MGT-440 Topic 3 Project Scheduling Assignment- ONLINE

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MGT-440 Topic 3 Project Scheduling Assignment- ONLINE

Scoring Guide

Grading Criteria Points Comments
Assignment Instructions:

NOTE: Refer to the Instructions for Citrix in the Course Materials.

Submit your Microsoft Word file and your two Microsoft Project files. Ensure that your last name is in your file names.

Please complete the following:
1. Refer to Exercise 9 in Chapter 6 of the textbook. Read the assignment thoroughly and analyze the data provided in the diagram.

Using Microsoft Project, compute the project network diagram and proper timing to complete the project. Address all required information in the description presented in Exercise 9.

 0/20
a) Determine which tasks are on the critical path. How long will it take to complete the project? 0/10
b) A task that is on the critical path for this project has increased by 7 days. Will the project end date be delayed? If so, by how much? 0/10
2. Complete Chapter 6, Exercise 18 (Optical Disk Pre-installation Project) in Larson and Gray. Use Microsoft Project and create a project schedule based on the information provided in the problem. Will the project be completed in 45 weeks? In your Microsoft Project file, insert a text box in the Gantt bar area (go to FORMAT – DRAWING – TEXT BOX) and place your response in the text box. 0/20
Total 0/60

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Week 6 Assignment 2

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Figures title: 8

Week 6 Assignment 2

Student’s Full Name

BUS499 Business Administration Capstone

Professor’s Name

Date

Template Instructions (delete this page before submitting)

This template is provided to help you meet the assignment requirements.

This page should NOT be submitted with your assignment, as it is not part of an academically written paper. Note the “Clarity, writing mechanics, and formatting requirements” section of the grading rubric.

HOW TO USE THIS TEMPLATE

· Read the explanations provided in the template for each section of your paper.

· The explanations are in blue font below.

· You should have already read the assignment instructions in Blackboard.

· Type your response to each of the assignment requirements within the designated sections.

· Each assignment requirement is identified using a section Heading that is in black font

· DO NOT add extra spaces between sections.

· DO NOT change the margins.

· You are required to have a heading for each of the sections in your paper.

· The required headings have been provided for you.

· Follow the instructions below to customize the Headings as directed.

· DO NOT type the assignment instructions into the sections.

· After typing your responses, change the font color to black and make sure it is not in bold.

· Be sure to change the font color on the title page to black after typing your name, professor’s name, and date.

· Everything in blue font below should be deleted and replaced with your responses.

· DELETE this entire page before you submit your assignment to avoid losing points. Do not leave a blank page here.

REMINDERS

· The assignment is due in week 6. Late submissions negatively impact your grade.

· Use the same public corporation you used for assignment 1.

· Do not copy content from other assignments in this class or others.

· Include at least 4 full and complete academically written pages that address the requirements. The title page, this instruction page, and the source page do not count.

· Use at least 3 quality sources, one of which MUST be the course textbook.

· Strayer uses SafeAssign – an automated plagiarism checker. It is advised that you do your own writing and use external resources to support what you have written in your own words.

Week 6 Assignment 2

Write your introduction here. Include one (1) paragraph (not more than 6 lines of text) that explains what your paper will discuss. Much of your introduction may be taken from the assignment instructions (in your own words). Read all assignment resources to understand what should be included in your paper. Be sure to review the assignment instructions in Blackboard, the grading rubric, and relevant course announcements to understand the requirements. Do not exceed 6 lines of text in this introduction. There should be no direct quotes in this section. After reading these instructions, replace this blue text with your introduction and change the font color to black.

General Environment

In this section you will choose the two (2) segments of the general environment that would rank highest in their influence on the public corporation you chose for assignment 1. You must select from the segments discussed in the course. Hint: see table 2.1 in the textbook. Do not assess all the segments—only assess the two (2) segments that rank highest in influencing your corporation. You will then assess how these segments affect the corporation and the industry in which it operates. There are two (2) subsections below, each has a heading. The heading “Segment 1” should be changed to the first segment of the general environment you select. The heading “Segment 2” should be changed to the second segment of the general environment you select. Replace this paragraph with a very brief introduction that includes the identification of the two (2) segments of the general environment you selected and change the font color to black.

