Futura Company purchases the 70,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.20 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $14.20 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 7.00 3.00 1.50 1.40 0.70 0.60 $14.20 Total $ 105,000 $ 98,000 $ 42,000
Q: Notice also that prices are stated relative to a par value of $100. Assume all bonds have the same…
A: Bond price:Bond prices are an essential aspect of the financial market, and they play a crucial…
Q: a. b. C. What is the sustainable growth rate for the company? (Do not round Intermediate…
A: The sustainable growth rate measures the greatest rate at which a business may expand its revenue,…
Q: A stock price is $20. It has an expected return of 12% and a volatility of 35%. What is the standard…
A: The objective of the question is to calculate the standard deviation of the change in the price of a…
Q: You own 100 shares of stock in BFRL and wish that the company sticks to its current capital…
A: To maintain your earnings irrespective of the company's decision, you would need to replicate the…
Q: Pertinent information for two alternatives A and B is shown below. If i=10% / year and the effective…
A: Depreciation charges using the MACRS depreciation method can be found by using the MACRS chart…
Q: Andrea wants to know how much money she will have in 7 years if she deposits her $1000 tax refund…
A: The future worth of the amount deposited today can be found by using the FV function in the excel…
Q: the rate of 7% per year. Its yield to maturity is 4.4805% p.a., semi-annual compounding. What are…
A: Bond valuation aims to determine the present value of a bond's future cash flows, which include the…
Q: Loan 30-Year Type Mortgage Rate 3.03% 15-Year New Car Mortgage Loan 2.30% 9.20% Used Car Loan 9.45%…
A: When the lender lends a loan to the borrower, he charges a rate of interest on the borrowed amount.…
Q: Segments of the bonds markets include a) treasury b) municipal c) agency d) corporate e) all of…
A: Features of Bonds are:-Bonds are the financial instruments issued by the government or companies to…
Q: In the year 2010, the average firm in the S&P 500 Index had a total market value of five times…
A: The objective of the question is to calculate the percent return on equity for a firm given its…
Q: a) Explain the term PPP/project Finance.b) Explain the two scenarios (cases) that underlie the…
A: The term PPP stands for Public-Private Partnership, and it refers to a cooperative arrangement…
Q: What is the value today of receiving $4, 500 at the end of each year for the next 6 years, assuming…
A: Present value is the equivalent value of the future money based on time value of money that is…
Q: If bad credit risks are the ones who most actively seek loans and, therefore, receive them from…
A: In this scenario, bad credit risks actively seeking loans create a situation where the lender…
Q: Refer to the table below: Expected return, E(R) Standard deviation, o Correlation 3 Doors, Inc.…
A: A minimum variance portfolio refers to the mix of investments that provides the lowest level of risk…
Q: Lynch Pin in Learning is considering investing $411,000 in equipment to expand their operation. They…
A: The capital budgeting tool that is regarded as a payback period is one of the simplest methods that…
Q: You are an investor who wants to maximize your profits, and to avoid risks of loss, you have…
A: Investing in a diversified portfolio is a strategy aimed at spreading investments across various…
Q: a. Finding TTC's stock worth today, its expected dividend, and capital gains yields Year Dividend…
A: To calculate Dividends for Year 1 and Year 2:Year 1 Dividend = Last Dividend (1 + Normal Growth…
Q: 14. You are thinking about buying a printing press today that will print t-shirts for many years…
A: a) Net Present Value (NPV) is difference between Present Value of Cash inflow to Present Value of…
Q: A security analyst has regressed the monthly returns on Exxon Mobil equity shares over the past five…
A: In this question, we are required to determine the estimated Exxon Mobil's equity beta.
Q: Lingenburger Cheese Corporation has 7.3 million shares of common stock outstanding, outstanding, par…
A: WACC is the weighted average cost of capital and is weighted cost of equity, weighted cost of debt…
Q: The Airbus A380 is the largest civilian aircraft ever built. It can carry 555 passengers on two…
A: The net present value (NPV) capital budgeting approach is used to determine the current value of…
Q: FTB has a book value per share of $6. They expect EPS to remain constant at $0.60 per share forever…
A: The objective of the question is to calculate the value of the stock using two different models: the…
Q: A bank makes a loan of $10,000. The loan will be paid back after 10 years with yearly payments of…
A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…
Q: Anna received a loan of $29,000 at 4.5% compounded semi-annually. He had to make payments at the end…
A: Loan installment is that which is paid by borrower to lender for a specified period of time. This…
Q: Working Capital Cash Flow Cycle Strickler Technology is considering changes in its working capital…
A: In the realm of financial management, optimizing working capital policies is a strategic endeavor…
Q: Whispering Inc. now has the following two projects available: Project Initial CF After-tax CF1…
A: Capital budgeting:Capital budgeting plays a crucial role in strategic planning and resource…
Q: The Wildcat Oil Company is trying to decide whether to lease or buy a new computer- assisted…
A: > A lease payment is a payment made under the terms of a written lease agreement between the…
Q: A 10-year corporate bond has coupon rate equal to 5.5%. This bond has a par value equal to 100, pays…
A: Here, Settlement Date11/17/2023Maturity Date11/17/2033Coupon Rate5.50%Redemption Value100Coupons…
Q: QUESTION 8 APO and 10 class of securities is formed backed by a $7,500,000 pool of 10-year FRMs…
A: PO class securities can include principal interest payments while taking a mortgage of a certain…
Q: Joe Levi bought a home in Arlington, Texas, for $148,000. He put down 30% and obtained a mortgage…
A: Mortgage:A mortgage is a legal agreement in which a person borrows money from a bank or a financial…
Q: You found the following stock quote for DRK Enterprises, Incorporated, at your favorite website. You…
A: Net income, also known as profit or earnings after tax, is a measure of a company's profitability,…
Q: please respond to both. A company that has a stock price of $200 must have a higher market…
A: Market capitalization = Stock price x Number of shares outstandingThe statement '' A company that…
Q: Select between the two options using the corporate MARR of 15% per year and a future worth Option…
A: As both have different life we will calculate the future worth for a period of 6 years (Lcm of 3 and…
Q: Q-H A firm has liabilities of $50,000,000 and equity of $25, 000, 000. What is the firm's debt -…
A: Debt Equity ratio is that which shows the relationship between the debt obtained by the company and…
Q: A $1,000 par value bond has a current price of $883.07 and a maturity value of $1,000 and matures in…
A: Bonds are debt instruments issued to raise capital by governments, municipalities, and companies.…
Q: accept and reject this project.
