PowerDrive Inc. produces a hard disk drive that sells for $175 per unit. The cos

PowerDrive Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 250 Show more PowerDrive Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25000 drives in the prior year was: Direct material $625000 Direct labor 375000 Variable overhead 125000 Fixed overhead 1500000 Total cost $2625000 At the start of the current year the company received an order for 3800 drives from a computer company in China. Management of PowerDrive has mixed feelings about the order. On the one hand they welcome the order because they currently have excess capacity. Also this is the companys first international order. On the other hand the company in China is willing to pay only $135 per unit. What will be the effect on profit of accepting the order? Show less

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Wizard Corporation has analyzed their customer and order handling data for the p

Wizard Corporation has analyzed their customer and order handling data for the past year and has det Show more Wizard Corporation has analyzed their customer and order handling data for the past year and has determined the following costs: Order processing cost per order $7 Additional costs if order must be expedited (rushed) $10.00 Customer technical support calls (per call) $12 Relationship management costs (per customer per year) $1200 In addition to these costs product costs amount to 75% In the prior year Wizard had the following experience with one of its customers Chester Company: Sales $15000 Number of orders 160 Percent of orders marked rush .70 Calls to technical support 80 Required: Calculate the profitability of the Chester Company account. Show less

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St. Be Show more NOTE: I did everything else but I need help on 4.8. You need th

St. Be Show more NOTE: I did everything else but I need help on 4.8. You need the information below to do 4.8 St. Benedicts Hospital has three support departments and four patient services departments. The direct costs to each of the support departments are: General Administration $2000000 Facilities 5000000 Financial Services 3000000 Selected data for the three support and four patient services departments are as follows: Patient Space Services (Square Housekeeping Salary Department Revenue Feet) Labor Hours Dollars Support: General 10000 2000 $1500000 Administration Facilities 20000 5000 3000000 Financial Services 15000 3000 2000000 Total 45000 10000 $6500000 Patient Services: Routine Care $30000000 400000 150000 $12000000 Intensive Care 4000000 40000 30000 5000000 Diagnostic Services 6000000 60000 15000 6000000 Other Services 10000000 100000 25000 7000000 Total $50000000 600000 220000 $30000000 Grand total $50000000 645000 230000 $36500000 4.6 Assume that the hospital uses the direct method for cost allocation. Furthermore the cost driver for General Administration and Financial Services is patient services revenue while the cost driver for Facilities is space utilization. a.What are the appropriate allocation rates? b. Allocate the hospitals overhead costs to the patient services departments. 4.7 Assume that the hospital uses salary dollars as the cost driver for General Administration housekeeping labor hours as the cost driver for Facilities and patient services revenue as the cost driver for Financial Services. (The majority of the costs of the Facilities Department are devoted to housekeeping services.) a.What are the appropriate allocation rates? b. Allocate the hospitals overhead costs to the patient services departments. c. Compare the dollar allocations with those obtained in Problem 4.6. Explain the differences. d.Which of the two cost driver schemes is better? Explain your answer. 4.8 Using the direct method now assume that $2million of Financial Services costs are related to billing andmanagerial reporting and $1million are related to payroll and personnelmanagement activities. a. Devise and implement a cost allocation scheme that recognizes that Financial Services has two widely different functions. b. Is there any additional information that would be useful in completing Part a? c. What are the costs and benefits to St. Benedicts of creating two cost pools for Financial Services? Show less

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Berta Industries stock has a beta of 1.25. The company just paid a dividend of $

Berta Industries stock has a beta of 1.25. The company just paid a dividend of $0.40 and the di Show more Berta Industries stock has a beta of 1.25. The company just paid a dividend of $0.40 and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent and Treasury bills are yielding 4.7 percent. The most recent stock price for Berta is $64. a. Calculate the cost of equity using the DCF method. (Round your answer to 2 decimal places. (e.g. 32.16)) DCF method % b. Calculate the cost of equity using the SML method. (Round your answer to 2 decimal places. (e.g. 32.16)) SML method % Show less

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Suppose you have been hired as a financial consultant to Defense Electronics Inc