Segment 1

This subsection is where you assess the first of the two (2) segments of the general environment you think ranks highest in its influence on the public corporation you chose for assignment 1. Change the subheading for this section, which currently says “Segment 1” to the name of the selected segment. Assess how this segment affects the corporation and the industry in which it operates. Remember that to assess a concept, you will weigh all aspects to judge the importance or relevance of that concept. Do not simply define the segment. Do not copy from you assignment 1 submission.

Your assessment should demonstrate that you have read, understand, and can apply the concepts covered in the course resources regarding the segment. Your writing here should thoroughly assess how the selected segment influences your corporation. Do not write about the general environment in general terms. Your assessment should be directly related to your selected corporation. A thorough assessment is defined as providing a complete response that is not superficial or partial regarding the various details of the concepts as described in the course. You will need to apply and incorporate key concepts from the course material to your assessment. Do not Google “segments of the general environment” or provide high-level summaries. You must display, in specific detail, an understanding based on what is studied in this course and demonstrate your ability to apply the concepts in a real-world assessment of a corporation. Read chapter 2 in the course textbook. Review the Week 2 Learn Reading for supporting content. Properly cite your sources and avoid the use of direct quotes. After reading these instructions, replace this blue text with your assessment and change the font color to black.

Segment 2

This subsection is where you assess the second of the two (2) segments of the general environment you selected. Change the subheading for this section, which currently says “Segment 2” to the name of the selected segment of the general environment that would rank highest in its influence on the public corporation you chose for assignment 1. Repeat the evaluation instructions provided in the “Segment 1” subsection above for this second segment of the general environment. Re-read the instructions above to ensure you have covered all of the requirements for this second segment of the general environment. After completing this section, replace this blue text with your evaluation and change the font color to black.

Five Forces of Competition

In this section you will consider the five (5) forces of competition and choose the two (2) that you estimate are the most significant for the corporation you chose in assignment 1. Hint: see figure 2.2 in the textbook. You will then, evaluate how well the company has addressed each of these two (2) forces in the recent past. There are two (2) subsections below, each has a heading. The heading “Force 1” should be changed to the first of the two forces of competition you select. The heading “Force 2” should be changed to the second of the two forces of competition you select. Replace this paragraph with a very brief introduction that includes the identification of the two (2) forces of competition you selected and change the font color to black.

Force 1

This subsection is where you evaluate the first of two (2) forces of competition that you estimate to be the most significant to the corporation you chose. Change the subheading for this section, which currently says “Force 1” to the name of your selected force. Provide a thorough assessment of why you think the selected force is significant to your corporation. A thorough assessment is defined as providing a complete response that is not superficial or partial regarding the various details of the concept as described in the course. Do not Google “five forces of competition” or simply provide a definition. You will need to apply and incorporate key concepts from the course material in your assessment.

Evaluate how well the company addressed the selected force in the recent past. This will require some research. Remember that to evaluate a concept, you will break down all components to determine or analyze facts, value, or views. Your evaluation should demonstrate that you have read, understand, and can apply the concepts covered in the textbook and course resources. Do not write about the selected force in general terms. Your evaluation should be directly related to your selected corporation and include a thorough evaluation of how the company has addressed the force recently. You must display an understanding based on what is studied in this course and demonstrate an ability to apply the concepts in a real-world evaluation of a corporation. You will need to read the chapters and listen to the lectures to understand the key concepts for each force. Read chapter 2 in the course textbook and review the Week 2 Learn Reading for supporting content. Cite all sources and limit the use of direct quotes. After reading these instructions, replace this blue text with your evaluation and change the font color to black.

Force 2

Choose another one (1) of the five (5) forces of competition that you estimate to be the most significant for the corporation you chose. This should not be the same force assessed in the “Force 1” section above. Change the subheading for this section, which currently says “Force 2” to the name of the selected force. This subsection is where you evaluate the second of the two forces of competition that you selected. Repeat the evaluation instructions provided in the “Force 1” subsection above for this second force of competition. Re-read the instructions above to ensure you have covered all of the requirements for this second force of competition. After completing this section, replace this blue text with your evaluation and change the font color to black.

