For each of the following situations, select the most appropriate risk financing plan (retention, transfer, or hybrid) for the given organization based on the given loss exposure’s relative frequency and severity.

1. Local Package Delivery experiences frequent physical damage losses to its trucks.
2. National Farm Products wants to protect its poultry operation from the possible financial consequences of an avian flu outbreak.
3. Construction Contractor recognizes that worker injuries are an unfortunate consequence of doing business.

4. Cost of debt versus cost of equity. Because the cost of debt is lower than the cost of equity, firms must increase their use of debt as much as possible to increase the firm’s value. What is your answer to this argument?

Explain and draw total cost, average cost, Marginal cost for decreasing returns to scale.

Capital component weights, cost of debt, cost of preferred stock, and cost of common equity.

Be sure to use 4 decimal places.

Current assets: 3,100

Property, plant and equipment: 3,400

Total assets: 6,500.

Current liablities: 1,500

Long term debt: 1,750

Preferred stock, $100 par: 500

Common stock, no par: 1,250

Retained earnings: 1,500

Total liabilities and equities: 6,500

Growth rate 7.5%

Coupon on new bonds: 7.75%

Corporate tax rate: 25%

Dividend on preferred: 8%

Price of common stock: $24.00

Price of $100 par value preferred: $75.00

Anticipated common dividend: $1.56

Flotation cost on preferred: $4.00

Flotation cost on common: $2.50

How to find the cost of debt, cost of preferred stock, cost of common equity, capital structure, and the weighted average cost of capital for a publicly traded company like Costco or Amazon.

a) What are the similarities and differences between prime cost, product cost and period cost. b) What are the similarities and differences between fixed costs, variable costs.

Discuss the assumptions that are inherent in production setup cost, ordering cost and carrying cost. How valid are they?

1. Graph the Average Cost and the Marginal Cost for three different levels of Fixed Cost: $0, $5,000, and $10,000.
2. Assuming that the firm is a Price Taker in the product market (that is, it can sell as many units as it wants without affecting the market price), compute the minimum price that would make production profitable when Fixed Costs are $0, $5,000, and $10,000.

Provide both your answer and a brief explanation.

Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making

Sonimad Sawmill, Inc. (SSI), purchases logs from independent timber contractors and processes them into the following three types of lumber products:

1. Studs for residential construction (e.g., walls and ceilings)
2. Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings)
3. Posts used as support braces (e.g., mine support braces and braces for exterior fences around ranch properties)

These products are the result of a joint sawmill process that involves removing bark from the logs, cutting the logs into a workable size (ranging from 8 to 16 feet in length), and then cutting the individual products from the logs, depending upon the type of wood (pine, oak, walnut, or maple) and the size (diameter) of the log.

The joint process results in the following costs and output of products during a typical month:

Product yield and average sales value on a per-unit basis from the joint process are as follows:

The studs are sold as rough-cut lumber after emerging from the sawmill operation without further processing by SSI. Also, the posts require no further processing. The decorative pieces must be planed and further sized after emerging from the SSI sawmill. This additional processing costs SSI $120,000 per month and normally results in a loss of 10 percent of the units entering the process. Without this planing and sizing process, there is still an active intermediate market for the unfinished decorative pieces where the sales price averages $60 per unit.

Required:

1. Based on the information given for Sonimad Sawmill, Inc., allocate the joint processing costs of $1,010,000 to each of the three product lines using the:

a. Relative sales-value-at-split-off method. When required, round decimal values to four places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as "88.35" percent.

(Note: Difference due to rounding.)

b. Physical units method at split-off.

c. Estimated net realizable value method. When required, round decimal values to four places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as "88.35" percent.

(Note: Difference due to rounding.)

2. Prepare an analysis for Sonimad Sawmill, Inc., to compare processing the decorative pieces further as it presently does, with selling the rough-cut product immediately at split-off.