Question 1
Project Risk Analysis -Sensitivity Analysis. HMG is considering the manufacture of a new chemical compound that is used to make high-pressure plastic containers. An investment of $4 million in plant and equipment is required. The firm estimates that the investment will have a five year life, using straight-line depreciation towaard a zero salvage value. However, the investment has an anticipated salvage equal to 10% of its original cost. The number of pounds of the chemical compound that HMG expects to sell over the five year life of the project are as follows (in millions): 1, 1.5, 3, 3.5, and 2. To operate the new plant, HMG estimates that it will incur additional fixed cash operating expenses of $1 million per year and variable operating expenses equal to 45% of revenues. Furthermore, HMG estimates that it will need to invest 10% of the anticipated increase in revenues each year in net working capital. The price per pound for the new compound is expected to be $2 in Years 1 and 2, then $2.50 per pound in Years 3 through 5. HMG's tax rate is 38%, and it requires a 15% rate of return on its new product investments. a. What are the key sources of risk that you see in this project? b. Use the "goal seek" function within Excel to find the breakeven values for each of the following variables: the initial CAPEX, the working capital percentage of revenue growth, variable cost % of sales, and sale volume c. Which of the variables analyzed in part b do you think is the greatest source of concern? What, if anything, could you do to reduce the risk of the project? d. Should you always seek to reduce project risk?
Question 2
Problem Statement Fujiyama Electronics, Inc. has had difficulties with circuit boards purchased from an outside supplier. Unacceptable variability occurs between two drilled holes that are supposed to be 5 cm apart on the circuit boards. Thirty samples of four boards each were taken from shipments from the supplier as shown in the data from the worksheet below. Data in the worksheet below can also be accessed in Doc Sharing in a file named Fujiyama Electronics Sample Data. Fujiyama Electronics Observations Sample 1 2 3 4 1 4.92 4.26 4.94 4.29 2 4.65 5.54 5 5.42 3 5.77 5.26 4.76 4.79 4 6.25 4.88 5.66 4.44 5 5.27 5.41 6.02 4.91 6 5.22 5.38 5.08 4.65 7 5.47 4.68 4.56 4.7 8 5.71 4.54 4.17 4.87 9 5.24 5.58 4.72 5.41 10 4.42 5.18 4.79 4.73 11 5.14 4.26 4.71 5.48 12 4.92 5.78 5.5 5.05 13 5.79 3.83 4.3 4.78 14 4.92 4.8 4.75 5.59 15 5.68 5.74 4.65 5.2 16 5.43 4.81 5.27 4.96 17 4.79 6.04 4.47 5.18 18 4.43 5.08 3.69 6.43 19 6.35 5.95 6.29 5.89 20 5.03 4.66 5.25 4.46 21 6.32 6.09 5.57 5.91 22 4.3 5.47 4.27 4.34 23 6.07 4.97 5.51 5.02 24 5.11 4.9 5.91 4.66 25 4.5 5.24 4.86 4.35 26 4.91 4.79 5.74 5.03 27 4.65 4.71 4.81 5.32 28 4.7 5.5 6.04 4.3 29 5.87 5.3 5.78 5.07 30 4.41 4.75 4.95 5.11 Calculate X-Bar-Bar, R-Bar, and associated control limits using the data in the table above. Create X-Bar?R (Average & Range) Control Charts from the data in the table above. Discuss notable out-of-control conditions displayed in the completed X-Bar?R (Average & Range) Control Charts. Only consider points outside the control limits. Do not consider runs, set of points within certain zones, and so forth. If the conditions you note could be defined as assignable conditions, and they are removed from the process, then what will happen to the X-Bar?R Control Chart? Remove the data related to the out-of-control points you observed from the original data, and recalculate new X-Bar-Bar, R-Bar, and associated control limits. Create new X-Bar?R (Average & Range) Control Charts from your updated data. Discuss how the two sets of Control Charts are different. What has changed?
Question 3
Prepare general journal entries, including appropriate interest accruals, to record the following transactions in the general ledger of the General Fund of Wick Township. 1. Township Council adopted the budget for the fiscal year: Budgeted revenues, $23 million Appropriations, $24 million 2. Township levied property taxes for the current year, $20 million. All except the expected uncollectible portion (1%) are expected to be collected by year end. 3. Taxes of $12 million were collected before the due date. The remaining taxes were declared past due. 4. Taxes receivable of $7 million were collected. 5. Fines and forfeits of $300,000 were collected in cash. 6. Police uniforms were ordered at an estimated cost of $15,000. 7. Salaries and wages paid, $10 million; accrued but not paid, $580,000. 8. Three million dollars was loaned to an Enterprise Fund. It is to be repaid in 5 years. 9. Borrowed $500,000 on a 6 month, 12%, interest-bearing note due three months after year-end. The note is not considered general long-term debt. 10. Received half of the police uniforms that were ordered. Actual cost was $7,450. 11. Temporarily invested $400,000 of idle cash in securities. 12. Purchased goods on account from an Internal Service Fund department, $20,000.
Question 4
Complete Case # 12, ?The Wallingford Bowling Center? on pp.C-14 through C-15 in the back of your textbook. Answer the end-of-case questions and submit your answers where designated in Blackboard. Instructions Write your case study paper according to APA style guidelines including cover and reference pages. The cover page should contain a running head, page number, and byline. The body of the paper should include an introduction, narrative (body), and conclusion. These three sections should discuss the case study contents and provide the reader with adequate information that when the questions are answered, the reader is able to make a connection between the case study and the question responses. Please address the questions in a comprehensive and scholarly fashion; additional citations and references are expected. The page length for this assignment should be 3?5 pages excluding cover and reference pages. No abstract is required for this assignment; however, a table-of-contents is. POINTS: 100 TOTAL Formatting ? APA Basics ?1? margins all around ?Double-spaced from beginning to end ?Times New Roman Font ?12-point font size ?Indent beginning of paragraphs one-half inch ?Use headings as necessary: ?Introduction (Use title of the paper, not the word introduction) ?Narrative (Body of the paper) ?Conclusion ?Question 1 ?Question 2 ?Question 3 ?Question 4 (as necessary) ?References
Question 5
1. Suppose you buy a 10 year 7% annual bond for $960. Suppose you hold the bond for 5 years and sell it for $1060. Assuming you reinvested the coupon payments you receive at 6%, what was your total return? (25 points) 2. Suppose you purchase a 5 year 5% annual bond that has a YTM of 6%. What is the duration of this bond? Estimate the change in the price of this bond for a 50 basis point increase in the YTM. Estimate the change in the price of this bond for a 50 basis point decrease in the YTM. (25 points) 3. What are the collateralized mortgage obligations? How they are different from pass through securities? Why do some economists say CMOs are the one of the reasons for the recent financial crisis? (15 points) 4. When would you buy a call option and when would you buy a put option? In other words, how would you expect the underlying stock price move when you buy a call option and a put option? (15 points) 5. Wisteria Lane Cleaning System announced today a $1 per share dividend to be paid a year from now and expect the dividend to increase by $1 a year for another 2 years. After the third year, dividend growth is expected to settle down to steadier rate of 4%. If the required rate of the return of the company is 7%, what must be the price of the stock? (20 points)