Future Improvements

With the same two (2) forces assessed and evaluated in the previous two (2) sub-sections above, predict what the company might do to improve its ability to address the forces in the near future. Your writing here should provide a thorough prediction of what the company should do to address impacts from the selected forces. Do not simply discuss company information published by your sources. This section should be your prediction of what the corporation should do. Your prediction should be your own, not predictions or recommendations from your sources or actions your corporation has already taken or plans to take. Remember that a thorough evaluation is defined as providing a complete response that is not superficial or partial regarding the various details of the concepts as described in the course. Your prediction should be specific to your selected corporation, relevant to the evaluation you conducted, and directly related to improvements the corporation could make to address the two forces you selected in the two (2) sub-sections above. Read chapter 2 in the course textbook and review the Week 2 Learn Reading for supporting content. Cite your sources and avoid the use of direct quotes. After reading these instructions, replace this blue text with your prediction and change the font color to black.

Greatest External Threat

Identify what you consider to be the greatest external threat to the corporation you selected. The threat should be specific to your corporation. Justify why you consider the threat to be the greatest. Support your justification with an assessment of the impact the threat has on the corporation. For example, your justification could include a comparison of other threats or an evaluation of facts that support the magnitude of the threat’s impact. Follow this justification with a discussion on how the corporation should address the threat. Specifically describe the strategy and provide a justification that supports why you believe the strategy will be successful in combating the threat. This section must include both a clearly identified external threat and a clearly articulated actionstrategy the corporation should take to address the threat. Do not write in general terms. Your writing here should be specific and incorporate the course concepts relating to threats and the external environment. Read chapter 2 in the course textbook. The textbook provides a solid background for this section. Review the Week 2 Learn Reading for supporting content. Cite your sources and avoid the use of direct quotes. After reading these instructions, replace this blue text with your response and change the font color to black.

Greatest Opportunity

Identify what you consider to be the greatest opportunity to the corporation you selected. The opportunity should be specific to your corporation. Justify why you consider the opportunity to be the greatest. Support your justification with an assessment of the impact the opportunity could have on the corporation. For example, your justification could include a comparison of other opportunities or an evaluation of facts that support the magnitude of the opportunity’s impact. Follow this justification with a discussion on how the corporation could best take advantage of the opportunity. Specifically describe the strategy and provide a justification that supports why you believe the strategy will be successful in adding value to the corporation. This section must include both a clearly identified opportunity and a clearly articulated action the corporation should take to take advantage of the opportunity. Do not write in general terms. Your writing here should be specific and incorporate the course concepts relating to opportunities and the external environment. Read chapter 2 in the course textbook. The textbook provides a solid background for this section. Review the Week 2 Learn Reading for supporting content. Cite your sources and avoid the use of direct quotes. After reading these instructions, replace this blue text with your response and change the font color to black.

Strengths and Weaknesses

Give your opinion on the corporation’s greatest strengths and most significant weaknesses. Keep in mind that strengths and weaknesses are internal to the organization (i.e. the internal environment). You will need to address both the greatest strengths and most significant weaknesses. Do not choose one or the other. Both the greatest strengths and most significant weaknesses must be addressed. Do not write in general terms. The identified strengths and weaknesses should be specific to your selected corporation. Include a justification that supports your opinions. This section must include both clearly identified strengths and clearly identified weaknesses. Read Chapter 2 and 3 in the course textbook. The textbook provides a solid background for this section. Review the Week 2 and Week 3 Learn Reading for supporting content. Cite your sources and avoid the use of direct quotes. After reading these instructions, replace this blue text with your application and change the font color to black.

Strategy or Tactic

Choose the strategies or tactics the corporation should select to take maximum advantage of the strengths you identified in the section above, and the strategies or tactics the corporation should select to fix the most significant weaknesses you identified. You will need to select strategies/tactics for both the strengths and weaknesses. Do not choose one or the other. Strategies/tactics for both the strengths and weaknesses must be addressed. Justify your choices. Your justifications should be sound and thoroughly explained. For example, do not simply state that the corporation should choose a selected strategy, but rather explain why the strategy is a good choice for your corporations’ specific strengths or weaknesses. Read Chapter 2 and 3 in the course textbook. The textbook provides a solid background for this section. Review the Week 2 and Week 3 Learn Reading for supporting content. Cite your sources and avoid the use of direct quotes. After reading these instructions, replace this blue text with your responses and change the font color to black.

