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Required: Determine the net present value of the project. Show your work!
Required: Determine the net present value of the project. Show your work!
2. Complete the following sentence: “Virtual organizations __________ whereas modular organizations __________.” (Points : 5)
3. The phrase that best defines a virtual organization is (Points : 5)
4. Effective ambidextrous organizations have alignment, which means that (Points : 5)
5. Important advantages of a holding company structure include (Points : 5)
6. An organization such as ConAgra that has dozens of different divisions with similar products will probably have the greatest success with which form of organization structure? (Points : 5)
7. What is the name of the practice that many modular organizations use to grow? (Points : 5)
8. Which of the following statements would least likely be found in a corporate credo? (Points : 5)
9. Leaders play a key role in developing and sustaining an organization’s (Points : 5)
10. The “bottom-up” perspective of empowerment (Points : 5)
11. Which of the following is not a characteristic of a successful learning organization? (Points : 5)
12. Coercive power is (Points : 5)
13. Refusal to share information, conflicts over resources, conflicts between departments and divisions, and petty interpersonal differences are symptoms of which type of barrier to change? (Points : 5)
14. Expert power (Points : 5)
15. Strategic reasons for undertaking a corporate venture include which of the following? (Points : 5)
16. Product champions (Points : 5)
17. The innovation dilemma known as seeds versus weeds refers to (Points : 5)
18. __________ produce fundamental changes that can transform a company or even revolutionize an industry, while __________ enhance existing practices and often represent evolutionary applications of fundamental breakthroughs. (Points : 5)
19. Which kind of risk taking requires that a company borrow heavily or commit a large portion of its resources in order to grow? (Points : 5)
20. Real options analysis is most appropriate when (Points : 5)
Year 1 $ 3,000,000
Year 2 3,100,000
Year 3 3,200,000
Year 4 3,300,000
Year 5 3,400,000
Year 5 balloon payment 6,000,000
Total $22,000,000
Required
Suppose you are Hardy’s agent and you wish to evaluate the two contracts using a required rate of return of 12 percent. In present value terms, how much better is the second contract?
Variable rate Value of the swap
July1, 20×1 7.9%
December 31, 20×1 7.75% 10,400
Prepare all journal entries to record this hedge through December 20×1.
Estimated Estimated Variable Cost
Fixed Cost (per unit sold)
Production costs
Direct materials…………………………………… − $30
Direct Labor………………………………………. − 20
Factory overhead…………………………………. $340,000 11
Selling expenses:
Sales salaries and commissions ………………… 80,000 5
Advertising …………………………………….. 32,000 −
Travel …………………………………………… 8,000 −
Miscellaneous selling expense …………………. 7,000 5
Administrative expenses:
Office and officers’ salaries……………………… 120,000 −
Supplies ………………………………………… 8,000 2
Miscellaneous administrative expense ………… 4,400 2
Total ……………………………………………. $600,000 $75
It is expected that 8,000 units will be sold at a price of $200 a unit. Maximum sales within the relevant range are 9,000 units.
Instructions
1. Prepare an estimated income statement for 2012.
2. What is the expected contribution margin ratio?
3. Determine the break-even sales in units and dollars.
4. Construct a cost-volume-profit chart indicating the break-even Sales.
5. What is the expected margin of safety in dollars and as a percentage of sales?
6. Determine the operating leverage.
Assessing Roche Publishing Company’s Cash Management Efficiency
Lisa Pinto, vice president of finance at Roche Publishing Company, a rapidly growing publisher of college texts, is concerned about the firm’s high level of short-term resource investment. She believes that the firm can improve the management of its cash and, as a result, reduce this investment. In this regard, she charged Arlene Bessenoff, the treasurer, with assessing the firm’s cash management efficiency. Arlene decided to begin her investigation by studying the firm’s operating and cash conversion cycles.
AND SO ON
Roche Publishing Company is currently spending $12,000,000 per year on its operating-cycle investment, but it expects that initiating a cash discount will increase its operating-cycle investment to $13,100,000 per year. (Note: The operating-cycle investment per dollar of inventory, receivables, and payables is assumed to be the same.) Arlene’s concern was whether the firm’s cash management was as efficient as it could be. Arlene knew that the company paid 12% annual interest for its resource investment and therefore viewed this value as the firm’s required return. For this reason, she was concerned about the resource investment cost resulting from any inefficiencies in the management of Roche’s cash conversion cycle. (Note: Assume a 365- day year.)
To Do
need be under these more efficient conditions?
Coley Co. issued $30 million face amount of 9%, 10-year bonds on June 1, 2009. The bonds pay interest on an annual basis on May 31, each year.
a.) Assume that the market interest rates were slightly higher than 9% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount? Explain.
b.) Independent of your answer to part A, assume that the proceeds were $26,640,000. Use the horizontal model to show the effect of issuing the bonds.
c.) Calculate the interest expense that Coley Co. will show with the respect to these bonds in its income statement for the fiscal year ended September 30, 2009, assuming that the discount rate of $360,000 is amortized on a straight-line basis.
On October 1, Keisha King organized Real Answers, a new consulting firm. On October 31, the company’s records show the following items and amounts. Use this information to prepare an October income statement for the business.
Cash . . . . . . . . . . . . . . . . . . $11,500 Cash dividends . . . . . . . . . . . . . . $ 2,000
Accounts receivable . . . . . . . 12,000 Consulting fees earned . . . . . . . . 14,000
Office supplies . . . . . . . . . . . 24,437 Rent expense . . . . . . . . . . . . . . . 2,520
Land . . . . . . . . . . . . . . . . . . . 46,000 Salaries expense . . . . . . . . . . . . . 5,600
Office equipment . . . . . . . . . 18,000 Telephone expense . . . . . . . . . . . 760
Accounts payable . . . . . . . . . 25,037 Miscellaneous expenses . . . . . . . 580
Common stock . . . . . . . . . . . 84,360
(Interest Rate Sensitivity) An investor purchased the following 5 bonds. Each bond had a par value of $1,000 and 8 % yield to maturity on the purchase day. Immediately after the investor purchased them, interest rates fell and each then had a new YTM of 7% . What is the percentage change in price for each bond after the decline in interest rates? Fill in the following table:
Price @ 8% Price 7% Percentage change
10-yr,10% annual coupon
10-year zero
5-year zero
30-year zero
$100 perpetuity