Question: For an interest rate of 9% per

> Plush Cruiser Ltd builds luxury houseboats. The entity needs funds for expansion. It could take out a fixed-rate or variable-rate business loan over, say, 25 years. An alternative is issuing new shares to investors in the form of a rights issue. Explain

> Base Company buys in sand, gravel, cement powder and steel reinforcement. These raw materials cost about $15 million most years. Base Company has recently enjoyed a surge in sales after it liberalised its credit policies. The result of the change in cred

> Katelyn Ltd arranges a 91-day commercial bill: 91 days because the 90th day was a Sunday. The face value is $200 000 and Katelyn receives $197 010. What is the yield?

> Outline the reason for implementing a team-based reward structure and the disadvantages in doing so.

> JB Hi-Fi Ltd’s 2018 statement of financial position provides the following data. In 2018, JB Hi Fi Ltd earned record revenue (increased by 35.3 per cent) and the EPS (earnings per share) increased by 31.5 per cent. JB Hi-Fi Ltdâ&

> Rosedale Ltd is a listed company with 30 million shares issued. It wants to raise more capital by means of a rights issue. The current market price is $6 and the subscription price is $5. The rights will be issued on the basis of 1:5. How much will Rosed

> Advantage Tennis Coaching (ATC) in Brisbane offers coaching for junior, elite and mature tennis players. Nicholas Cash, the sole proprietor, has identified that the business cycle will be seasonal, with most activities in the spring and summer months. As

> Toowong Ltd has been growing relatively slowly in a mature industry. Its trade creditor and credit sales data for the last five years (in $ million) are shown below. Required (a) Compute the creditors turnover for Toowong Ltd’s trade c

> Lavender Plantations Pty Ltd manufactures Lavender-based products and commenced operations in 2019. Production and sales have grown consistently. Here are data for the last four years (in $ thousand). Required (a) Compute the creditors turnover for Lave

> Baxter Ltd reported $200 million in credit sales in 2017–18 and 2018–19. Average accounts receivable dropped from $25 million to $20 million over the two periods. Required (a) Assuming 220 trading days each year, how has debtors turnover changed? (b) Ex

> Volley Ltd has $1 million spare cash from commissions earned during the busy pre-Christmas season. Staff are paid a retainer, as well as part of the commissions earned through sales. Volley Ltd is aware from past experience that sales fall off during win

> CuteIT makes smartphone covers. The employee payroll averages $600 000 per week. CuteIT would like to extend the pay cycle to fortnightly. The manufacturing workers union argues that the company is saving payroll-handling costs of $10 000 and receives ot

> Coconut Plantations Pty Ltd manufactures sustainable, coconut-based products for sale to wholesalers and retailers around Australia and New Zealand. Jo Geter, the manager, has a goal of increasing the market share of the company. Strategies to achieve th

> A friend is thinking about starting a company manufacturing small robots for household chores. Explain to your friend the different types of finance that would be available to him.

> Outline a typical executive performance compensation package.

> Explain what is meant by an ICO. Differentiate between IPOs and ICOs.

> Explain the trend in crowdfunding over the past five years. What types of businesses are commonly financed by crowdfunding?

> Explain the advantages to all parties of a novated lease.

> Before reforms were put in place during the 1980s, many entities allowed their overdraft accounts to remain continually overdrawn. Banks reformed the situation by advising these clients to contract for longer term funding. Provide an example of a company

> Give examples of inventories of retail products that would incur high costs for each of the following. (a) Storage and display (b) Insurance (c) Deterioration or obsolescence (d) Theft

> After thinking about how this could be done, explain the processes an entity might use to collect its debts.

> Explain, with numerical examples, four aspects of an entity’s credit policies and how decisions regarding each impact on the value of accounts receivable at any time.

> ‘Entities must juggle the costs of holding cash with the costs of not having enough.’ Explain the issues involved.

> Pineapple Plantations Pty Ltd manufactures sustainable, Pineapple-based products for sale to wholesalers and retailers around Australia and New Zealand. Dave Geitz, the manager, has a goal of increasing the market share of the company. Strategies to achi

> Mike and Andy has on average $150 000 of employees’ pay, tax withheld and superannuation contributions in its hands at all times. What use should it make of these funds?

