3.1.10 Cash Budget The cash budget is “an estimation of the cash inflows and outflows for a business for a specific period of time. Cash budget are used to assess whether the entity has sufficient cash to fulfil regular operations and whether too much cash is being left in unproductive capacities”. (Reference 2) The cash budget is prepared in advance for the first 6 months, and a cash deficit of £20,364 and £2,228 were incurred in January and February. A second-hand bottling plant was purchased in January which cost £420,000. The business required £30,000 cash for working capital.
a. Based on this information, the ValueLine 1995 expected dividend, and the annual rate of dividend change for the growth estimate, what is the company’s return on common stock using the constant growth model? What is the expected dividend yield and expected capital gains yield? Explain the difference in the required return estimates from the ValueLine (see question 1a) to the WSJ price data. Return on common stock…D1/Po+g=Expected Return…0.60/27+5.5%= 7.72% Expected dividend yield= D1/P0=2.22% Expected capital gains yield= growth rate, 5.50% Stock Price increased, but expected return decreased.
Question: (TCO 8) Which waiting-line model has a dependent relationship between the length of the queue and the arrival rate? 9. Question: (TCOs 6 and 7) XYZ plating is going ahead on an expansion project. They will be able to earn $300 per hour and run 3,000 hours per year. What is the net present value for the next five years with an interest rate of 6%?
Use the indirect method. Problems P13-3A. The income statement of Whitlock Company is presented here. *PLEASE REFER TO ATTACHMENT FOR ADDITIONAL INFORMATION** Additional information: • Accounts receivable increased $200,000 during the year, and inventory decreased $500,000. • Prepaid expenses increased $150,000 during the year.
In year 2 it reports a $40,000 loss. For year 3, it reports taxable income from operations of $100,000 before any loss carryovers. Using the corporate tax rate table, determine how much tax Willow Corp. will pay for year 3. Answer: $4,500. Description (1) Year 3 taxable income $100,000 (2) Year 1 NOL carryforward ($30,000) (3) Year 2 NOL carryforward ($40,000) (4) Taxable income reported 30,000 (1) - (2) -
Basic flexible budgeting Centron, Inc., has the following budgeted production costs: |Direct materials |$0.40 per unit | |Direct labor |1.80 per unit | |Variable factory overhead |2.20 per unit | |Fixed factory overhead | |Supervision |$24,000 | |Maintenance |18,000 | |Other |12,000 | The company normally manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000 units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500,
| Bethesda Mining Company Case Study | Financial Analysis | | Section 2, Team 3: Alicha Brown, Michael Simon, Lisa Young | 3/7/2014 | | Financial Management 526 – Team Project 1 Instructor – Andy Boettcher Professor – John Nofsinger Financial Management 526 – Team Project 1 Instructor – Andy Boettcher Professor – John Nofsinger The Bethesda Mining Company has been offered a contract to ramp up its production. This new contract would run for a period of four (4) years and would entail the delivery of 2,000,000 tons of coal. At first blush it seems like a favorable undertaking, in that the company currently owns a 5000-acre plot of land ideal for the mine. It also estimates production in excess of the contract, allowing for additional sales in the spot market. The downsides are that Bethesda is currently operating at maximal capacity and would incur the costs of supplying all new equipment along with a host of both fixed and variable costs.
The table below contains the relevant information for this project. | | | Development cost | $ | 1,050,000 | | Estimated development time | | 9 | months | Pilot testing | $ | 200,000 | | Ramp-up cost | $ | 400,000 | | Marketing and support cost | $ | 150,000 | per year | Sales and production volume | | 60,000 | per year | Unit production cost | $ | 100 | | Unit price | $ | 185 | | Interest rate | | 8 | % | | Tuff Wheels also has provided the project plan shown below. As can be seen in the project plan, the company thinks that the product life will be three years until a new product must be created. | a. | What is the net present value (discounted at 8%) of this project?
Net initial investment outlay is $302,040. (Cost of new system + Installation) + (Proceeds from old equipment + Tax on proceeds + Removal cost) = Total cost + NCF (old) = 303,000 +-960 2. Tax depreciation savings = (36% tax rate) x (depreciation of each year) Depreciation for each year based on MACRS 5-year (Wikipedia) 3. Incremental cash flows = (Deprn. Tax savings + A.T. cost savings) each year [pic]2.
To compare our two options, we have compared the cash flow on an after-tax basis. 2. Assumptions We have taken more assumptions in addition to the assumptions listed in the case 1 to support a comparison of NPV on the same dimension. Output. 100,000 units will be required for each year of the project.