Variable Cost and Following Table

2. Use the projections provided in the case to compute the incremental cash flows for the PCB project. Provide a reasonable estimate for cash flows after 2009 as well.

The Central Valley Project (CVP) is a Federal water project set up and run by the US Bureau of Reclamation to provide water for the Central Valley in California. Through twenty dams and reservoirs the CVP facilitates the collection and delivery of water for irrigation, municipal, and industrial use, as well as producing hydropower, providing flood control and recreational facilities on their reservoirs. The CVP provide a good example of how cost allocation works within a vast organization. I will use this organization to describe the method used by the CVP to allocate cost and whether I agree or disagree with their methods. I will also be identifying situations where common costs are allocated. I will explain the impact of allocating

(3 marks) c) Determine the optimal number of bus and train travelers. (2 marks) d) Say a train strike significantly reduced the number of trains available. By how much would the train capacity constraint have to fall for the optimal solution to be altered? (2 marks)

| Use this information for questions that refer to the World Tennis Ball (WTB) Company case.

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。

Q1. Briefly describe the complexity of international water use, using the Rhine River or the Aral Sea as an example.

See Table 1: Expected non-operating cash flow when the project is terminated at year 4 = 165,880$

Peter’s Peripherals assembles multimedia upgrade kits --- sets of components for adding sound and video to desktop computers. The demand for their kits for the next four quarters is estimated in the table below. Unit manufacturing cost for each kit is $160. Holding costs on each kit is $80 per quarter. Any kit that must be delivered late is assessed a backorder cost of $120. Each worker is capable of finishing 10 kits per quarter. If the company chooses to vary work force levels, it will incur costs of $400 for each additional worker; $600 for each termination. The company currently has 28 employees.

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.

The receiving overhead per unit of Flow Controllers produced = (0.78 X 20,000)/ 4000 = $3.9

18) In a maximal flow problem, each node in the network is associated with a decision variable.

The senior management of Company A employ you to advise them on the cost of capital the company should use to calculate net present value and decide whether or not to undertake a new investment project. You may assume that the new project is comparable to the average of the company’s existing projects in all respects.

Alternative 1 provides the best solution based upon the evaluation matrix displayed in Exhibit 1.

Suppose a potential customer wants to know the projects for profitability index (PI). What is the value of the PIU of Lone Star, and what is the rationale behind this measure? Profitability Index = PI Present Value of Future Cash Flow over Initial Cost = 212500 + 36944 = 249,455 over Initial Cost 212,500 equal 1.173 for every $1 invested in the project, the total value created is 1.173. Therefore the Chicago Valve Company has a net profit of 1.173 – 1=$0.173 per every dollar invested.

A proposed investment has a cost of $5000. It will have a life of 3 years. The cost will be depreciated straight-line to a book salvage value of $2000, and will be worth $2500 at the end of the project’s economic life. Year-end sales will be $3200 per year and Year-end costs will be $200 per year. It requires an initial investment in net working capital of $500. The NWC will be recovered at the end of the project. The appropriate discount rate is 10%, and the corporate tax rate is 30%.