The company's financial year is the calender year. Certain costs (incl. wages, rents and taxes) of 202500 € total are paid out in the middle of each month.

The company's first financial year is, exceptionally, only six months of length (1.7.-31.12.). At the beginning of the first financial year, the company has taken out a loan of 7200000 € total that has not been amortized. However, an interest of 5 % p.a. has been paid at the end of the financial year. The company has made an initial investment of 10800000 €. Half of the investment has been paid during the previous financial year and the rest must be paid at the beginning of the second financial year. Nothing has been sold yet during the the first financial year.

The revenues of the second financial year are estimated according to shipped (billed) quantities of 30000 units at a unit price of 300 € per unit. The variable costs consist of purchasing the materials and are expected to be 171 € per unit. At the end of the second financial year, 3600000 € of the debt must be amortized and an interest must be paid.   

The company then specifies the plan for the second financial year. 28 % of the annual volumes are delivered during the first half of the year and 72 % during the second. Monthly volumes are constant during both phases and the customers are given one month for payments. The company purchases the materials for the second financial year in three equal instalments. The first batch has arrived at the end of December, but the bill is not due until at the end of January. The next batches arrive at the beginning of May and September. In order for the business to run smoothly during the next year as well, the company purchases an additional batch of materials for 7500 units towards the end of December (20.12). Each batch is payable in 14 days.

It is recommended to make a table of months having the monthly information of incoming and outgoing payments allocated to the three cash flows, changes in cash and equivalents and total cash and equivalents.

Calculate the cash flow from operating activities and the cash flow from investment activities of the first financial year.

I do not understand question number three. However, I belive the answers to questions number 1 and 2 are already on chegg I just need clarification with how to do question number 3. PLEASE HELP

Q. 1.    Prepare a budgeted income statement for Premium Grade Ovenware for 2007 if the engineers’ redesign efforts had worked as originally planned. Use these assumptions:

First quarter sales of 1,500,000 units will be achieved each quarter in 2007.

The selling price for 2007 will remain 10% below the price charged from 2002-2006, and there were no sales price increases during the 2002-2006 period.

Variable cost of goods sold averaged about $5.55 per unit of ovenware from 2002-2006.

Variable production costs will be reduced by 35% due to the new design.

The fixed cost of production in 2006 contained one-time, increased costs (about $4,000,000) for the design changes. For 2007, fixed costs are expected to be about 3.5% higher than 2005.

Marketing costs contain both fixed and variable elements, however, it is budgeted based on spending 7% of expected sales revenue.

Other fixed costs are expected to increase about 2.5% over 2006.

Would the product manager have met his profit target of 25% return on sales in 2007 for the product line with the redesign?

Q. 2.    Prepare the budgeted 2007 income statement for Premium Grade Ovenware that the production, quality, and product managers considered when they discussed the first option available to them.

a.   Under that option, shipment would be delayed and about one third of the year’s sales of 6,000,000 units would be lost.

Product would be sold at the 10% price reduction but produced under the old cost structure for six months (variable production costs of $5.55 per unit). After the six months the variable cost savings of 35% would be achieved.

Assume that recycling the current production would add $500,000 to the fixed production costs originally budgeted for 2007. In addition, the product line will incur an additional $2,000,000 in design engineering to solve the problem within a 6-month period (this will involve the use of overtime and consultants).

Other cost items would stay as originally budgeted for 2007.

What would the product line’s profit be under this alternative? What would the return on sales for the product line be?

Q. 3.     The production, quality and product managers considered their second option to be producing and selling flawed units for 6 months while engineers corrected the problem. Under this option, the company would not disclose the problem and hope for the best. Perhaps none of the product claims would involve any injury; only product replacement would be required at a cost of about $12 per unit.

a.    Adjust the 2007 budget for an assumed defect rate of .25% for 6 months production. (Note this is a defect rate in addition to the normal rate faced in each year, 2002-2006, which is already accounted for in marketing cost.)

b.   Adjust the fixed production cost for 2007 for an additional $2,000,000 in design engineering to solve the problem within a 6-month period. (This will involve the use of overtime and consultants).

What would the budgeted profit and return on sales be if option two were selected?

If the engineer’s redesign efforts had worked originally, the Budgeted Income Statement for Premium Grade Overnware in 2007 would have been:

Since the budgeted profit target is 33.66%, the product manager met his profit target of 25% return on sales in 2007 for the product line with the redesign.

The production, quality, and product managers used this budgeted income statement to consider the first option that was given:

2)

2. Why is it that the consumer can maximize total net utility only if the purchase quantity brings marginal utility as close as possible to equality with price?

