Flamengo Co is a sporting goods manufacturing. Its basketball division had an ROI of 13% last year. The manager of the basketball division is considering additional investment in a new clothing line for the coming year. What step will the manager likely choose to take? Not invest in the clothing line if it gives less than 13% ROI. Not invest in the clothing line if it gives an ROI equal to 13%. Invest in the clothing line as long as its ROI is positive. Invest in the clothing line as long as it provides positive operating income. O Not invest in the clothing line if it gives more than 13% ROI.

The managers of Lessing Toy & Hobby (LTH) have decided to keep the stores in the Northern Division open, in spite of the dwindling demand in the area. They want to forecast what the income will be in the coming year, using the income statement as the base. The cost analyst at LTH estimates sales in the coming year will only be 85 percent of the current year sales. Cost of goods sold is estimated to be 90 percent of the current year. The managers have decided to increase advertising next year by 10 percent above the current year, but will cut administrative salaries in the Northern Division by 30 percent. They also expect to lower rent and occupancy costs by 15 percent. Allocated corporate overhead, based on information from the CFO, is expected to be $1.2 million. Required: Prepare an income statement for Year 2 for the Northern Division based on the estimates provided by the cost analyst and other managers at LTH. Note: Enter your answers in thousands e.g., 10,000,000 should be…

BeneMart, a large national retail chain, is nearing its fiscal year-end. It appears that the company is not going to hit its revenue and net income targets. The company's marketing manager, Ed Mellon, suggests running a promotion selling $50 gift cards for $45. He believes that this would be very popular and would enable the company to meet its targets for revenue and net income. What do you think of this idea?

Harrison Jones is a marketer of facial care products. It plans on introducing a new product line next year and is not quite certain whether its sales team can accomplish the sales objectives. It must determine how much dollar business it must do to at least break even. Its historical average annual sales has been $10,000,000 and its cost of sales has been $4,500,000. Its planned investment in the new business is $450,000. How much dollar business must Harrison Jones do in order to recoup its planned investment?

My company, Naughty Knitts, has decided to market our products more aggressively and ride the popularity of mittens from the Bernie memes. Current sales are 60,000 units per year and are expected to increase by 20%. Carrying costs are $0.50 per unit and order costs are $10. Naughty Knitts wants to minimize its inventory costs. Calculate the company's current economic ordering quantity.

Divine Electronics Ltd. manufactures a line of headphones. Sales are increasing, and management is concerned that the company may not have sufficient capacity to meet the expected demand for the coming  year. The following data are available for planning purposes:   Product Estimated Demand Next Year Selling Price Direct Materials Direct Labour   1 Wire 78,000 $25.00 $7.30 $5.00   2 Wire 75,000 20.00 10.20 3.20   3 Wire 115,000 17.50 2.80 5.00             The following additional information is available: 1. With the strong competition, the company feels that it can't increase its selling prices above those indicated 2. The direct labour rate is $10 per hour; this rate is expected to remain unchanged during the coming year. 3. Fixed manufacturing costs total $640,000 per year.  Variable manufacturing overhead costs are equal to 25% of the direct labour costs. 4. The company's plant has a capacity of 110,000 direct labour-hours per…

B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 55 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.18 million. By going through research, the company will be able to better target potential customers and will increase the probability of success to 70 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $18.8 million. If unsuccessful, the present value payoff is only $5.8 million. The appropriate discount rate is 15 percent. Calculate the NPV for the firm if it goes to market immediately and if it conducts customer segment research. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

A moped company produces 200,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside producer. The manager believes that the chains can be made in house at an additional cost of $0.40 per chain. However, the manager believes that the quality of the product is slightly better and she’ll be able to add $1.0 to the selling price per unit without reducing the 200,000 units sold per year. The new machinery would cost $260,000 and the entire cost would be depreciated straight line over 10 years. The inhouse production would require $26,000 of inventory and other working capital upfront (year 0), which can be recovered at the end of the 10th year. The proceeds from selling the machine after 10 years would be $20,000. The company pays a tax rate of 20%. a. What are the incremental annual cash flows associated with changing the production of the chains from outsourcing to in-house? b. What is the IRR of the option to switch to an inhouse…

B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 65 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.13 million. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 80 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $18.3 million. If unsuccessful, the present value payoff is $5.3 million. The appropriate discount rate is 13 percent. Calculate the NPV for the firm if it conducts customer segment research and if it goes to market immediately. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Market immediately Research option Should the firm conduct customer segment research or go to the market immediately? O Market…

To increase Sales and Sales Growth, the top Marketing Manager suggested to price products slightly lower than the main competitor and at the same time increase product quality (competitor is not expected to react or make changes).  This strategy would require an initial one time investment today of $1 million in advertising (and for some machines) and the Net Profit Margin (and Cash Flows) will be zero for years 1, 2, 3.  However, sales are expected to grow 20% in years 1,2,3 (then sales will stabilize and sales growth will be 1% in year 4 and over).  Also, in year 4 Net Profit Margin will return to 5% (due to economies of scale). (Some numbers have been pre-filled in the tables below). CURRENT BUSINESS SITUATION           END OF YEAR 0 1 …       Sales Growth   0% …       Net Profit Margin   5% …                     Sales ($Millions)   80.00 …       Profit or Cash Flow   4.00 …       NPV(i=.15) 26.67 $Millions                                   SUGGESTED SALES…