Resources, Capabilities, and Core Competencies

Determine the company’s resources, capabilities, and core competencies. Your determination should include an explanation of the relevance of each resource, capability, and core competency. Do not simply list the resources, capabilities, and core competencies. Remember that a thorough determination will provide a complete response that is not superficial or partial regarding the various details of the concepts as described in the course. Use your course materials to demonstrate your understanding of the key course concepts regarding resources, capabilities, and core competencies. Do not write in general terms. Your determination should display that you can apply the course concepts to your selected corporation. Read Chapter 3 in the course textbook. The textbook provides a solid background to this section. Review the Week 3 Learn Reading for supporting content. Cite your sources and avoid the use of direct quotes. After reading these instructions, replace this blue text with your determination and change the font color to black.

Sources

1. Hitt, Ireland, & Hoskisson. 2020. Strategic management: Concepts and cases: Competitiveness and globalization (13th ed.). Mason, OH: South-Western Cengage Learning

2. Author. Publication Date. Title. Page # (written as p. #). How to Find (e.g. web address)

3. Author. Publication Date. Title. Page # (written as p. #). How to Find (e.g. web address)

YO19_Excel_Ch01_Assessment_TCO

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YO19_Excel_Ch01_Assessment_TCO_Instructions.docx

Grader – Instructions Excel 2019 Project

YO19_Excel_Ch01_Assessment_TCO

Project Description:

Most people own, or will at some time own, an automobile. Few actually take the time to calculate what owning an automobile actually costs, in other words the total cost of ownership. This is an important calculation for both individuals and for businesses. In this project, you will complete the development of an automobile total cost of ownership worksheet for your supervisor, Jan Bassy, CFO at your place of employment.

Steps to Perform:

Step Instructions Points Possible
1 Start Excel. Download and open the file named Excel_Ch01_Assessment_TCO.xlsx. Grader has automatically added your last name to the beginning of the filename. Save the file to the location where you are storing your files. 0
2 Rename Sheet1 Documentation and then rename Sheet2 AutoTCO 1.6
3 To ensure there are no blank worksheets in the workbook, delete the Sheet3 worksheet. 0.8
4 In the AutoTCO worksheet, enter the values as shown below into the specified cells: Data Item Cell Value Miles Driven / year E4 15000 Fuel Cost / Gallon E5 3.15 MPG E6 29 1.8
5 To create a worksheet title, merge and center the worksheet heading across cell range A1:F1. 2
6 To save yourself time, copy and paste data to other cells within a worksheet or workbook. Select cell range C16:C22, and then copy the selected range to the Clipboard. Paste the copied range to cell range D16:F16. Note, you are copying and pasting the formulas in cell range C16:C22. 2
7 Select cell range B15:C15. Using the fill handle, copy the range through cell F15. 2
8 Insert a row above row 15 to allow space to add a descriptive title to the section. 2
9 In cell B15, type 5-year Total Cost of Ownership Analysis Apply Center Across Selection to cell range B15:F15. 1.6
10 In cell D6, insert the note Miles per gallon 1
11 Headers and footers can add more information to a worksheet. Add the File Name code in the left footer of both the AutoTCO and Documentation worksheets. 1.2
12 In the Documentation worksheet, enter the values as shown below into the specified cells: C8 Completed Ms. Bassy’s Automobile Total Cost of Ownership worksheet B20 AutoTCO 0.8
13 At times text in a cell can be longer than the width of the cell. Wrapping the text in a cell will allow the text to stack within the cell. In cell C8 of the Documentation worksheet, apply Wrap Text. 0.4
14 Changing the widths of columns can enhance the look of a worksheet. On the AutoTCO worksheet, change the width of Column A to 20 Change the width of Columns B:F to 12. 0.8
15 Documentation worksheets are usually the last (right) sheet of a workbook. Move the AutoTCO worksheet to the left of the Documentation worksheet to make the Documentation worksheet the last worksheet in the workbook. 0.6
16 Prepare the worksheets for printing by changing the orientation of the AutoTCO worksheet to Landscape Orientation. For the Documentation worksheet, set the orientation to Landscape Orientation. On the Documentation worksheet, set the page scaling to Fit All Columns on One Page. 1.4
17 Save and close the Excel_Ch01_Assessment_TCO workbook. Exit Excel. Submit the file as directed. 0
Total Points 20

