Financial Management – NPV, IRR and Sensitivity Analysis

Emu Electronics is an electronics manufacturer located in Box Hill, Victoria. The company’s managing director is Shelly Chan, who inherited the company from her father. The company originally repaired radios and other household appliances when it was founded more than 50 years ago. Over the years, the company has expanded, and it is now a reputable manufacturer of various specialty electronic items. Robert McCanless, a recent MBA graduate, has been hired by the company in the finance department. One of the major revenue-producing items manufactured by Emu Electronics is a smart phone. Emu Electronics currently has one smart phone model on the market and sales have been excellent. The smart phone is a unique item in that it comes in a…

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Investment appraisal

Investment appraisal The Company X. is considering tendering for a local authority contract to supply school snacks. If they decide to tender and are successful, this will be their first contract in the public sector. The contract is for a period of five years. The company has spent $2,500 on a feasibility study related to this contract. From this study, they have obtained the following estimates of costs, revenues and volumes. The initial cost of the investment for the necessary cooking equipment will be $30,000. This sum will be payable at the beginning of the contract. Selling price of snacks: $1.00 per snack for the first three years, than $1.20 for years four and five. Cost of snacks: $0.60 per snack…

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Portfolio, Bond and Share valuation

Question 1 Portfolio valuation Consider shares in two companies, JAY and KAY, as follows:   Expected Return E(R) Standard Deviation Correlation Coefficient Share JAY 12% 18% – 0.3 Share KAY 24% 32%   a) Calculate the covariance between Share JAY and KAY returns. b) What is the expected return and standard deviation of returns on a portfolio comprising 35% in Share JAY and 65% in Share KAY? c) If you wanted to create a portfolio consisting only of these two shares, how much would you need to invest (weights) in each share so that your portfolio return would be equal to 15.6%? Note: do not round. d) Using the weights calculated in part c), calculate the variance and standard deviation of…

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Variance Analysis

Question 1: Calculate the material purchase price variance, which is
(actual price – standard price) × actual quantity of materials used
Question 2: Work out the actual hours worked, to the nearest hour, remembering that the direct labour usage variance is equal to:
(actual labour hours – standard labour rate hours) × standard labour rate

 

 

Standard unit price of materials	£9.00
Actual unit price of materials	£8.68
Standard quantity of material for actual production (units)	3,300
Actual quantity of materials purchased and used (units)	3,600
Standard direct labour rate	£28.00
Actual direct labour rate	£24.40
Standard direct labour hours	24,000
Direct labour usage variance	£28,280 U = unfavourable or adverse

 

 

Calculate the monthly mortgage payment of principal and interest for a loan

Using MS Excel spreadsheet, create an assessment for each of the following problems: 1.Calculate the monthly mortgage payment of principal and interest for a loan with an initial balance of $250,000, an annual stated interest rate of 5%, and 30 years to maturity. Use Excel to develop this response and present your result within a separate page of the spreadsheet. Would only someone who makes a high income be able to afford this mortgage payment? Or would someone who makes the minimum wage be able to afford this mortgage payment? 2.Develop the amortization table for the loan outlined in problem 1. Use an Excel spreadsheet to develop and present this table. Present this result in a separate page of the spreadsheet.…

NPV decisions

You’ve been offered a full time position as an assistant financial analyst at Bathurst Metal Works. Your latest assignment involves the analysis of several risky projects. Because this is your first assignment dealing with risk analysis, you have been asked not only to provide a recommendation on the project in question but also respond to a number of questions aimed at judging your understanding of risk analysis and capital budgeting. The memorandum you received outlining your assignment follows: To: Assistant Financial Analyst From: Chief Financial Officer Re: Capital budgeting and risk analysis You are required to conduct a risk analysis of the following new project, as outlined below. This new project involves purchase of a new laser cutting tool that can…

FIN 320: Managerial Finance Capital Budgeting

FIN 320: Managerial Finance Capital Budgeting Consider the following two mutually exclusive projects Year CF of Project A CF of Project B 0 -$350,000 -$50,000 1 45,000 24,000 2 65,000 22,000 3 65,000 19,500 4 440,000 14,600 Whichever project you choose, if any, you require a 15 percent return on your investment. If you apply the payback criterion, which investment will you choose? Why? I would pick project B because the payback period is less. If you apply the NPV criterion, which investment will you choose? Why? If you apply the IRR criterion, which investment will you choose? Why? If you apply the profitability index criterion, which investment will you choose? Why? Based on your answers in (a) through (e ),…