A: IRR stands for Internal Rate of Return.. It is a financial metric used to estimate the profitability…
Q: A. Calculate the initial outlay and depreciable value of the project. B. Calculate the annual…
A: Net Present Value (NPV) is a financial concept widely used in investment analysis and capital…
Q: please respond to both. Company Dividend Yield Dividend next year Chesapeake Energy Corp…
A: The term "stock price" refers to the current market price at which a share or unit of ownership in a…
Q: Elijah Enterprises will need to upgrade the computer system in 8 years. They anticipate the upgrade…
A: Time = t = 8 YearsFuture Value = fv = $112,100Discount Rate = r = 11%
Q: The Investments Fund sells Class A shares with a front-end load of 5% and Class B shares with 12b-1…
A: Variables in the question:Class A shares:Front-end load = 5%Class B shares:12b-1 fees = 0.5%…
Q: Valuing Delayed Annuities Suppose that you will receive annual payments of $18,650 for a period of…
A: An annuity refers to a series of regular payments that are made in exchange for a lump sum payment.…
Q: Assume an investor deposits S117, 000 in a professionally managed account. One year later, the…
A: The DWR of a portfolio refers to the return provided by the portfolio such that the PV of the cash…
Q: ou have the following information to determine the per share value of a stock using the free cash…
A: WACC is the weighted cost of equity and weighted cost of debt and is used as cost of capital for the…
Q: Risks of investing in bonds The higher the risk of a security, the higher its expected return will…
A: A bond is a fixed-income security that gives the investor the right to receive the coupon payments…
Q: 24. Suppose you are short a full S&P 500 futures contract at 2; 750. If the contract moves $500 per…
A: "As you have asked multiple questions in a single post, according to honoring guidelines only the…
Q: Project cost of capital and company cost of capital are exactly equal. True or False True False
A: Project Cost of Capital:The project cost of capital, also known as the specific cost of capital, is…
Q: A price level adjusted mortgage (PLAM) is made with the following terms: Amount = $96,000…
A: b. To calculate the loan balance at the end of the fifth year, we need to calculate the outstanding…
Q: Seas Beginning sells clothing by mail order. An important question is when to strike a customer from…
A: A simulation model for forecasting is a computational representation of a system or process, used to…
Q: Econo - Cool air conditioners cost $390 to purchase, result in electricity bills of $168 per year,…
A: Equivalent annual cost is equivalent cost that includes the cost of purchase and also the cost of…
Q: 5. What is the rate of return for an investor who pays $1,054.47 for a 3-year bond with a 7% coupon…
A: Given information:Beginning Value (purchase price) = $1,054.47Ending Value (sale price) =…
Vijay
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)Boston Executive. Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per Unit and supply 1,000 mini-bars for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?
- Futura Company purchases the 66,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.10 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: Direct materials. Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 7.00 2.20 1.80 1.20 0.40 0.50 $ 13.10 Total $ 118,800 $ 79,200 $ 33,000 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $118,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant and can't be avoided. The total rent on the plant is $81,000…Futura Company purchases the 74,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: Direct materials. Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.60 1.50 0.60 0.40 $ 13.10 Total $ 118,400 $ 111,000 $ 29,600 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $118,400) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $81,000 per period.…Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Per Unit Total Direct materials $ 5.00 Direct labor 3.50 Supervision Depreciation Variable manufacturing overhead 1.80 $117,000 1.50 $ 97,500 0.80 Rent 0.30 $ 19,500 Total product cost $12.90 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $117,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $85,000 per period.…
- Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.50 1.30 0.70 0.40 $ 12.90 Total If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $106,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period. Depreciation is due to obsolescence…Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.50 1.30 0.70 0.40 $ 12.90 Total $ 106,500 $ 92,300 $ 28,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $106,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period.…Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.50 1.30 0.70 0.40 $12.90 Total $ 106,500 $ 92,300 $ 28,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $106,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period.…
- Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.00 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $14.20 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 7.00 3.00 B 1.90 $ 134,900 1.40 $ 99,400 0.50 0.40 $ 28,400 $14.20 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $134,900) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $82,000 per period.…Futura Company purchases the 80,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 5.00 2.50 1.80 1.50 0.60 0.50 $11.90 Financial advantage Total If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $144,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $83,000 per period. Depreciation is…Futura Company purchases the 76,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.70 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.50 1.80 1.40 0.60 0.40 $ 13.70 Financial advantage Total $ 221,600 $ 136,800 $ 106,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $136,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $86,000…