Created On: 05/16/2020 1 YO19_Excel_CH01_Assessment – TCO 1.0

McDonald_Excel_Ch01_Assessment_TCO.xlsx

Sheet1

Kallio Auto Sales
Create Date By Whom Description Workbook Name
5/18/22 Jan Bassy Automobile TCO Analysis Excel_Ch01_Assessment_TCO.xlsx
Mod. Date By Whom Mod. Description Last Version Backup Name
Author: VERSION BACKUP NAME : Before modifying any worksheet, save the original workbook with the following name format: Original name_yyyymmdd
Create Date Sheet Name Creator Purpose
5/18/22 Sheet2 Jan Bassy 5-year TCO for an automobile

Sheet2

Automobile Total Cost of Ownership Calculator
Model: Impala LT
Purchase Price: $ 31,115 Miles Driven / year:
% Down Payment: 10% Fuel Cost / Gallon:
Annual Interest Rate: 4.75% MPG:
Loan Term (months): 60 Oil Change Miles: 5,000
5-year Residual Value: 50% Oil Change Cost: $ 35
License Cost: $ 125 Purchase Tax Rate: 5%
Ins. Increase / Year 2% Paperwork Fees: $ 150
Year 1 2 3 4 5
Depreciation Rate: 35% 20% 17% 15% 13%
Maintenance: 0% 0% 0% 3% 4%
Year 1 Year 2
Depreciation: $5,445.13 $3,111.50
Financing: $1,220.46 $973.71
Taxes & Fees: $1,675.18 $125.00
Fuel: ERROR:#DIV/0! ERROR:#DIV/0!
Insurance: $1,200.00 $1,224.00
Maintenance: $0.00 $0.00
TOTAL COST: ERROR:#DIV/0! ERROR:#DIV/0!

Sheet3

Describe two (2) financial career options that an individual with a finance education might pursue and explain the value that such a position adds to a company.

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Write a two to three (2-3) page paper in which you:

  1. Describe two (2) financial career options that an individual with a finance education might pursue and explain the value that such a position adds to a company.
  2. Explain the essential skills that would make a person successful in each of the described positions.
  3. Recommend one (1) of the career options. Identify the most attractive features of the position.
  4. Format your assignment according to the following formatting requirements:
    1. Typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
    2. Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page is not included in the required page length.

The specific course learning outcomes associated with this assignment are:

  • Describe the forms of business organizations and the role of financial managers within an organization.
  • Use technology and information resources to research issues in finance.
  • Write clearly and concisely about finance using proper writing mechanics.

What are the fixed costs of hamburger production?

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1.

In a slow year, Deutsche Burgers will produce 3.8 million hamburgers at a total cost of $5.4 million. In a good year, it can produce 5.8 million hamburgers at a total cost of $6.5 million.

 

a. What are the fixed costs of hamburger production? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)

 

  Fixed cost $ million

 

b. What is the variable cost per hamburger? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Variable cost $ per burger

 

c. What is the average cost per burger when the firm produces 3 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Average cost $ per burger

 

d. What is the average cost per burger when the firm produces 4 million hamburgers? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Average cost $ per burger

 

e. Why is the average cost lower when more burgers are produced?
   
 
The fixed costs are spread across more burgers.
Fixed costs are constant per burger.
Variable costs are lower per burger.

2.

A project currently generates sales of $16 million, variable costs equal 50% of sales, and fixed costs are $3.2 million. The firm’s tax rate is 40%. Assume all sales and expenses are cash items.

 

a. What are the effects on cash flow, if sales increase from $16 million to $17.6 million? (Input the amount as positive value. Enter your answer in dollars not in millions.)

 

  Cash flow by $

 

b. What are the effects on cash flow, if variable costs increase to 60% of sales? (Input the amount as positive value. Enter your answer in dollars not in millions.)

 

  Cash flow by $

3.

Finefodder’s analysts have come up with the following revised estimates for the Gravenstein store:

 

  Range  
  Pessimistic   Expected   Optimistic  
  Investment $ 4,800,000     $ 4,740,000     $ 4,620,000    
  Sales   13,000,000       21,000,000       25,000,000    
  Variable costs as % of sales   73       72       70    
  Fixed cost $ 2,400,000     $ 2,300,000     $ 2,100,000    

 

Assume the project life is 12 years, the tax rate is 40%, the discount rate is 8%, and the depreciation method is straight-line over the project’s life. Conduct a sensitivity analysis for each variable and range and compute the NPV for each. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Negative amounts should be indicated by a minus sign. Enter your answers in dollars, not in millions.)