The accounts of Antique Furniture Suppliers Ltd from 1st October 2013 to 30th September 2014

The accounts of Antique Furniture Suppliers Ltd from 1st October 2013 to 30th September 2014 Antique Furniture Supplies Ltd’s Cash book for September 2014 Ledger accounts for Antique Furniture Suppliers Ltd’s Ledger for the year ended 30 September 2014 Debit   Credit Date Details Fo £ Date Details Fo £ Delivery van account 01-Oct-13 Balance b/d 82000 30-Sep-14 balance c/d 82000 01-Oct-14 Balance b/d 82000 Accumulated depreciation DV 30-Sep-14 Balance c/d 11500 01-Sep -13 Balance b/d 11500 01-Oct-14 Depreciation 11500 Fittings account 01-Oct-13 Balance b/d 16000 31/09/2014 balance c/d 16000 01-Oct-14 Balance b/d 16000 Accumulated depreciation fittings 30-Sep-14 Balance c/d 2000 01-Sep-13 Balance b/d 2000 01-Oct-14 Balance b/d 2000 Premises Account 01-Oct-13 Balance b/d 200000 30-Sep-14 Balance c/d 200000 01-Oct-14 Balance…

Job Order Costing Assignment

Job order costing                                                                          40 marks Your friend has his own business (Sisulu Ltd). He is currently using job order costing and is applying a plant-wide overhead rate. At the beginning of March, Sisulu Ltd had two jobs in process: Job 24 and Job 25, with the following accumulated cost information:   Job 24 $ Job 25 $ Direct materials 5 100 1 500 Direct labour 1 200 3 000 Applied overhead   780 1 950 Balance, 1 March 7 080 6 450   During March, two more jobs (26 and 27) were started. The following direct materials and direct labour costs were added to the four jobs during the month of March: Job 24 $ Job 25 $ Job…

On December 31, 2014, Paladium International purchased 70% of the outstanding common stock of Sennex Chemical

Question 1 On December 31, 2014, Paladium International purchased 70% of the outstanding common stock of Sennex Chemical. Paladium paid $140,000 for the shares and determined that the fair value of all recorded Sennex assets and liabilities approximated their book values, with the exception of a customer list that was not recorded and had a fair value of $10,000 and an expected remaining useful life of 5 years. At the time of purchase, Sennex had stockholders’ equity consisting of capital stock amounting to $20,000 and retained earnings amounting to $80,000. Any remaining excess fair value was attributed to goodwill. The separate financial statements at December 31, 2015 appear in the first two columns of the consolidation workpapers shown below.   Complete…

Yankee Hotel Foxtrot initiated operations on July 1, 2014. To manage the company officers and managers have requested monthly financial statements starting July 31, 2014

Answer all the questions, each question carries 20 marks.   Question: 1   What is accounting? Discuss its Advantages and Disadvantages in a detailed manner?                                                                        Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the result thereof. According to the American Accounting Association [AAA];   Question:2 Yankee Hotel Foxtrot initiated operations on July 1, 2014. To manage the company officers and managers have requested monthly financial statements starting July 31, 2014. The adjusted trial balance amounts at July 31 are shown below.     Debits   Credits Cash $ 7,680 Accumulated Depreciation- Equipment $ 840 Accounts…

Saturn Olive Oil Co is a subsidiary of Mercury Australasia based in Cobram Victoria and produces a range of olive oil products

Saturn Olive Oil Co is a subsidiary of Mercury Australasia based in Cobram Victoria and produces a range of olive oil products. Olives are purchased from sub-contract olive plantation farmers in an around Cobram. The olives are cold pressed and the oil processed and filtered before bottling and sold to a variety of wholesale and retail vendors under several different brand names. The following data relates to the production of Saturn Olive Oil during the month of February 2017. At the start of February there was 75,000 litres of product in process. All materials are added at the start of the process and conversion costs are incurred evenly throughout whole of the process.   Work-in-Process: February 1, 2017 75,000 Litres Stage…