Suppose you have been hired as a financial consultant to Defense Electronics Inc. (DEI) a larg Show more Suppose you have been hired as a financial consultant to Defense Electronics Inc. (DEI) a large publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.6 million in anticipation of using it as a toxic dump site for waste chemicals but it built a piping system to safely discard the chemicals instead. The land was appraised last week for $5.4 million. In five years the aftertax value of the land will be $5.8 million but the company expects to keep the land for a future project. The company wants to build its new manufacturing plant on this land; the plant and equipment will cost $32.08 million to build. The following market data on DEIs securities are current: Debt: 231000 7.4 percent coupon bonds outstanding 25 years to maturity selling for 109 percent of par; the bonds have a $1000 par value each and make semiannual payments. Common stock: 8900000 shares outstanding selling for $71.10 per share; the beta is 1.2. Preferred stock: 451000 shares of 6 percent preferred stock outstanding selling for $81.10 per share. Market: 8 percent expected market risk premium; 6 percent risk-free rate. DEI uses G.M. Wharton as its lead underwriter. Wharton charges DEI spreads of 9 percent on new common stock issues 7 percent on new preferred stock issues and 5 percent on new debt issues. Wharton has included all direct and indirect issuance costs (along with its profit) in setting these spreads. Wharton has recommended to DEI that it raise the funds needed to build the plant by issuing new shares of common stock. DEIs tax rate is 38 percent. The project requires $1325000 in initial net working capital investment to get operational. Assume Wharton raises all equity for new projects externally and that the NWC does not require floatation costs.. a. Calculate the projects initial time 0 cash flow taking into account all side effects. (Negative amount should be indicated by a minus sign. Enter your answer in dollars not millions of dollars i.e. 1234567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.) Cash flow $ b. The new RDS project is somewhat riskier than a typical project for DEI primarily because the plant is being located overseas. Management has told you to use an adjustment factor of 3 percent to account for this increased riskiness. Calculate the appropriate discount rate to use when evaluating DEIs project. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g. 32.16)) Discount rate % c. The manufacturing plant has an eight-year tax life and DEI uses straight-line depreciation. At the end of the project (that is the end of year 5) the plant and equipment can be scrapped for $4.6 million. What is the aftertax salvage value of this plant and equipment? (Enter your answer in dollars not millions of dollars i.e. 1234567. Do not round intermediate calculations.) Aftertax salvage value $ d. The company will incur $6900000 in annual fixed costs. The plan is to manufacture 17500 RDSs per year and sell them at $10850 per machine; the variable production costs are $9450 per RDS. What is the annual operating cash flow (OCF) from this project? (Enter your answer in dollars not millions of dollars i.e. 1234567.) Operating cash flow $ e. DEIs comptroller is primarily interested in the impact of DEIs investments on the bottom line of reported accounting statements. What will you tell her is the accounting break-even quantity of RDSs sold for this project? (Do not round intermediate calculations and round your final answer to nearest whole number.) Break-even quantity units f. Finally DEIs president wants you to throw all your calculations assumptions and everything else into the report for the chief financial officer; all he wants to know is what the RDS projects internal rate of return (IRR) and net present value (NPV) are. (Enter your answer in dollars not millions of dollars i.e. 1234567. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g. 32.16)) IRR % NPV $ Show less

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Stock in Dragula Industries has a beta of 1.6. The market risk premium is 6 perc

Stock in Dragula Industries has a beta of 1.6. The market risk premium is 6 percent and T-bills Show more Stock in Dragula Industries has a beta of 1.6. The market risk premium is 6 percent and T-bills are currently yielding 5.50 percent. The companys most recent dividend was $1.90 per share and dividends are expected to grow at a 7.0 percent annual rate indefinitely. If the stock sells for $38 per share what is your best estimate of the companys cost of equity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g. 32.16)) Cost of equity % Show less

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Modern Artifacts can produce keepsakes that will be sold for $70 each. Nondeprec

Modern Artifacts can produce keepsakes that will be sold for $70 each. Nondepreciation fixe Show more Modern Artifacts can produce keepsakes that will be sold for $70 each. Nondepreciation fixed costs are $2300 per year and variable costs are $42 per unit. a. If the project requires an initial investment of $6000 and is expected to last for 5 years and the firm pays no taxes. The initial investment will be depreciated straight-line over 5 years to a final value of zero and the discount rate is 10%. What are the accounting and NPV break-even levels of sales? (Do not round intermediate calculations. Round your answers to the nearest whole number.) Accounting break-even levels of sales units NPV break-even levels of sales units b. What will be the accounting and NPV break-even levels of sales if the firms tax rate is 40%? (Do not round intermediate calculations. Round your answers to the nearest whole number.) Accounting break-even levels of sales units NPV break-even levels of sales units Show less

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A corporation has decided to replace an existing asset with a newer model. Three

A corporation has decided to replace an existing asset with a newer model. Three years ago the exis Show more A corporation has decided to replace an existing asset with a newer model. Three years ago the existing asset originally cost $60000 and was being depreciated under MACRS using a five-year recovery period. The existing asset can be sold for $30000. The new asset will cost $55000. In addition the new model will require an increase of $6000 in net operating capital. If the assumed tax rate is 40% on ordinary income and 15 % on capital gains the initial investment is __________. Show less

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Otobai Company in Osaka Japan is considering the introduction of an electrically

Otobai Company in Osaka Japan is considering the introduction of an electrically powered motor Show more Otobai Company in Osaka Japan is considering the introduction of an electrically powered motor scooter for city use. The scooter project requires an initial investment of 15 billion. The cost of capital was assumed to be 10%. The initial investment can be depreciated on a straight-line basis over the 10-year period and profits are taxed at a rate of 50%. Consider the following estimates for the scooter project. Market size 1.1 million Market share 0.1 Unit price 400000 Unit variable cost 360000 Fixed cost 2.0 billion What is the NPV of the electric scooter project? Consider the following estimates for the scooter project. Market size Market share Unit price Unit variable cost Fixed cost Required: What is the NPV of the electric scooter project? (Enter your answer in billions. Round your answer to 3 decimal places. Negative amount should be indicated by a minus sign. Omit the sign in your response.) ? Net present value billion Show less

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. The treasurer of a middle market import-export company has approached you for

. The treasurer of a middle market import-export company has approached you for advice on how to be Show more . The treasurer of a middle market import-export company has approached you for advice on how to best invest some of the firms short-term cash balances. The company which has been a client of the bank that employs you for a few years has $250000 that is able to commit for a one year holding period. The treasurer is currently considering two alternatives: (1) invest all the funds in a one year U.S treasury bill offering a bond equivalent yield of 4.25% and (2) invest all the funds in a Swiss government security over the same horizon locking in the spot and forward currency exchanges in the FX market. A quick call to the banks FX desk gives you the following two currency exchange quotes. Swiss francs U.S Dollar per per U.S Dollar Swiss Franc (CHF) Spot 1.5035 0.6651 1-year CHF futures 0.6586 a. calculate the one year bond equivalent yield for the Swiss government security that would support the interest rate parity condition. Show less

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