a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder?
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- Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 65 hours each week, the company's EBIT will be $620,000 per year; if he works a 75-hour week, the company's EBIT will be $765,000 per year. The company is currently worth $3.9 million. The company needs a cash infusion of $2 million and can issue equity or issue debt with an interest rate of 8 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder?Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 40 hours each week, the company's EBIT will be $630,000 per year; if he works a 50-hour week, the company's EBIT will be $785,000 per year. The company is currently worth $4 million. The company needs a cash infusion of $2.1 million and can issue equity or issue debt with an interest rate of 10 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder? a. Debt issue and 40-hour week Debt issue and 50-hour week Equity issue and 40-hour week Equity issue and 50-hour week b. Which form of financing is Tom likely to work harder?Mike made $10,000 investment in an endorser whereby he manufactures products that are easily sold at $50 per unit. Per computation, the payback period is 2 years. If the total cost incurred by the company during a year is $21,000 a) What is the no. of products that the company was able to sell during the year? b) If his target is to attain a 15% Rate of Return, do you think he has achieved his goal? Why?
- A young mechanical engineer is considering establishing his own small company. Aninvestment of P400,000 will be required which will be recovered in 15 years. It is estimatedthat sales will be P800,000 per year and that operating expenses will be as follows. (see attached photo) The man will give u his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest?You are the CFO of Oriole, Inc., a retailer of the exercise machine Slimbody6 and related accessories. Your firm is considering opening up a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 4,000 exercise machines, and the price of each machine is $2,500. The annual sales of accessories will be $600,000, and the operating expenses of running the store, including labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $30,900,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $1,000,000 in additional working capital immediately, and recover it at the end of the investment. Your firm's marginal tax rate is 30 percent. The opportunity cost of opening up the store is 10.80 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in years…You are the CFO of Sunland, Inc., a retailer of the exercise machine Sunland6 and related accessories. Your firm is considering opening a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 4,800 exercise machines, and the price of each machine is $2,400. The annual sales of accessories will be $576,000, and the operating expenses of running the store, including labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $29,300,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $1,000,000 in additional working capital immediately and recover it at the end of the investment. Your firm's marginal tax rate is 30 percent. The opportunity cost of opening up the store is 11.80 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in years 1-19…
- You are the CFO of Carla Vista, Inc., a retailer of the exercise machine Slimbody6 and related accessories. Your firm is considering opening up a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 4,000exercise machines, and the price of each machine is $2,500. The annual sales of accessories will be $600,000, and the operating expenses of running the store, including labor and rent, will amount to 50percent of the revenues from the exercise machines. The initial investment in the store will equal $26,800,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $3,000,000 in additional working capital immediately, and recover it at the end of the investment. Your firm’s marginal tax rate is 30 percent. The opportunity cost of opening up the store is 13.70 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in…Suppose Gormley can increase the annual capacity of its regular machines by 15,000 machine-hours at a cost of $300,000. Should Gormley increase the capacity of the regular machines by 15,000 machinehours? By how much will Gormley’s operating income increase or decrease? Show your calculationsA young mechanical engineer is considering establishing his own small company. An investment of P400,000 will be required which will be recovered in 15 years. It is estimated that sales will be P800,000 per year and that operating expenses will be as follows: Materials P160,000 per year Labor P280,000 per year Overhead P40,000 +10% of sales per year Selling expense P60,000 The man will give you his regular job paying P216,000 per year and devote full time to the operation of the business; this will result in decreasing labor cost by P40,000 per year, material cost by P28,000 per year and overhead cost by P32,000 per year. If the man expects to earn at least 20% of his capital, should he invest using the ROR method and what is the ROR? a. ROR = 13.224% (not justified) b. ROR = 18.345 % (justified) %3D c. ROR = 23.564% (not justified) d. ROR = 23.564 % (justified)
- Toshovo Computer owns four production plants at which computer workstations are produced. The company can sell up to 40,000 computers per year at a price of $1500 per computer. For each plant, the production capacity, the production cost per computer,and the fixed cost of operating a plant for a year are given in the file P06_56.xlsx. Determine how Toshovo can maximize its yearly profit from computer production.Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $18 million, and production and sales will require an initial $3 million investment in net operating working capital. The company's tax rate is 25 %. Enter your answers as a positive values. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places. Please show all work and solutions. Show all work.Tanner is CEO of Jones Aerospace. The firm manufactures titanium screws utilized on spacecraft. The firm charges $72.00 per unit for screws that cost the firm $25.20 per unit to manufacture; the firm manufactures 26,400 units. The firm has 927,000 in fixed costs per year. Given this information, calculate the following: D: What is the firm's Breakeven point (in units), given Target Net Income of $420,000? E: What is the firm's Margin of Safety, given its current unit volume? F: What is the firm's Margin of Safety Percentage, given the above information? G: What is the firm's Degree of Operating Leverage (DOL), given the above information? H: If the firm's revenue increases by 22%, what is the predicted percentage change in Net Operating Income, given its DOL? INSTRUCTIONS: Write dollar amounts out to the penny, with no dollar sign: 1000.00. All interest rates should be entered as follows: 11.28 (no percent sign). Show Degree of Operating…