3. Use the law of diminishing marginal utility to explain why Domino's and Pizza Hut allow the purchase of a second pizza for only $5 when one pays full price (around $10) for the first pizza. Why not simply charge $7 a pizza instead?

2. Explain why the long-run average cost is typically U-shaped. Explain the connection between the shape of long-run average cost curve and returns to scale.

3. "Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve." True or false? Explain your answer.

4. Why is the total profit curve shaped like a hill? Is it a good thing to go to a point where marginal profit is zero? Explain. What is the value of marginal profit at the profit-maximizing output?

Expert Answer

Obtain monthly close prices of Microsoft (symbol: MSFT) adjusted for stock splits and dividends during December 1989 – December 2019 from Yahoo Finance (finance.yahoo.com). Using Excel, compute monthly returns during January 1990 – December 2019. From these returns, compute arithmetic and geometric return averages over the entire period. Report your answers and confirm that arithmetic average is greater than geometric average.

Guideline:

1. Yahoo Finance allows you to download the data in a spreadsheet.

2. At Yahoo Finance, go to Historical Prices and use Adj. Close to compute returns.

3. When you download monthly data from Yahoo Finance, you will see first days of each month appearing under the "Date" variable. The Adj. Close on the same row is the adj. close at the end of that month. For example, the adj. close price for Microsoft that appears in the row where the Data is 2019-12-01 is the adj. close price for December 2019

Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price, and holds these investments in its trading portfolio. The company’s fiscal year ends on December 31. The following selected transactions relating to Rantzow-Lear’s trading account occurred during December 2021 and the first week of 2022. 2021 Dec. 17 Purchased 130 Grocers’ Supply Corporation bonds at par for $585,000. 28 Received interest of $3,200 from the Grocers’ Supply Corporation bonds. 31 Recorded any necessary adjusting entry relating to the Grocers’ Supply Corporation bonds. The market price of the bond was $5,000 per bond. 2022 Jan. 5 Sold the Grocers' Supply Corporation bonds for $617,500. Required:

1. Prepare the appropriate journal entry or entries for each transaction.

2. Indicate any amounts that Rantzow-Lear Company would report in its 2021 balance sheet and income statement as a result of this investment.

Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price, and holds these investments in its trading portfolio. The company’s fiscal year ends on December 31. The following selected transactions relating to Rantzow-Lear’s trading account occurred during December 2021 and the first week of 2022.

Required:
1. Prepare the appropriate journal entry or entries for each transaction.
2. Indicate any amounts that Rantzow-Lear Company would report in its 2021 balance sheet and income statement as a result of this investment.

1) With creating value we have:

a shift in both the demand and supply curves to the right.

a shift in both the demand and supply curves to the left.

demand shift to the right and supply to the left.

demand shift to the left and supply to the right.

2.) A necessary condition for market power to exist for a particular company in a market is that:

Digital camera has gained popularity in recent years over traditional cameras that rely on old-fashioned 33MM film. What will happen to the equilibrium price and quantity of traditional camera film if traditional cameras become more expensive, digital cameras become cheaper, the cost of the resources needed to manufacture traditional film falls, and more firms decide to manufacture traditional film?

Hints: (1) In your answer, first, sketch the Supply and Demand graphs at initial equilibrium for the two markets, one for Traditional Camera film, and another for digital cameras.

(2) Next, determine which curves (Supply, Demand or both) of the two markets may be changed as a result of the events described in the opening scenario and in which direction and indicate this on your graph.

Finally, Determine the outcome on equilibrium price and quantity of traditional Camera film. Keep in mind that if we are discussing changes to both supply and demand curves simultaneously, one of the equilibrium variables will be ambiguous. Describe your answer to part 3 in words as well as in your graph.

HARLAND CORP has been in existence for 45 years. Over the past, 6 years the stock price has stagnated and remained between $22.15 and $22.82. The CEO, who started the company, believes that the stock price needs to be higher, and the best way to do that is to pay a dividend to increase the demand for the stock. The company has never paid a dividend in their history. The CEO needs to determine what type of dividend policy to follow, and how much the first dividend should be, so he comes to you for advice. He provides you with the following historical information as it relates to the company's earnings per share (as an aside, dividends per share should not exceed EPS unless the firm is liquidating):

      YEAR                          EPS

      2017                           $2.36

      2016                           $2.12

      2015                           $0.81

      2014                           $2.01

      2013                           $2.09

      2012                           $2.44

      2011                           $2.31

      2010                           $2.01

what is the brief memo as to what dividend policy you recommend, why recommend it, what initial dividend amount you recommend, and why you recommend that amount.