A firm is considering an investment in a new machine with a price of $18.02 million to replace its existing machine. The current machine has a book value of $6.02 million and a market value of $4.52 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.72 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $252,000 in net working capital. The required return on the investment is 10 percent and the tax rate is 35 percent. What is the NPV of the decision to purchase a new machine?

015824 A systems analyst tests a new algorithm designed to work faster than the currently-used algorithm. Each algorithm is applied to a group of 89 sample problems. The new algorithm completes the sample problems with a mean time of 17.64 hours. The current algorithm completes the sample problems with a mean time of 17.75 hours. Assume the population standard deviation for the new algorithm is 4.561 hours, while the current algorithm has a population standard deviation of 4.210 hours. Conduct a hypothesis test at the 0.05 level of significance of the claim that the new algorithm has a lower mean completion time than the current algorithm. Let μ1 be the true mean completion time for the new algorithm and μ2 be the true mean completion time for the current algorithm. Step 1 of 5: State the null and alternative hypotheses for the test.

Newsoft is a computer software company that is setting up a new program design facility in a nation that the company has not had any relationship with before. Yusuf is the Human Resource manager for the entire company. He is considering two different candidates to be the Operations manager of the new facility, Maria (who is a woman) and Raj (who is a man). Maria is better qualified than Raj for this new opportunity and is Jared’s preferred choice. Jared then learns from the Property manager, who has just returned from building the new facility, that this nation has a culture and laws that favour males in the workplace. Yusuf realizes that if he chooses Maria to be the new Operations manager, he will certainly be altering local customs and possibly violating the law. Who should Yusuf send to be the Operations manager of the new facility? [Who should Yusuf send if the local customs and laws promoted a particular race and Raj was a member of that race? Who should Yusuf send if the local customs and laws promoted right-handed people and Maria was left-handed?]

A store has 5 years remaining on its lease in a mall. Rent is $2,000 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year and wants rent at that time to be high so that the property will appear more valuable. Therefore, the store has been offered a "great deal" (owner's words) on a new 5-year lease. The new lease calls for no rent for 9 months, then payments of $2,600 per month for the next 51 months. The lease cannot be broken, and the store's WACC is 12% (or 1% per month). Should the new lease be accepted? The store owner is not sure of the 12% WACC—it could be higher or lower. At what nominal WACC would the store owner be indifferent between the two leases? f the store owner decided to bargain with the mall's owner over the new lease payment, what new lease payment would make the store owner indifferent between the new and old leases?

D&R Corp. has annual revenues of $276,000, an average contribution margin ratio of 33%, and fixed expenses of $117,500.  

Required:

a. Management is considering adding a new product to the company's product line. The new item will have $8.3 of variable costs per unit. Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio. (Round your answer to 2 decimal places.)

b. If the new product adds an additional $32,100 to D&R's fixed expenses, how many units of the new product must be sold at the price calculated in part a to break-even on the new product? (Do not round intermediate calculations.)

c. If 20,100 units of the new product could be sold at a price of $13.6 per unit, and the company's other business did not change, calculate D&R's total operating income and average contribution margin ratio. (Round your intermediate calculations to 2 decimal places. Round "Average contribution margin ratio" to 2 decimal places.)

Rex Berhad is considering buying a new production machine. The proposed machine would cost the company RM85,000 and require an installation and modification cost of RM1,500 to be installed properly. In addition, the new machine would require an increase of inventory and account payable of RM 3 000 and RM1 700 respectively. The new machine will be depreciated over its five year life using the simplified straight line method. By using the new machine, sales is expected to increase by RM25 000 and annual maintenance cost for the new machine would be 10 percent of the incremental sales over the life of the asset. At the end of its life the firm expect to be able to sell the machine for RM10 000. The firm’s tax rate is 28 percent and its required rate of return is 12 percent.

A. Calculate the initial outlay associated with the new machine.

B. Calculate the annual cash flow.

C. Calculate the terminal cash flow.

Should the firm buy the machine? Justify your answer.

Proposal #1 would extend trade credit to some customers that previously have been denied credit because they were considered poor risks.   Sales are projected to increase by $200,000 per year if credit is extended to these new customers.  Of the new accounts receivable generated, 6% are projected to be uncollectible.  Additional collection costs are projected to be 5% of incremental sales, and production and selling costs are projected to be 78% of sales.  Your firm expects to pay a total of 30% of its income after expenses in taxes.

1. Compute the incremental income after taxes that would result from these projections:

2. Compute the incremental Return on Sales if these new credit customers are accepted:

If the receivable turnover ratio is expected to be 5 to 1 and no other asset buildup is needed to serve the new customers…

3. Compute the  additional investment in Accounts Receivable
4. Compute the incremental Return on New  Investment

5. If your company requires a 20% Rate of Return on Investment for all proposals, do the numbers suggest that trade credit should be extended to these new customers?  Explain.

Aqua Adventures currently generates net income of $500,000 every year, all of which is paid out in dividends, and expects no future growth. Aqua has 200,000 shares outstanding, and investors require an 8% return on the company's shares. Assume that new management is hired to grow the company. One plan for the company is to invest its earnings of $500,000 per year for 1 year in a new project. If Aqua goes with the new project it will not be able to pay a dividend for the next year. However, the new project will increase net income to $570,000 in the second year and onward, all which will be paid out as dividends.

1. Calculate the share price if the company maintains its current no-growth policy. Calculate the share price if the company goes with the new project. Briefly explain why

   the share price has gone higher or lower.

2. What must the minimum increase in net income be so that investors are equally well off

   between its current no-growth policy and its proposed new project?

GMFC is planning to expand its U.S. operations by building a new plant. They will employ about 500 production workers. This new plant will manufacture motorized recreational equipment including all-terrain vehicles, personal watercraft, and snowmobiles. The equipment will assemble mechanical components produced in other GMFC operations or purchased from suppliers. The new plant will fabricate fiberglass body parts and complete the final assembly process. GMFC would like to operate the new plant union-free. It's likely that the Untied Automobile Workers (UAW), and perhaps other internationals, will attempt to organize the workforce within a year after start-up. You are a member of a planning committee for the new plant. Your primary area of responsibility involves issues related to potential unionization and labor costs.

What advice would you provide to the company on size, location, staffing, wages and benefits, and other employee relations issues that would help GMFC keep the new plant union-free and competitive?