Do you think the company should make this investment? Why?
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Q: Do you think the company should make this investment? Why?
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International energy drink giant Energica America's regional sales manager Will Smith investigate the plans for the Middle East and plans to launch in Azerbaijan in 2021. The market price of the Company's plant in America is determined to be $ 5 million. It causes the company to need a capital of $ 20 million in 2021 to shift the investment to Azerbaijan and to establish a new bottling factory and distribution channel. While the fixed expenses required for production, distribution and marketing as of 2021 are $ 3 million per year, 50 million liters of energy drink will be produced in the country at the end of each year. Variable costs arising from production and distribution will be 12 Cent per liter. According to the policy pursued, the expected minimum return rate of the company is accepted as 6%. The income from sales is expected to be 35 cents per liter. Bottling factories are expected to serve almost forever, so all unit costs and sales revenues are expected to remain constant forever. The company will be subject to a 30% tax tranche in accordance with the Azerbaijan tax law and capital investments will be eliminated with equal shares within 5 years. Do you think the company should make this investment? Why?
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- International energy drink giant Energica Turkey's regional sales manager Hakan Çokbilir investigate the plans for the Middle East and plans to launch in Azerbaijan in 2021. The market price of the Company's plant in Turkey is determined to be $ 5 million. It causes the company to need a capital of $ 20 million in 2021 for the investment to Azerbaijan and to establish a new bottling factory and distribution channel. While the fixed expenses required for production, distribution and marketing as of 2021 are $ 3 million per year, 50 million liters of energy drink will be produced in the country at the end of each year. Variable costs arising from production and distribution will be 12 Cent per liter. According to the policy pursued, the expected minimum return rate of the company is accepted as 6%. The income from sales is expected to be 35 cents per liter. Bottling factories are expected to serve almost forever, so all unit costs and sales revenues are expected to remain constant…The Houston American Cement factory will require an investment of $200 million to construct. Delays beyond the anticipated implementation year of 2012 will require additional money to construct the factory. Assuming that the cost of money is 10% per year, compound interest. Determine the following for the board of directors of the Brazilian company that plans to develop the plant. (a) The equivalent investment needed if the plant is built in 2015. (b) The equivalent investment needed had the plant been constructed in the year 2008.Pulsar Plc is considering of exporting its products to the Swedish market. It expects to earnan annual accounting profit of £200m from doing so. It has also the option to beginexporting to India, Brasil or South Africa, but it has the production capacity for only one ofthe four possible markets (including Sweden). The expected annual accounting profit forthe above three markets is £250m, £200m, and £150m respectively. On the basis of thisinformation, the economic profit of exporting to Sweden is equal to:a. -£50m.b. £0m.c. £50m.d. £200m.
- A bank is considering two alternatives for handling its service calls in the next decade ( treat this as one period). The projected number of service calls is 10,000,000. If the bank sets up its own service call center in the U.S., the fixed cost is estimated to be $2,700,000, and the variable cost is calculated to be 32 cents per call. If the call service is outsourced to a foreign company, the fixed cost would be $240,000, and the unit charge would be 57 cents per call. (a)What is the break-even number of service calls? (b)Would the bank set up its own service call center or outsource call handlings? (Enter 1 for Produce or enter O for Outsource) (C)What would be the dollar amount that the bank can save by choosing the better option? (Cost difference between the two options)The directors of EMY plc are currently considering an investment in a new production machinery to replace an existing one. The new machinery would produce goods more efficiently, leading to increased sales volume. The investment required will be GH¢1,150,000 payable at the start of the project. The alternative course of action would be to continue using the existing machinery for a further five years, at the end of which time it would have to be replaced. The following forecasts of sales and production volumes have been made: Sales in units Year Using existing machinery Using new machinery GH¢ GH¢ 1 400,000 560,000 2 450,000 630,000 3 500,000 700,000 4 600,000 840,000 5 750,000 1,050,000 Production in units Year Using existing machinery Using new machinery GH¢ GH¢ 1 420,000 564,000 2 435,000 637,000 3 505,000 695,000 4 610,000 840,000 5 730,000 1,044,000…Kako Ltd is considering introducing a new product unto the market. This will require the injection of capital to the tune of GH¢20,000 for the purchase of the equipment for production. The cost of the building that Kako Ltd intends to use for the project is GH¢30,000. The Production and Marketing department has presented the information in the table below: 2019 Variable cost per unit of the product GH¢2 Selling price per unit GH¢6 Quantity 4000 units per annum Again the following information should be taken not of: • Feasibility studies cost the company GH¢2000 • Test marketing expenses amounts to GH¢3000 • Variable cost will increase by 5% per annum • Selling price will increase by 10% per annum • Marketing expense will be 5% of sales revenue per year • An initial working capital investment of GH¢2000 will be made. Subsequently, net working capital at the end of each year will be equal to 10 percent of sales for that year. In the final…
- Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment of S$20,000,000 (Singapore dollars). Kittle Co. managers provide you key information regarding the project. 1. The government in Singapore will tax any remitted earnings at a rate of 10.00%. 2. The subsidiary will remit all of it’s after-tax earnings back to the parent. 3. The forecasted exchange rate of the Singapore dollar over the four-year period is $0.50. 4. The salvage value is S$12,000,000, which will be paid by the Singapore government in exchange for ownership of the subsidiary after four years. 5. The required rate of return is 15.00%. Furthermore, no funds can be remitted from the subsidiary to the parent until the subsidiary is sold for the salvage value at…Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment of S$20,000,000 (Singapore dollars). Kittle Co. managers provide you key information regarding the project. 1. The government in Singapore will tax any remitted earnings at a rate of 10.00%. 2. The subsidiary will remit all of it’s after-tax earnings back to the parent. 3. The forecasted exchange rate of the Singapore dollar over the four-year period is $0.50. 4. The salvage value is S$12,000,000, which will be paid by the Singapore government in exchange for ownership of the subsidiary after four years. 5. The required rate of return is 15.00%. Furthermore, no funds can be remitted from the subsidiary to the parent until the subsidiary is sold for the salvage value at the…You are considering producing a new golf ball for sale in China to meet agrowing demand in the country. This golf ball is less expensive to manufacture compared with a better known brand, but it meets all requirements set by the United States Golf Association (USGA) for play at any competitive event. Production will require an initial outlay for the purchase of equipment worth $1,500,000. The equipment has a six-year life with an expected salvage value of $100,000. You already own the land on which the project will be located. The land has a current market value of $100,000, and its price is expected to grow by 5% per year. If you decide not to produce the golf balls, you will sell the land. You have also gathered the following information:(i) You expect revenue of $500,000 per year for each year of operation. Yourdirect cost of producing the golf ball is expected to be 30% of the revenue.(ii) The operating cost, including marketing, is another 15% of the revenue.(iii) You will need to…
- Explain why proponents of LIFO argue that it provides a better match of revenue and expenses. In what situations would it not provide a better match? Be specific. The management of the Esquire Oil Company believes that the wholesale price of heating oil that they sell to homeowners will increase again as the result of increased political problems in the Middle East. The company is currently paying $0.80 per gallon. If they are willing to enter an agreement in November 2021 to purchase a million gallons of heating oil during the winter of 2022, their supplier will guarantee the price at $0.80 per gallon. However, if the winter is a mild one, Esquire would not be able to sell a million gallons unless they reduced their retail price and thereby increase the risk of a loss for the year. On the other hand, if the wholesale price did increase substantially, they would be in a favorable position with respect to their competitors. The company’s fiscal year-end is December 31. Discuss the…Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment of S$20,000,000 (Singapore dollars). Kittle Co. managers have provided you with the forecasted demand (number of guitars sold), along with the forecasted price at which each guitar can be sold, over the next four years. e following table with the total revenue from the subsidiary for years 1 through 4, in Singapore dollars (S$) e Year S$ Year 1 60,000 units S$350 S$ Year 2 60,000 units S$350 S$ Year 3 100,000 units S$360 S$ Year 4 100,000 units S$380Leland Industries is a producer of bakery and snack goods in Western Canada and are considering expending into Eastern Canada. The expansion is estimated to cost $10,000,000 for a new production facility. This project is in the same line of business as the firm's current operations and is therefore not expected to alter the risk of the firm. The most recent balance sheet is provided below. Leland Industries Balance Sheet As at Dec 31, 2021 Assets Liabilities Accounts Payable Other Current Liabilities $ Cash & Marketable Securities 425,000 300,000 Accounts Receivable $ 400,000 425,000 Inventories 500,000 Total Current Liabilities 725,000 Total Current Assets $ 1,325,000 Net Fixed Assets 18,000,000 LT Debt * 6,500,000 Preferred Stock ** 2,500,000 Common Stock*** 3,000,000 Retained Earnings 6,600,000 Total Liabilities & Total Assets $ 19,325,000 Owners Equity $ 19,325,000 Notes to financial statements: * The 5% semi-annual coupon bonds have a face value of $1,000, were issued 5 years ago…