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- Product X is sold for $500 per unit. The total cost of production per year, including capital recovery and a return, is given by the expression TC = 0.04n3 − 700n + 50, 000 where n is the number of units sold. If TC represents the total of all fixed and variable costs, determine the following: a. The value of n that maximizes profit. b. The maximum profit for a year. c. The fixed cost per year.A rough rule of thumb for the chemical industry is that OMR 1 of annual sales required OMR 2 of fixed capital investment. In a chemical processing plant where this rule applies, the total capital investment is OMR 3200000 and the working capital is 18% of the total capital investment. The annual net total product cost amounts to 1500000 OMR. If the income tax rates on gross earnings total 21%, determine the following: (a) Percent of total capital investment returned annually as gross earning. (b) Percent of total capital investment returned annually as net profit.A seasonal bus tour firm has 5 buses with a capacity of 60 people each. Each customer pays $25 for a one-day tour. Records show $360,000 in fixed costs per season, incremental costs of $5 per customer, and an average daily occupancy of 80%. The number of days of operation necessary each season to break even is closest to which value? (a) 50 days (b) 75 days (c) 100 days (d) 120 days?
- Identify the special cash flow category for each of the following. While developing a new product line, Cook Company spent $3 million two years ago to build a plant for a new product. Ultimately that project was not pursued. You are now evaluating a new project and would locate production inside of this building. What type of cash flow is the cost of the building? You hope to increase membership at your yoga studio by opening a smoothie bar inside of the yoga studio. When considering the feasibility of the smoothie bar, what type of cash flow is the increased studio membership? Suppose Walker Publishing Company is considering bringing out a new finance text whose projected revenues include some revenues that will be taken away from another of Walker's books. What type of cash flow are the lost sales on the older book? You currently operate a taco truck but are considering converting the food truck into a bubble tea truck. What type of cash flow are the profits currently earned…A firm earns an accounting profit of K150, 000 per year in project A. The firm could earn K150, 000 and K120, 000 in investments B and C, respectively. How much economic profit is the firm earning assuming the three projects are mutually exclusive?For mutually exclusive projects, the internal rate of return and the net present value give consistent accept/reject decisions if: A.the investment projects have identical cash flows in the final year. B.the required rate of return is less than the discount rate, which causes the net present value profiles of the two projects to intersect. C.the net present value profiles for both projects do not intersect. D.the investment projects have equal lives.
- Suppose that KCA University intends to introduce a new course from September 2020. The college estimates that it will incur a fixed cost of Ksh.2.4M per annum and an average annual variable costs of Ksh.8,000 per student to run the course: Required: Calculate the number of students KCA should enroll in order to breakeven if it intends to charge annual fee of Ksh.40,000 per student. Using the level of enrolment obtained in (i) above, compute the level of expected total revenue and total cost of the college. Suppose that you are the Vice Chancellor of KCA University, will you introduce this course if the maximum number of students Kenya University and College Central Placement Service (KUCCPS) will allocate you is 200? (Justify your answer – show all relevant calculations).The marginal damage cost equation for carbon monoxide (CO) in urban areas is: MDCU = 36E; The marginal damage cost equation for CO in rural areas is: MDCR = 6E.The marginal abatement cost equation for CO is: MAC = 400 - 4E What is the total compliance cost under this scheme?Given a project with three paths and their corresponding path lengths: AB-C: 25 days, A-D-E: 15 days, and B-C-E: 20 days; which of the followingstatements is TRUE? A. Activity B has the most slackB. The critical activities are A, B and CC. The earliest project completion time is 15 daysD. The expected duration of the project is 60 days
- A pharmaceutical company has spent $500 million to date working on a blood pressure treatment. It has to decide whether to spend another $500 million today to get final approval from the FDA in two years. Once approved, expected profits will be $50 million per year for the foreseeable future. The firm’s cost of capital is 5%. Should the firm proceed? (Hint: use the perpetuity formula used to value projects found in the readings to find the value of the profit stream that starts in two years, and then discount that.) 2. Suppose some doctors do not see any advantage of using the drug over what they currently prescribe for patients and the profit stream is only $25 million per year. Should the firm proceed? 3. Going back to the original information, suppose there is a delay of a year in getting FDA approval. Should the firm proceed? 4. Going back to the original information, suppose the firm’s’ cost of capital is 10%. Should the firm proceed?1. Compute the contribution margin per unit if the total fixed cost is P400, 000 and breakeven point is 4,000 units. a. P25 b. P100 c. P2, 500 d. P1, 000 2. What is the contribution margin ratio when the fixed costs are P13, 000, 000, the sales are P25, 000, 000, and the variable costs are P10, 000, 0000? a. 40% b. 48% c. 60% d. 52% 3. Which of the following is the value that we need to consider that will contribute towards covering fixed cost and providing for profit?* a. contribution margin b. net margin c. gross profit d. gross marginWhat can you say about negative and positive gross margin in sensitivity analysis