> Explain the concept of eco-efficiency.

> How can a profitable, fast-growing entity such as Mike and Andy be chronically short of cash?

> Mike and Andy is a clothing store for teenagers. It is chronically short of cash, so arranges a 120-day commercial bill (BAB). According to the theory of management of assets, what use should it put this money to?

> Distinguish between rights and options.

> Summarise the advantages and disadvantages of owning ordinary shares in a company compared with financing the company through a loan.

> What is a novated lease? How is it markedly different from other leases?

> If you had just started a business and were in the early development phase, which forms of short-term credit would you try to maximise? Why?

> As inventory manager in a retail-chain warehouse, how would you react regarding your inventory levels in the following circumstances? (a) Sudden volatility in sales. (b) Continual short deliveries by suppliers. (c) Managerial suggestions to reduce the nu

> As production manager for a hoodie manufacturing company, how would you react regarding your inventory levels in the following circumstances? (a) Continual breakdowns in the machine used to weave the fabric for the hoodies. (b) Unreliable outsourced fina

> Which of the following entities do you think would have the greatest proportion of working capital held as inventory? Why? (a) Local butcher (b) Hardware store (c) Stallholder at a weekend market selling handicrafts

> The following table illustrates key figures from Robertson Ltd’s statement of profit or loss and statement of financial position for the five-year period ending 30 June 2020. Calculate the creditors turnover (in days) for Robertson Ltd

> List the principles espoused by the United Nations Division for Sustainable Development when designing an environmental performance system.

> What is the main criticism of the balanced scorecard framework?

> The Fair fold family decided to buy a super ski and water sports boat. They took out an $80,000, 5-year, 6% per year, compounded semiannually loan with monthly payments from First Bank and Trust (FB&T). After making only two payments, a banker frie

> How has the capital recovery amount changed for the Lloyd’s protectors with these new estimates?

> With these new estimates, what is the recalculated AW for the Lloyd’s protectors? Use the old first cost and maintenance cost estimates for the first 3 years. If these estimates had been made 3 years ago, would Lloyd’s

> Plot a graph of the newly estimated maintenance costs and repair savings projections, assuming the protectors last for seven more years.

> Economically, what is the best combination of plans for Brad and Sheryl, assuming they both live to be 85 years old?

> Plot the future worth values for all four plans on one spreadsheet graph.

> What is the future worth at 6% per year of each plan at age 85?

> Brad and Sheryl are the same age. Brad determined that most of their investments make an average of 6% per year. With this as the interest rate, the analysis for the four alternatives is possible. Sheryl and Brad plan to answer the following questions, b

> A credit card issued by the GECU credit union has an APR of 16% and an APY of 16.64%. (a) What is the compounding period? (b) Use the EFFECT function to find the compounding period. Answer: 0.1664 = (1 + 0.16/m)m – 1 By trial and error, m= 2 Compound

> Sales of bottled water in the United States totaled 34.0 gallons per person in 2014. Evian, a high-quality natural spring water, costs about 60¢ per bottle, while a local brand of purified municipal water may cost only 25¢ per bottle. On average, a local

> The Premier Car Title Loan Company makes emergency loans of up to $500 for 1 month for a fee of 4% of the loan amount. If a person borrows $500, what is (a) the nominal interest rate per year, and (b) the effective rate per year?

> First Corp Bank advertises interest paid at 2% every 6 months. What is the APR?

> For an interest rate of 1% per quarter, determine the nominal interest rate per (a) semiannual period, (b) year, and, (c) 2 years.

> For an interest rate of 10% per year, compounded quarterly, determine the number of times interest is compounded (a) per quarter, (b) per 6 months, (c) per year, and (d) per 3 years.

> Determine the number of times interest is compounded in a year for the following interest statements: (a) 1% per quarter; (b) 2% per month; and (c) 8% per year, compounded every 2 months.

> Identify the compounding period for the following interest statements: (a) nominal 7% per year, compounded monthly; (b) effective 6.8% per year, compounded monthly; and (c) effective 3.4% per quarter, compounded weekly.

> What is the difference between APR and APY? Which one is used in interest factor formulas, tables, and spreadsheet functions?

