Rad Case Study

If the depreciation method changes from straight-line method to accelerated method then, depreciation expense would be increase and net income would decrease. The EPS ratio would represent a loss of $0.19 per share.

When the discount rate increases from 15% to 40%, the company faces a 37.3% drop in its total value. The loss will be $5,609,132. the largest difference rate comes from the silver segment. Firstly, the silver segment has the most significant amount of customers. The requirement of being a silver customer is small ( fly with the Northern Aero at least one time). Secondly, each year some of the customers will degrade from the platinum or gold segment to the silver segment. Due to the

d) Break even sales change that would change the profits by the same amount as a reduction in price.

operating costs. This could most effectively be accomplished in two ways. First, through a reduction in flying

What Smith would like to see happen is a reduction in payroll, which is costing about $17,000 per month. While a sale in membership fees might possibly raise income and cut into the losses, the results are not something that can be controlled. Smith much

1. The first step to evaluating the cash flows is to conduct the depreciation tax flow analysis. Depreciation is not a cash flow, but the depreciation expense lows the taxes payable for the company. As a result, the tax effect of deprecation needs to be calculated as a cash flow. There are two depreciable items on the company's balance sheet the building and the equipment. The equipment is known to have a seven year depreciable life, which will be assumed to be straight line. The building is also assumed to be subject to straight line depreciation, this time of forty years. The tax saving reflects the depreciation expense multiplied by the tax rate, which in this case is assumed to be 28%. The following table illustrates the tax effect in future dollars of the depreciation expense:

a) In the first set of calculations, the staff used a discount rate of 20%, a five-year time horizon, and ignored taxes and terminal value. What is the relative attractiveness of these three alternatives?

If the company can solve the cash shortage problem, taking 2% trade discount is profitable decision.

For years 1983-1985, additional corporate assessment expense was given. This would lower Polymold’s earnings on their income statement. Another piece of data that was given is research and development expense. Without the CAD/CAM investment, research and development expense is $130,000. This is double to $260,000 without the CAD/CAM investment. This would lower earnings. We are also given the savings that the investment would yield. Without the CAD/CAM investment, there would still be savings – but not as much as with the CAD/CAM investment, which is due to the depreciation of the equipment and tax credits.

Ellen Zane had her work cut out for her at Tufts-NEMC. The Tufts University affiliated teaching and research hospital had long been on the decline. It was mired in financial difficulty, was falling behind other teaching and research AMCs, and was not effectively serving its local community. Beginning on the day she accepted her position as CEO, Ellen Zane started on a path of reform. Upon learning that the hospital only had 10 months of cash on hand, she began brainstorming on how to make the hospital financially viable, starting by meeting payroll needs first. She discovered that Tufts-NEMC was being drastically underpaid and began looking for solutions to the problem of reimbursements. One of the more

(b) Calculate by how much the proposed addition will either increase or reduce operating income. Show all work.

Option 2: Decrease Cost of Goods Sold and Expense by 20% due to the current economic climate.

Costco’s business model is to generate high-volume sales and rapid inventory turnover by offering low prices on a limited set selection of brands and a few selected privately labeled products. This model does not turn a profit on its own with the company operating slightly below its break-even cost. However, to make up for this Costco charges a membership fee and this is a simple way of padding their profit but also enabling them to provide a customer experience that emphasizes value.

By using option 1 TDS will sell 116,666.67 units more in 2003 considering is they don’t make any changes, they are only expected to reach 400,000 bottles in sales, as a result they will break even in option 2 and make a loss of (54,545.45 units) for option 3.

a. Assuming the most current operational cost levels, what sales must it generate to recoup the above investment?