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You are the owner of a company that produces Zumba toning sticks, and business is really on the rise. The Zumba machine you currently use can produce 10,000 toning sticks per week (5,000 pairs) on a single 8 hour production shift. You sell a pair of sticks at wholesale for $8.56, and your production cost (including materials and direct labor) per pair is $4.00. The problem is you are currently selling every stick you produce, and are falling behind on orders. You are concerned that a competitor will take away this part of your business if you don’t find a way to keep up with the increased demand. You could easily sell 40,000 sticks per week, and you are 90% confident that the Zumba craze will last for at least 10 years. You can replace your current machine for $500,000, and it will have a capacity to produce 50,000 sticks per 8 hour shift. Your current machine is completely paid for. Maintenance costs will be lower for a new machine, but the utility costs will increase, so you think the net operating costs for the new machine will be similar to the older machine. 1. Do you purchase the new machine or not? Explain and justify your decision. 2. What factors do you need to consider? Are there other solutions? 3. What are the risks involved in purchasing the new machine? In not purchasing the new machine? 4. Summarize this scenario.
Explain how each of the following factors would probably affect a firm’s target cash balance if all other factors were held constant.
Considering investing in a store with a 10 year lease and it will be in business for the next 10 years. It produces annual cash flows of $400,000. Discount rate 10%. Cash flows will grow at 5%. Therefore, expected annual cash flow for next year is 42..
Truman Industries is considering an expansion. The necessary equipment would be purchased for $10 million, and the expansion would require an additional $1 million investment in net operating working capital. The tax rate is 40%.
Four years ago I purchased 100 shares of the XYZ Corp preferred stock. The company pays a $6.75 annual dividend and had a required return of 19%. The most recent required return for the stock is 14%. What was the stock value when purchased? What was ..
The McKeegan Corporation has two different bonds currently outstanding. Bond M has a face value of $13,500 and matures in 17 years. The bond makes no payments for the first 5 years, then pays $700 every six months over the subsequent 7 years, and fin..
Records of capital assets owned by Lucas County have never been maintained in a systematic manner. The auditor has recommended that an inventory be taken and that General Capital Assets accounts be established and maintained. What suggestions or comm..
Could an investor beat the stock market and generate a superior return with companies that have formulated and implemented a blue ocean strategy? Why or why not? Elaborate through at least two concrete examples (use Fortune 500 companies different fr..
May an attorney allow a financial planning organization to refer its members to him for preparation of wills and trusts and accept payment of part or all of his fee from the organization?
John plans to buy a vacation home in 6 years from now and wants to have saved $91,024 for a down payment. How much money should he place today in a savings account that earns 8.11 percent per year compounded daily to accumulate money for his down pay..
You place an order for 320 units of inventory at a unit price of $180. The supplier offers terms of 3/15, net 30. How long do you have to pay before the account is overdue? a-2 If you take the full period, how much should you remit? What is the disco..
Lee purchased a stock one year ago for $27. The stock is now worth $30, and the total return to Lee for owning the stock was 0.40. What is the dollar amount of dividends that he received for owning the stock during the year?
Evaluate the costing process and procedures of the organisation with respect to method or approach utilised - capital decision making process within the organisation with regards to what methods are utilised, how such methods are chosen, how project..
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