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Final exam questions




Question;Question 1;Score;0;Evaluate the following Cash Flows;using the criteria in parts a-f with a MARR of 15%. Indicate for each part whether the proposal;should be accepted or rejected.;MARR=;15%;Year;0;1;2;3;4;5;Cash;Flow;($50,000);$13,200;$14,300;$22,100;$25,000;$10,000;a;Present Worth (PW);b;Future Worth (FW);c;Annual Worth (AW);d;Internal rate of Return (IRR);e;Discounted Payback by end of year;(EOY) 3;f;Discounted Payback by end of year;(EOY) 4;Question 2;Score;0;3. Sheldon Stahl, CEO of Modern;Medical Mechanics (M3), has convened his staff to select an;investment for the coming year. A;subcommittee previous pared the list down to the following based on a;strategic evaluation of each. Now a;decision has to be made as to which one should be approved. M3 uses a MARR of 10%. What should the choice when using only the;IRR criterion?;Question 3;Score;0;Solarium, LLC has analyzed their;2012 revenue and cost data and determined that the sales of 400,000 units;worth $3,500,000 incurred $2,200,000 of variable costs and $800,000 if;fixed costs. If the price per unit and variable cost per unit is constant;for the coming year, and the fixed cost rises $100,000 to pay for an;expanded marketing program;a;What will the sales have to be to break even in the coming year?;b;What will the sales have to be in the coming year to earn the same;amount of profit as last year?;c;What would the unit price have to be in the coming year to achieve a;profit of $750,000 with the increased marketing and a sales volume of;500,000 units.;Question 4;Score;0;Precision Products, Inc. has;developed a new ?Luxury? model that is expected to take sales away from the;?Premium? model. Forecasted sales of;the Premium model, both with and without the introduction of the Luxury;model, and the sales of the new Luxury model are shown below for years;2014-16. The unit prices and COGS;for the Premium and Luxury products;are also shown below.;Determine the Gross Margin only for each year that could be used in preparation of the evaluation;of the Luxury model proposal.;Sales Quantities;2014;2015;2016;2017;Question 5;Score;0;A project proposal for a new product will require a buildup of;$50,000 of inventory in year 0 before sales are started. Associated with this, accounts payable;will also increase by $20,000 in year 0.;Both of these will stay constant at these amounts in years 1-3 and;beyond. After sales start in year;1, accounts receivable is expected to increase to $30,000 in year 1, to;$40,000 in year 2, and to $50,000 in year 3 and continue at $50,000 into;the future. Assume that no other;working capital items are affected.;a;What will be the change in working capital for each year;(0-3)?;b;What will be the change in cash flow from working capital in years;0-3?;Question 6;Score;0;A pharmaceutical company is evaluating a proposal for a new;product using a 4 year time span.;The product line is expected to be sold for $1,000,000 to another;pharmaceutical company at the end of the four years. The revenue COGS, Gross margin and;S.G.& A. (does not include depreciation) is shown below. The investment made in this product;(assume it is all in year 0) was $500,000. The working capital needed for each of;the four years is $200,000 in year 0, $250,000 in year 1, $300,000 in;year 2, $300,000 in year 3, and decline to zero by the end of year;4. The MARR is 20%, depreciation is to use 5-year MACRS;the income tax rate is 25%,and the;capital gains tax rate is 15%.;Complete the Income Statement, prepare a cash flow statement, and;determine the present worth and internal rate of return.;Investment;$5,00,000;Sale price at end of 4 years;$10,00,000;Income Tax rate;25%;Capital Gains Tax rate;15%;`;5 year;20.00%;32.00%;19.20%;11.52%;Income Statement;0;1;2;3;4;Revenue;$2,50,000;$2,75,000;$3,50,000;$3,00,000;COGS;($1,00,000);($1,10,000);($1,40,000);($1,20,000);Gross Margin;$1,50,000;$1,65,000;$2,10,000;$1,80,000;SG&A;($75,000);($75,000);($75,000);($75,000);Question 7;Score;0;A robotic assembly work center has been proposed. It would cost $750,000 to purchase and;$150,00 to install and train personnel.;It is expected to reduce cost by $200,000 annually, with no effect;on revenues. If 5-year MACRS, a MARR of 15%, tax rates of 20% and a time;span of 5 years is used, would the acquisition be justified using a five;year time span. Assume that the;robot assembly center will be worth $400,000 at the end of 5 year;although it is expected to be kept in service beyond that. No change on working capital or other;expenses is expected.;1;2;3;4;5;MACRS;5 year;20.00%;32.00%;19.20%;11.52%;11.52%;5.76%;Question 8;Score;0;Maryland Technical Acumen;(MTA) is considering a new product line which will require an investment;in production equipment and facilities in the current year. Management needs information for;setting the price and a variable;COGS that needs to be achieved.;Below is an Income and cash flow statements that management has;approved. (If there are errors or;oversights, that is their problem, not yours).;a;Determine the sensitivity of the present worth to changes in the;Variable Cost of Goods Sold from $10 through $14.;b;Determine the Unit Price that would achieve the MARR (PW = 0) when;the variable cost of goods sold is $15.00 and the quantity sold is;50,000. Explain how you determined this.;c;If the variable COGS was $14.00 and the price was reduced to;$47.99, how many units would have to be sold to achieve a net Income of;$250,000 in year 1? Explain;how you determined this.;Question 9;Score;0;Due to;the budget sequester, the bridge department had their repair budget reduced for the coming;year. The cost of repair for;several bridges needing repair are shown below. Also shown is the average number of;cars per day that travel over each bridge. If the bridge department only has;sufficient resources to repair one bridge per year, which one should be;repaired first from a cost effectiveness perspective.;Bridge;Repair Costs;Average Cars per day;Washington;$24,00,000;1500;$1,600;Adams;$27,00,000;1400;Jefferson;$23,00,000;1640;Madison;$22,40,000;1550;Monroe;$19,00,000;1300;Jackson;$20,00,000;1440;Premium w/o Luxury;8,00,000;8,15,000;8,20,000;8,25,000;Question 10;Should different financial analyses be used in nonprofit and;for-profit organizations? Justify your answer.. Answer below, or attach a Word;Document Limit your answer to 500;words or less.;Premium with Luxury;7,90,000;770000;750000;745000;Luxury;100000;120000;150000;150000;Premium;Luxury;Sales price each;$699;$980;COGS Each;$526;$615;Investment;in Year 0;1;2;3


Paper#49023 | Written in 18-Jul-2015

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