> An interest rate of 12% per year, compounded monthly, is nearest to: (a) 12.08% per year (b) 12.28% per year (c) 12.48% per year (d) 12.68% per year

> Some years ago, Penny purchased the car of her dreams for $25,000 by paying 20% down at purchase time and taking a $20,000, 5-year, 6% per year, compounded monthly loan with 60 monthly payments of $386.66 each. She is examining her loan situation and wou

> Identify the compounding period for the following interest statements: (a) 1% per week; (b) 2.5 % per quarter; and (c) 8.5% per year, compounded semiannually.

> When evaluating multiple alternatives or projects, against what must they be compared, if they are (a) independent, and (b) mutually exclusive?

> An engineer deposited her annual bonus of $10,000 into an account that pays interest at 8% per year, compounded semiannually. She withdrew $1000 in months 2, 11, and 23. Now, she wants to know the total value of the account at the end of 3 years. Solve b

> Solve Problem 4.44 using a spreadsheet, which analyzes the loan on a boat purchased by the Fairfold family. Display the answers for parts (a) through(d) below the spreadsheet and indicate the functions that you used to obtain the answers. Problem 4.44 T

> Solve Problem 4.19 by applying the EFFECT function to determine the rates. Problem4.19 Jennifer and Rex both receive a dividend from their 401(k) retirement plan every 6 months. The earning rates for this year have been 5% per year, compounded quarterly

> If you have the annual worth of an alternative with a 5-year life, you can calculate its perpetual annual worth by: (a) no calculation needed. The perpetual annual worth is equal to the annual worth (b) multiplying the annual worth by (A∕P,i,5) (c) divi

> The AW amounts of three revenue alternatives are $−23,000 for alternative A, $−21,600 for B, and $−27,300 for C. On the basis of these AW values, the correct decision is to: (a) select alternative A (b) select alternative B (c) select alternative C (d)

> The future worth of alternative B is closest to: (a) $−85,000 (b) $−750,000 (c) $−850,000 (d) −∞

> All of the following equations for calculating the capitalized cost of alternative B are correct, except: (a) CCB = −750,000 − 10,000/0.10 (b) CCB = −750,000 − 10,000/0.10 + 2,000,0

> The capitalized cost of alternative B is nearest: (a) $−590,000 (b) $−625,000 (c) $−734,000 (d) $−850,000

> The product development group of a high-tech electronics company developed five proposals for new products. The company wants to expand its product offerings, so it will undertake all projects that are economically attractive at the companyâ€&

> The present worth of alternative B is nearest: (a) $−85,000 (b) $−750,000 (c) $−850,000 (d) $−950,000

> Citizens Bank of Toronto advertises an APR of 12% compounded monthly for collateral loans. What is the APY? Also, write the spreadsheet function to display the APY.

> Humana Hospital Corporation installed a new MRI machine at a cost of $750,000 this year in its medical professional clinic in Cedar Park. This state-of-the-art system is expected to be used for 5 years and then sold for $125,000. Humana uses a return req

> You have been asked to compare the alternatives on the basis of a present worth comparison. The PW of alternative A is closest to: (a) $−724,320 (b) $−530,520 (c) $−388,950 (d) $−72,

> An engineer analyzed four independent alternatives by the present worth method. On the basis of her results, the alternative(s) she should select are: (a) Only D (b) Can’t tell from this information (c) All of them (d) None of them

> The capitalized cost of machine Y is closest to: (a) $17,726 (b) $86,590 (c) $177,260 (d) $207,720

> In comparing the alternatives on a future worth basis, the FW of machine X is closest to: (a) $23,160 (b) $40,560 (c) $58,950 (d) $71,860

> In comparing the alternatives on a present worth basis, the PW of machine X is closest to: (a) $23,160 (b) $40,560 (c) $58,950 (d) $72,432

> The cost of maintaining a permanent monument is expected to be $70,000 now and $70,000 every 10 years forever. At an interest rate of 10% per year, the capitalized cost is nearest: (a) $−11,393 (b) $−58,930 (c) $−84,360 (d) $−113,930

> An upgraded version of a CNC machine has a first cost of $200,000, an annual operating cost of $60,000, and a salvage value of $50,000 after its 8-year life. At an interest rate of 10% per year, the capitalized cost is closest to: (a) $−93,116 (b) $−100

