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Our estimated cost of capital, 20.81%, is lower than Ricketts’ expected return, 30%-50%, thus the investment is worthy. However, it’s higher than other pessimistic members’ expected return, 10%-15%, making the decision more complex and requiring further valuation。

The implementation of the integrated aquasnap, will increase at a slightly greater rate each year, and will allow Carrier to earn about $8.6 million dollars more in 2002 alone, and $22.5 million more from 1997 to 2002. Also mass production will lower the overall cost of manufacturing due to various factors (i.e. cost of materials, number of parts, number of operations, assembly time, assembly cost, selling price, and overall price will all be reduced). The share projections are a steady 14% until 1998. If the delay bleeds into 1999 the overall loss on that entire year would be $6.8 million, but the overall market share would still increase $15.7 million through 2002.

The unit selling price is $26. Assume that costs have been stable in recent years.

Wilkerson’s competitive situation is that of declining profits due largely to chronic and severe price-cutting on pumps, the company’s main product in terms of units produced (Exhibit 4). Being a standard commodity product, demand for pumps is price elastic, and customers look for the cheapest price irrespective of the company they buy from. With its competitors constantly lowering their prices, Wilkerson’s only option for remaining competitive in the pump market was to match these price cuts. As a result, the actual selling price of pumps is $87, well below the target selling price of $107.69 (Exhibit 2). Consequently, Wilkerson’s actual gross margin of 19.5% on pumps is well below the company’s uniform target line of 35% for all

Star Appliance is looking to expand their product line and is considering three different projects: dishwashers, garbage disposals, and trash compactors. We want to determine which project would be worth doing by determining if they will add value to Star. Thus, the project(s) that will add the most value to Star Appliance will be worth pursuing. The current hurdle rate of 10% should be re-evaluated by finding the weighted average cost of capital (WACC). Then by forecasting the cash flows of each project and discounting them by the WACC to find the net present value, or by solving for the internal rate of return, we should be able to see which projects Star should undertake.

A1. Concerns in Budget Planning: Budgetary Items. Depreciation: Depreciation is “the method that the accountants use to allocate the cost of equipment and other assets to the total cost of products and services as shown on the income statement” (Berman, Knight, & Case, 2013). Depreciation is said to be based on the same fundamentals as accruals in that a company “wants to match as closely as possible the costs of products and services with what was sold” (Berman et al., 2013). The idea is to spread the cost of the expenditure over the useful life of the item over the course of time (Berman et al., 2013). Depreciation carries too much of an increase in year 9. Year 8 totals for accumulated depreciation is at

This memo is about providing to Smithson’s family a summarized and explanatory paper that will advise them regarding their will to create a business, which will be able to grow steadily and feasibly expand globally. Due to the nature of their invention, which is a revolutionary widget, this is a viable and feasible option that has to be taken seriously. Gloria Smithson is concerned about her family member’s liabilities and our effort will be focused on narrowing personal liabilities. This will be achieved by selecting the most appropriate business formation for Smithson’s family case. In the following sections we’ll try to identify the most suitable business formations, define them, stimulate what are their advantages and disadvantages and propose the most appropriate

The three options are distinct with options one and two being more similar than option three. Initial annual revenue for option three is the only one in the positive; however, five years into each option, options one and two are roughly six and four times higher than option three respectively. Gross margins for options one and two are relatively equal, but the margin for is half for the distributer yet greater by seven percent for the retailers. The required investment for option three ($400+) pales by comparison with options one and two being nearly four and five million dollars respectively. This intial cost is offset by the potential profits over the lifespan of the options; option three yield of

Conversely, looking at the income statement for PMWL, operating income shows healthy gains of $45,862, which means the operating expenses are significantly lower in comparison to AWBL’s. However, PMWL’s cost of goods sold appear abnormally high, which makes an investor question whether this company is at it’s maturity phase in the product life cycle, and how much additional capital is necessary to bring this figure down to a number that leverages economies of scale and allows for profit maximization.

We valued the company using four different methods; Net Present Value, Internal Rate of Return, Modified Internal Rate of Return and Profitability Index. We began with the Net Present Value, or NPV, calculation. NPV values an investment’s profitability based on the projected future cash inflows and outflows of the investment, discounted back to present value using the WACC. The calculations for NPV are presented in Appendix 2. We started by separating cash inflows and outflows by each year. We used Bob Prescott’s estimates for the revenue per year and related operating costs of cost of goods sold as

The 1980s was an exciting time in the history of computer science. A variety of companies were competing in the computer market, including Apple, IBM and Microsoft. At the time, Apple owned 20% of the PC market, but the direction of the company went downhill after Steve Jobs was forced out of the company in 1985 over the commercial failure of the Apple Macintosh PC (Entrepreneur, 2012). The company had made enough mistakes that computer retailers had lost all faith in Apple (Kroenke, 2014). The problem was only compounded by the fact that Apple hired on a long series of CEOs who failed to manage the company properly (Kroenke, 2014). In 1996, Steve Jobs returned to Apple with the help of Gil Amelio, a company board member who adamantly believed Jobs was the “only one…who [could] rally the Apple troops, [the] only one…who [could] straighten out the company”(Hormby, 2006).

This adjustment accounts for the difference between the “current replacement value” and the historical depreciation value of assets. The purpose of the CRV adjustment is to assign replacement value to depreciating assets. As a result, the opportunity cost of these assets is deducted from a particular product line’s profit. The challenge associated with this adjustment will be directly related to properly allocating a % of fixed assets to a particular product line. We will address the issue concerning the allocation of fixed assets below (Fixed-Asset Charge). Consequently, this is the same method used by the corporate financial department. Therefore, by including the CRV depreciation, corporate managers will be pleased that product line performance measures are factoring in this opportunity cost. Furthermore, product line managers must be weary of fixed asset costs because of the CRV depreciation adjustment’s negative effect on economic profit.

The Teletech Corporation is currently using a single, constant, hurdle rate for their two different segments, which are, telecommunications services and products and systems divisions. Based on the estimate of corporation’s WACC, the hurdle rate is the cost of capital.

A meeting of senior managers at the Pringly Division has been called to discuss the pricing strategy for a new product. Part of the discussion will focus on estimating sales for the new product. Over the past years, a number of new products have failed to meet their sales targets. It appears that the company's profit for the year will be lower than budget and the main reason for this is the disappointing sales of new products.

The main assumption made in this calculation was that cash flows will be growing at the rate of 20% per year. This assumption was made because the company had a capital expense of $10,000,000. This would mean that the company would be buying more assets such as servers and software that will enable