. In both cases, physical inventory was lower.
• Two of the stores seem to have an unusually high amount of sales returns for cash.
• In 9 of the stores, gross profit has dropped significantly from the same time last year.
• At 4 of the stores, bank deposit slips did not match cash receipts.
• One of the stores had an unusual number of bounced checks. It appeared that the same employee was responsible for approving each of the bounced checks.
• In 7 of the stores, the amount of petty cash on hand did not correspond to the amount in the petty cash account.

Requirements

1. For each of these concerns, identify a risk that may have created the problem.
2. Recommend an internal control procedure to prevent the problem in the future.

Spire is a nanosatellite and data analysis company based out of San Francisco. The company specialises in gathering unique data from small satellites in a low-earth orbit. Spire collect this data, pull it down and through a network of ground stations, and sell the Spire opened its European headquarters in Glasgow, Scotland. Data, like that provided by Spire’s nanosatellites, can be the key factor in fighting the extreme and unpredictable weather events that cause so much destruction globally.

Scotland has a well-known reputation for providing a first-class welcome to all its visitors and Spire management were very impressed by the warm and open reception they received from the Scottish Government agency. CEO and Co-founder Peter Platzer stated 'Where Scotland won out was the access to risk capital, the flexibility and, importantly, the Scottish Government’s eagerness to support innovative companies – this really stood out here’. His vision when he co-founded Spire was to be able to provide satellite powered data from any location on earth. He also claims that his staff are very pleased; ‘We had a number of overseas staff come here for a temporary position to help set up who have since decided that they want to stay here permanently. Glasgow is a really great place to live and Scotland in general - our people really enjoy being here. The words friendly and hospitable are really not rich enough in meaning to describe the experience of being a part of everyday life here in Scotland’.

As well as the positive welcome and help that they have had to settle into life in Scotland, Spire management also point out that a key factor in their location decision was the access to a talented work force. ‘When we looked at Scottish staff, we found that the passion for what they do, their character and work ethic, is absolutely world-class’.

Questions

1. Why did Spire choose to locate in Scotland?

2. Why do companies set up overseas manufacture and service operations?

3. Are reduced labour costs the main reason for relocation?