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Evaluating Project Risk
It’s Better to Be Safe Than Sorry!
“It’s amazing how much difference there is in the way proposals are presented at two different firms,” said John Woods to his assistant, Pete Madsen, as he pointed to the stack of capital investment proposals piled on his desk. “We sure have our work cut out for us, Pete. I need you to collect some data for me as soon as possible. ”
John Woods, had recently been hired as the Assistant Vice President of Finance of Mid-West Home Products. His past experience included a seven-year stint with another large consumer products firm. His career had been very successful, thus far, as he had gone from being a financial analyst to an Assistant Vice-President of Finance in a little
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5% 3 Years $ 82,927.84
Table 2 Market Data Regarding Outstanding Securities
Type Par Value Current Price Number Outstanding
10%, 20-Year Bonds $1,000 $900 10,000
6% Preferred Stock $10 $12 500,000
Common Stock $1 $25 1,000,000
Table 3 Mid-West Home Products Last Year's Income Statement ('000s)
Revenues 37500
Cost of Goods Sold 31875
Gross Profit 5625
Selling & Administration Expenses 1125
Depreciation 1000
Earnings Before Interest and Taxes 3500
Interest Expenses 887
Earnings Before Taxes 2613
Taxes (40%) 1045
Net Income 1,568
Preferred Dividends 300
Income Available for Common 1,268
Common Stock Dividends 508
Addition to Retained Earnings 760
Table 4 Mid-West Home Products Balance Sheet (000's)
Current Assets 10,000 Current Liabilities 3000
Net Fixed Assets 75,000 Notes Payable 2000
Long-term Debt (10,000 outstanding, Coupon Rate = 8%, Face Value = $1,000) 10000
This memo is intend to present appropriate treatment of the ARO estimation problem experienced by the Lack of Information (LOI) based on the findings from interviews with all 50 of the warehouse managers and on-site visits at each of the 50 locations of its warehouses countrywide. The onsite observations search for any evidence of damages in both the on-site property like the roof, walls, floors and general conditions. The interview with the managers obtains information about the characteristics of the warehouses that are not readily observable. The information obtained is very important in the preparation of the fiscal
ASC 320-10-35-33F: “Changes in the quality of the credit enhancement should be considered when estimating whether a credit loss exists and the period over which the debt security is expected to recover.”
Second, the manufacturing order costs for non-stocked items was calculated by dividing total manufacturing order costs for non-stocked items by the number of orders for non-stocked products. Non-stocked products have additional costs associated with processing orders that went above and beyond the costs associated with a stocked product. The third step involved determining what the S"A allocation factor would be for calculating the S"A volume related costs. This allocation factor would then be applied to manufacturing COGS. The fourth and final step involved the calculation of the operating profit based on backing out volume related costs from sales revenues followed by deducting S"A and manufacturing order costs from the resulting gross margin to arrive at a operating profit.
When implementing project 1, you face technical and market risk. How would you assess the risks embedded in Project 1?
Shakespeare Inc., a private publishing company issued its F/S on March 20, 2012. There were several accruals and events that the management of Shakespeare is considering to determine if they should be recognized or disclosed in Dec 31, 2011 F/S. In my opinion, the important things to focus on subsequent events are the period they effect and if their influence is material or not, so that in conclusion, the F/S are fairly presented.
Patients who are uninsured or underinsured definitely benefit because they can potentially avoid crippling medical bills for the care they need. Insurance companies may also benefit due to not having to pay such large amounts for domestic
Hearts ‘R Us (the Company) is an early stage, non-public research and development medical device company. They are in the final stages of going to market with the Heart Valve System. Bionic Body (Bionic), a SEC registrant, could benefit from the approval of the Hear Valve System and will help finance. Hearts sold Bionic $3.5 million of Series A Preferred Shares (Shares) of the Company with a par value of $1 per Share. The transaction was completed on November 30, 2011. As part of the stock purchase agreement, Bionic has the following rights:
Many risks are interrelated. Analyze the following compound risk: Unstable requirements with tight budget will likely cancel the project. Discuss the dependencies that exist between the two risks.
What is the implied average collection period for the end of March? For the end of June?
This Saturday, December 3rd, we will be hosting Greg Francfort, a Senior Portfolio Manager from Neuberger Berman and Steve Catera, a Senior Associate from Siris Capital Group to judge the presentations. The presentations will be held in the Livingston Student Center Board Room from 10:00am to 3:00pm. Official time slots will be sent out after the research report and
The Closing Case in Chapter 13 focuses on options for a 401K for an employee of the East Coast Yacht Company. Several decisions must be made regarding investments, which will be highlighted in this discussion. Equity investments can go into the S & P 500 or an index related option. The former has lower fees, and the latter higher ones. Other elements to be discussed include the aforementioned investment options, graph implications regarding mutual fund investors, market efficiency, and an equity investment decision to be made by the East Coast Yacht employee.
Jennifer Sobieski, an analyst within the headquarters of working computers, has been asked to judge whether or not or not operating ought to sell a division of the firm that has been losing market share and needs a good deal of recent investment to stay competitive. The ailing product could be a personal data appliance, or PDA, that when led the market in options and innovation, solely to fall prey to competition from varied companies once it had paved the means for product category. Complicating Jennifer's analysis and recommendation are many political problems involving the disobedient division. Especially, Working's recently returned CEO, Stewart working man, has determined that the product (the Bernoulli device) is a
Chapter 6 Problem Summary |Prob. # |Concepts Covered |Level of |Notes | | | |Difficulty | | |6.1 |Decision Making Under Uncertainty -- maximax, maximin, |1 | | | |minimax regret and principle of insufficient reason criteria | | | |6.2 |Expected Value Criterion, EVPI |1 |
* Cadbury Schweppes bought the U.S.-based Adams chewing gum and mint business from Pfizer, Inc., for $4.2 billion in December 2002. The Adams brands include Dentyne, Bubbaloo, and Halls throat lozenges. Wrigley had also been a bidder in this deal.
• Attached is some information about The Wallace Group, Inc. This information includes data regarding corporate operations and operating problems as perceived by various managers of the company.