 

  NPV of Gravenstein Store
  Pessimistic Expected Optimistic
  Investment $ $ $
  Sales $ $ $
  Variable costs as % of sales $ $ $
  Fixed cost $ $ $

4.

The following estimates have been prepared for a project:
Fixed costs: $27,000
Depreciation: $18,000
Sales price per unit: $3
Accounting break-even: 20,000 units
 
What must be the variable cost per unit? (Round your answer to 2 decimal places.)

 

  Variable cost $ per unit

5.

Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $100. The materials cost for a standard diamond is $40. The fixed costs incurred each year for factory upkeep and administrative expenses are $219,000. The machinery costs $1.5 million and is depreciated straight-line over 10 years to a salvage value of zero.

 

a. What is the accounting break-even level of sales in terms of number of diamonds sold? (Do not round intermediate calculations.)

 

  Break-even sales diamonds per year

 

b. What is the NPV break-even level of diamonds sold per year assuming a tax rate of 40%, a 10-year project life, and a discount rate of 14%? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

  Break-even sales diamonds per year

6,

You are evaluating a project that will require an investment of $17 million that will be depreciated over a period of 18 years. You are concerned that the corporate tax rate will increase during the life of the project.

 

a. Would this increase the accounting break-even point?
   
 
Yes
No

 

b. Would it increase the NPV break-even point?
   
 
Yes
No

7.

Modern Artifacts can produce keepsakes that will be sold for $60 each. Nondepreciation fixed costs are $2,000 per year, and variable costs are $30 per unit. The initial investment of $5,000 will be depreciated straight-line over its useful life of 5 years to a final value of zero, and the discount rate is 12%.

 

a. What is the accounting break-even level of sales if the firm pays no taxes? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

  Acounting break-even level of sales units

 

b. What is the NPV break-even level of sales if the firm pays no taxes? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

  NPV break-even level of sales units

 

c. What is the accounting break-even level of sales if the firm’s tax rate is 40%? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

  Acounting break-even level of sales units

 

d. What is the NPV break-even level of sales if the firm’s tax rate is 40%? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

  NPV break-even level of sales units

8.

You estimate that your cattle farm will generate $.40 million of profits on sales of $8 million under normal economic conditions and that the degree of operating leverage is 2. (Leave no cells blank – be certain to enter “0” wherever required. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place.)

 

a. What will profits be if sales turn out to be $3.3 million?

 

  Profit will to $ million.

 

b. What if they are $12.0 million?

 

  Profit will to $ million.

9.

Modern Artifacts can produce keepsakes that will be sold for $50 each. Nondepreciation fixed costs are $700 per year, and variable costs are $40 per unit. The initial investment of $2,100 will be depreciated straight-line over its useful life of 3 years to a final value of zero, and the discount rate is 16%.

 

a. What is the degree of operating leverage of Modern Artifacts when sales are $7,750? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Degree of operating leverage  

 

b. What is the degree of operating leverage when sales are $13,500? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Degree of operating leverage  

 

c. Why is operating leverage different at these two levels of sales?

 

  Degree of operating leverage is when profits are .

10.

A silver mine can yield 15,000 ounces of silver at a variable cost of $36 per ounce. The fixed costs of operating the mine are $45,000 per year. In half the years, silver can be sold for $52 per ounce; in the other years, silver can be sold for only $26 per ounce. Ignore taxes.

 

a. What is the average cash flow you will receive from the mine if it is always kept in operation and the silver always is sold in the year it is mined? (Do not round intermediate calculations.)

 

  Average cash flow $

 

b. Now suppose you can shut down the mine in years of low silver prices. Calculate the average cash flow from the mine. Assume fixed costs are incurred only if the mine is operating. (Do not round intermediate calculations.)

 

  Average cash flow $

11.

An auto plant that costs $130 million to build can produce a line of flexfuel cars that will produce cash flows with a present value of $190 million if the line is successful but only $50 million if it is unsuccessful. You believe that the probability of success is only about 50%. You will learn whether the line is successful immediately after building the plant.

 

a-1. Calculate the expected NPV. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place.)

 

  Expected NPV $ million

 

a-2. Would you build the plant?
   