> The capitalized cost of an initial investment of $200,000 and annual investments of $30,000 forever at an interest rate of 10% per year is closest to: (a) $−230,000 (b) $−300,000 (c) $−500,000 (d) $−2,300,000

> When comparing mutually exclusive alternatives that have different lives by the present worth method, it is necessary to: (a) Always compare them over a period equal to the life of the longer-lived alternative (b) Always compare them over a time period o

> Western Energy makes quarterly deposits into an account reserved for purchasing new equipment 2 years from now. The interest paid on the deposits is 12% per year, compounded monthly. (a) Identify the interest period, compounding period, and compounding f

> An engineer is trying to decide which process to use to reduce sludge volume prior to disposal. Belt filter presses (BFP) will cost $203,000 to buy and $85,000 per year to operate. Belts will be replaced one time per year at a cost of $5500. Centrifuges

> One way to recover invested capital with interest is to collect the principal P over n years as P∕n and also collect the interest on the unrecovered balance. Assume you borrowed $6000 at 10% per year interest with a repayment period of 3 years to purchas

> The present worth of an alternative that provides infinite service is called its: (a) Net present value (b) Discounted total cost (c) Capitalized cost (d) Perpetual annual cost

> Petrobras, the Brazilian energy company, has identified two alternatives to provide potable water to offshore platforms—purchase and operate the equipment, or contract long term with Manal and Associates, an international oilfield servi

> Hannifin CNG Fuel Dispensers needs to purchase replacement equipment to streamline one of its production lines for a new contract, but may sell the equipment before its expected life is reached at an estimated market value for used equipment. At MARR = 1

> Charlie’s Truck Repair and Service has a new contract that requires him to purchase and maintain new equipment for work on 18-wheeler trucks and heavy road equipment. Two separate vendors have made quotes and estimates for Charlie. Use

> Use a spreadsheet and a study period of 8 years to select alternative A or B in Problem 5.20. Problem 5.20 Compare two alternatives, A and B, on the basis of a present worth evaluation using i = 10% per year and a study period of 8 years.

> You wish to evaluate four independent projects that all have a 10-year life at MARR = 15% per year. Preliminary estimates for first cost, annual net income, and SV have been made. (a) Accept or reject each project using a present worth analysis. On your

> Leonard Motors is trying to increase its international export business. It is considering several alternatives. Two were available earlier (per Problem 5.11), but a new one has recently been proposed by a potential internationally partnering corporation,

> An automaton asset with a high first cost of $10 million has required capital recovery (CR) of $1,985,000 per year. The correct interpretation of this CR value is that: (a) the owner must pay an additional $1,985,000 each year to retain the asset. (b) e

> Find the F, P, and A values for the negative cash flows shown in the diagram.

> Cost increases imposed by design changes introduced at different times during advancing stages of the product life cycle (PLC) usually rise dramatically as the change is introduced later in the life cycle of the product. Though the numbers vary from one

> Three methods to dispose of nonhazardous waste have been developed—land application, fluidizedbed incineration, and private disposal contract. Use AW analysis and an associated scatter chart of AW versus i values to select the economica

> A company that makes food-friendly silicone (for use in cooking and baking pan coatings) is considering the independent projects shown, all of which can be considered to be viable for only 10 years. If the company’s MARR is 15% per year

> Compare two alternatives, A and B, on the basis of a present worth evaluation using i = 10% per year and a study period of 8 years.

> As you came to work this morning, your department head asked you to perform an analysis of installing MAP/TOP in the manufacturing planning division of the company. (MAP/TOP is a business and manufacturing environment communications integration software

> Problem 6.9 described Google’s rental agreement for an airbase in California. It included the following estimates: P = $1.16 billion; M&O = $0.0063 billion per year; refurbishment cost = $0.0026 billion in year 4; n = 60 years; and i = 15% per year. (a)

> Lotus Development has a software rental plan called SmartSuite that is available on the World Wide Web. A number of programs are available at $2.99 for 48 hours. If a construction company uses the service every week for an average of 48 hours, what is th

> The cost of upgrading a section of Grand Loop Road in Yellowstone National Park is $1.7 million. Resurfacing and other maintenance are expected to cost $350,000 every 3 years. What is the capitalized cost of the road at an interest rate of 6% per year?