ad ofa bonus only if her residual income fromcome from last year, would she pursue the investment oppor-the owners of the company want her to pursue the investment opportunity?unty.ngconnectExerciseEXERCISE 11-1 Compute the Return on Investment (ROI) LO11-1Alyeska Services Company, a division of a major oil company, provides various services to theoperators of the North Slope oil field in Alaska. Data concerning the most recent year appearbelow:Sales ...$7,500,000$600,000$5,000,000Net operating incomeAverage operating assetsRequired:1. Compute the margin for Alyeska Services Company.2. Compute the turnover for Alyeska Services Company.3.Compute the return on investment (ROI) for Alyeska Services Company.EXERCISE 4a 2 Desidual Income LO11-2$600 000 on(d. of Manchester, England, is a company specializing in providing design ser-

1. Calculate the margin for Alyeska services company: Margin = Net operating income / sales Margin =…

Answered: ad of a bonus only if her residual…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 6P

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Requirements of the Offer. Technical ConsumerProducts, Inc. (TCP), makes and distributes energy-ecientlighting products. Emily Bahr was TCP’s district sales manager in Minnesota, North Dakota, and South Dakota whenthe company announced the details of a bonus plan. A districtsales manager who achieved 100 percent year-over-year salesgrowth and a 42 percent gross margin would earn 200 percentof his or her base salary as a bonus. TCP retained absolutediscretion to modify the plan. Bahr’s base salary was $42,500.Her final sales results for the year showed 113 percent yearover-year sales growth and a 42 percent gross margin. Sheanticipated a bonus of $85,945, but TCP could not aord topay the bonuses as planned, and Bahr received only $34,229.In response to Bahr’s claim for breach of contract, TCP arguedthat the bonus plan was too indefinite to be an oer. Is TCPcorrect? Explain. [Bahr v. Technical Consumer Products, Inc.,601 Fed.Appx. 359 (6th Cir. 2015)] (See Agreement.)
ADIB has signed a Musharaka contract with ADIA ADIA provided 27 9% capital contribution in the project and agreed to the same profit-sharing percentage (279%). In addition, ADIB appointed ADIA as a professional manager on a fee-based arrangement to manage the project. Suppose that at the end of the first year project generates a loss of AED 18,786. What will be the loss share of ADIA?
Assume there are three separate real estate companies: US Realty (which applies the cost model), UK Realty (which applies the revaluation model), and International Realty (which applies the fair value model). Assume also that on December 2003, each company pays $1,000 cash to obtain investment property comprising land with negligible value and an office building worth $1,000. The building has a 10-year useful life, has no residual value, and is expected to provide a constant stream of economic benefits over time. Estimate the profit on ordinary activities of Land Securities Group under the fair value model for the years 1990 to 2003. When will the profit under the fair value model equal that of the cost model?
All equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore income taxes and the time value of money. Q.Assume that all data are as given in the original exercise. Dan Doria is TechGuide’s manager, and his bonus is based on operating income. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Doria choose? Explain.
A company is thinking of investing in one of two potential new products for sale. The projections are as follows: Year Revenue/cost £ (Product A) Revenue/cost £ (Product B)0 (150,000) outlay (150,000) outlay 1 24,000 12,0002 24,000 25,3333 44,000 52,0004 84,000 63,333 Calculate the IRR for Product B only using 3% and 15% to 2 d.p.
He receives a base salary plus a 25% bonus of his salary if he meets certain income goals. The information he has available for the analysis is shown here: cost of the machine 2,000,000 income to be generated by the machine 1,000,000 income without the new machine 7,000,000 beginning of the year capital assets (without the machine) 8,000,000 end of year capital assests (without the machine) 8,400,000 tax rate 30% minimum required rate of return 15% weighted average cost of capital 9% sales revenue without the machine 18,000,000 sales revenue with the machine 19,400,000 The manager is looking at several different measures to evaluate this decision. Answer the following questions: 1.How would ROI be affected if the invested capital were measured at gross book value, and the gross book values of the beginning and end of the year assets without the new machine were ?11,000,000 and ?11,800,000, respectively?
Hide student question Time Left : 01:59:18 Student question ABC Inc. is considering a new project whose data are shown below. The required equipment has a 3-year tax life and the accelerated rates for such property are 33%, 45%, 15%, and 7% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected operating life. What is the project's Year 4 cash flow? Equipment cost (depreciable basis) $70,000 Sales revenues, each year $42,500 Operating costs (excl. depreciation) $25,000 Tax rate 35.0% Group of answer choices $11,814 $12,436 $13,090 $13,745 $14,432
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A company is thinking in investing in one of two potential new products for sale. The projections are as follows: year Revenue/cost £ (Product S) Revenue/cost £ (Product V) 0 (150,000) outlay (150,000) outlay 1 14000 15000 2 24000 25333 3 44000 52000 4 84000 63333 a) Calculate the IRR for Product V only using 1% and 17% to 2 d.p.b) Outline the advantages and disadvantages of the IRR and payback using appropriate academic sources.
Alternative Compensation Plans ADM Inc., an electronics manufacturer, uses growth in earnings per share (EPS) as a guideline for evaluating executive performance. ADM executives receive abonus of $5,000 for every penny increase in EPS for the year. This bonus is paid in addition to fixedsalaries ranging from $500,000 to $900,000 annually. Cygnus Corporation, a computer componentsmanufacturer, also uses EPS as an evaluation tool. Its executives receive a bonus equal to 40% oftheir salary for the year if the firm’s EPS is in the top third of a list ranking the EPS for Cygnus andits 12 competitors.Required1. Why are companies such as ADM and Cygnus switching from stock option incentives to programs morelike the ones described? What does the use of these plans by the two firms say about each firm’s competitive strategy?2. What are the weaknesses of incentive plans based on EPS?
A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A:PurchaseCost of Equipment 700,581Salvage Value 105,896Daily operating cost 534Economic life, years 10 Alternative B: Rental at 1,539 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.
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