 
Yes
No

 

Suppose that the plant can be sold for $125 million to another automaker if the auto line is not successful.

 

b-1. Calculate the expected NPV. (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Enter your answer in millions rounded to 2 decimal places.)

 

  Expected NPV $ million

 

b-2. Would you build the plant?
   
 
Yes

(Click to select)

(A) Determine the payback period for this project.

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P10–1 Payback period Jordan Enterprises is considering a capital expenditure that requires an initial investment of $42,000 and returns after-tax cash inflows of $7,000 per year for 10 years. The firm has a maximum acceptable payback period of 8 years.

(A) Determine the payback period for this project.

(B) Should the company accept the project? Why or why not?

P10–6 NPV for varying costs of capital Dane Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $24,000 and will generate after-tax cash inflows of $5,000 per year for 8 years. For each of the costs of capital listed, (1) calculate the net present value (NPV), (2) indicate whether to accept or reject the machine, and (3) explain your decision.

a. The cost of capital is 10%.

b. The cost of capital is 12%.

c. The cost of capital is 14%.

P10–16 IRR: Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm’s warehouse capacity. The relevant cash flows for the projects are shown in the following table. The firm’s cost of capital is 15%.

Project X Project Y
Initial investment (CF 0) $500,000 $325,000
Year (t) Cash inflows (CFt )
1 $100,000 $140,000
2 120,000 120,000
3 150,000 95,000
4 190,000 70,000
5 250,000 50,000

a. Calculate the IRR to the nearest whole percent for each of the projects.

b. Assess the acceptability of each project on the basis of the IRRs found in part a.

c. Which project, on this basis, is preferred?

P10–22 Payback, NPV, and IRR Rieger International is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table. The firm has a 12% cost of capital.

Year (t) Cash inflows (CFt )
1 $20,000
2 25,000
3 30,000
4 35,000
5 40,000

a. Calculate the payback period for the proposed investment.

b. Calculate the net present value (NPV) for the proposed investment.

c. Calculate the internal rate of return (IRR), rounded to the nearest whole percent, for the proposed investment.

d. Evaluate the acceptability of the proposed investment using NPV and IRR. What recommendation would you make relative to implementation of the project? Why?

P11–1 Classification of expenditures Given the following list of outlays, indicate whether each is normally considered a capital expenditure or an operating expenditure. Explain your answers.

a. An initial lease payment of $5,000 for electronic point-of-sale cash register systems

b. An outlay of $20,000 to purchase patent rights from an inventor

c. An outlay of $80,000 for a major research and development program

d. An $80,000 investment in a portfolio of marketable securities

e. A $300 outlay for an office machine

f. An outlay of $2,000 for a new machine tool

g. An outlay of $240,000 for a new building

h. An outlay of $1,000 for a marketing research report

P11–7 Book value Find the book value for each of the assets shown in the accompanying table, assuming that MACRS depreciation is being used. See Table 4.2 on page 120 for the applicable depreciation percentages.

Asset Installed cost Recovery period (years) Elapsed time since purchase (years)
A $ 950,000 5 3
B 40,000 3 1
C 96,000 5 4
D 350,000 5 1
E 1,500,000 7 5

Table 4.2 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes

Percentage by recovery year a
Recovery year 3 years 5 years 7 years 10 years
1 33% 20% 14% 10%
2 45 32 25 18
3 15 19 18 14
4 7 12 12 12
5 12 9 9
6 5 9 8
7 9 7
8 4 6
9 6
10 6
11          4
Totals 100% 100% 100% 100%
a These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance depreciation using the half-year convention.
Year Cost (1) Percentages (from Table 4.2 ) (2) Depreciation [(1) × (2)] (3)
1 $40,000 20% $ 8,000
2 40,000 32 12,800
3 40,000 19 7,600
4 40,000 12 4,800
5 40,000 12 4,800
6 40,000   5  2,000
Totals 100% $40,000

P11–11 Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased 2 years ago at a cost of $325,000. The system can be sold today for $200,000. It is being depreciated using MACRS and a 5-year recovery period (see Table 4.2 , page 120 .) A new computer system will cost $500,000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a 40% tax rate.

(C) Calculate the book value of the existing computer system.

(D) Calculate the after-tax proceeds of its sale for $200,000.

(E) Calculate the initial investment associated with the replacement project.