Collinsville case study
1. Which firms are the “identical twins” of the Collinsville investment? Using the β’s for those assets and the methodology learned in this course, determines the appropriate discount rate for the Collinsville investment.
We are interested in obtaining the asset beta for Collinsville investment. Here from the reading material, we find there were altogether 6 chemical companies that produce sodium chlorates. They are Hooker, Pennwalt, American, Kerr-McGee, Brunswick and Southern. However, since we are evaluating the addition of a sodium chlorate plant, the two firms (Brunswick and Southern) who specialize in producing sodium chlorate are likely the best “twins”. To determine the asset betas of each company, we
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Here, in the given pro forma in Exhibit 8, the cost of salt and other in 1984 was 1836 while that in 1983 is 1956. Thus, the growth rate is (1956-1836)/1836=6.6%.
Thirdly, since the total fixed costs account for 14.1% of its sales in the year of 1983 and 1984, we assume the total fixed costs will remain at this level until 1989. Similarly, the account receivable, account payable, and inventories stays at 10%, 5.5% and 4.5% of sales respectively.
For the depreciation part, we adopted the straight-line method. Here since the depreciation of year 1984 was $1270, we just assumed all the depreciation amount to be equal to $1270 till the year 1989. With all of these previous assumptions, we obtain the complete pro forma financial statement and the cash flow table for the Collinsville Plant.
Together with the discount rate we calculated from the first part, we get the NPV of this project is $8737.6. Under this valuation, the $12M offer is high and that Dixon should not make the investment without the laminate technology.
3.
Calculate the incremental NPV from adding the laminate technology to the Collinsville plant. What is the NPV of the Collinsville plant with the laminate technology?
When we consider the laminate technology, we have to add $2.25M to the CAPX for first year and add $225,000 to depreciation per annum from the second year to the last year. Moreover, we assume the
Many children await the day when they can be considered grown up. For them it represents a time where they possess more rights and privileges. However, for middle children which are between the ages of 7 through12 this time may seem more like a nightmare because it marks the time when they undergo physical and mental changes. These physical and mental changes have a major impact on their development. The subject in this scenario is a little boy named Mark who is being bullied at school by a group of older boys to the point that he has received bruises from the encounters. As a result, Mark dislikes going to school for the fear of being embarrassed or hurt and the looming threat of recurring bodily harm if he asks for help from the teachers. This situation has become so serious that Mark is barely eating and has withdrawn himself from his peers in efforts to avoid the boys who are bulling him. After examining the above scenario, this paper will explain Mark’s different issues based on signs of biosocial, cognitive and psychosocial development and discuss what should be done to help Mark succeed in his current situation based on research.
Even though Mr. Fordham mentions that he in his “Statement of Cost of Goods Manufactured for Year Ended Dec. 31 1956” that he depreciated $24,000 of Plant and Equipment, I decided to change the depreciation schedule so that PP&E would be fully depreciated by the end of the 5 year period. Thus, I used a straight-line depreciation schedule that accumulated $40,000 worth of depreciation per year, which was spread evenly across the 12 months of this Balance Sheet (or $3,333.33 per month).
Free cash flows of the project for next five years can be calculated by adding depreciation values and subtracting changes in working capital from net income. In 2010, there will be a cash outflow of $2.2 million as capital expenditure. In 2011, there will be an additional one time cash outflow of $300,000 as an advertising expense. Using net free cash flow values for next five years and discount rate for discounting, NPV for the project comes out to be $2907, 100. The rate of return at which net present value becomes zero i.e.
As a member of management Clive Jenkins is responsible for boosting employee morale to ensure that company goals are met
The items with a 12 month entries incur the cost irrespective of any production activities, while the items with 10 month
By using the 7.2% after tax rate and assuming the equipment will be sold at the beginning of the 5th year for its book value, if Agro-Chem bought the equipment the company would achieve a project NPV of ($1,043,500.23). In contrast, if Agro-Chem decided to lease the equipment with the same assumptions they would obtain a project NPV of ($1,030,205). Given these assumptions and based off our calculated NPV we recommend that Agro-Chem lease the equipment rather than buy because of the $13,295.23 savings. This $13,295.23 savings is the NAL.
12. What is the terminal value of the final 10 years of the acquisition, as of 2022? An appropriate multiplier can be found in the case body literature.
Commercial’s NPV is $.1516 million (see Table 3). This was determined by using the present values of the four year lease agreement between Prudent and Commercial. We concluded that Commercial’s discount rate will be 10% because of their opportunity cost. Commercial needs to have a residual value on the DAS of 6.8 million or greater, which will give them a positive net present value. Therefore, if their net present value shows negative, they would not want to lease to us. Assuming Commercial receives the same 5 year MACRS rate on the equipment purchase, then the system should be worth 7.01 million (book value) at the end of year 4 (see Table 4). This allows Commercial to have a positive NPV of $.1516 million (see Table 4). Therefore, they would be willing to lease the DAS to us.
The allowance would have been $8.5 million if they would have had consistency on the ratio from 1983 in 1984. As a result, the pre-tax income increase is $2.6 million due to the changed ratio in 1984.
After some time, Max discloses that he has been involved in multiple sexual relationships and says he “can get in any woman’s pants.” He also brags that he is smarter than anyone in the group, regardless of the fact that one person has a PhD in
This case study discusses the differences between Southern New Hampshire University (SNHU) and other well-known universities such as Berkley, Harvard and Stanford. For instance, SNHU College of Online and Continuing Education is not vanity project, unlike other big name colleges such as Harvard and Stanford who offers online classes for its purpose of mostly a branding exercise (Pearce & Robinson, 2015). Furthermore, SNHU differs from other colleges in their admissions processes, graduation rates, lower prices, and the way they address quality in their programs (Kingkade, 2014). SNHU is one of the fastest growing and most dynamic private, non-profit universities in the country (Pearce et al., 2015). According
In this table, it reflects the changes in fixed plant overhead from $420,000 to $378,000. The company still has the fixed selling and administrative expense per quarter of $118,000. The new company fixed overhead is now at $496,000 from the past $538,000 ($42,000) change from past to
2. The current NPV is negative. One way to save money would be to reduce consulting costs. Please set the average consulting cost per month in cell b33 to $5000. At what discount rate is the NPV for the project 0?_____0.026____
According to the depreciation rates used by the company and described in the Production Cost Report, if a company adds 50 new workstations at a cost of $250,000 each and also spends $5 million for an addition to its assembly plant to accommodate the new workstations, then its annual depreciation costs will rise by
14. Which of the following correctly matches the type of long-term asset with the term used to identify how that