Answer:
What does the IRR rule say about whether you should accept this opportunity?
The IRR rule basically states that if the project's internal rate of return (IRR) is higher than the cost of capital (discount rate or WACC), then the project should be accepted. In this case, we are not given the company's WACC or any discount rate we can use, therefore there is nothing to compare the project's IRR against.
Based on prior experience, this project's IRR will not be very high and if we consider the cost of keeping the site clean forever, I really doubt that the project is profitable. If you calculate the project's IRR without including the perpetual cleaning cost, IRR = 11%.
If we assume any of the 3 WACCs I used as an example below, the project's IRR including cleaning costs:
- if WACC = 12%, then IRR = 9.26% REJECTED
- if WACC = 10%, then IRR = 8.98% REJECTED
- if WACC = 9%, then IRR = 8.79% REJECTED
- if WACC = 8%, then IRR = 8.54% ACCEPTED
In order for this project to be profitable, the WACC would need to be very low (around 8% or less).
Explanation:
cost of opening a new mine $120 million
annual cash flow $20 million
expected cleaning costs $2 per year in perpetuity
the cost of keeping the site clean forever = $2 million / discount rate or WACC:
- if WACC = 12%, then perpetual cost = $16.67 million
- if WACC = 10%, then perpetual cost = $20 million
- if WACC = 9%, then perpetual cost = $22.22 million
- if WACC = 8%, then perpetual cost = $25 million
The court will most likely consider the parties' relative bargaining power.
<u>Option: C</u>
<u>Explanation:</u>
Bargaining power is the collective ability of groups to put control over one another in a circumstance. If all sides are in a dispute on an equivalent basis, then they would have equal bargaining power, such as in a reasonably free market, or between a monopoly and monopsony fairly balanced.
Purchaser bargaining power relates to the leverage customers may impose on businesses to get them to offer higher quality goods, improved customer satisfaction and lower costs. A powerful purchaser will make a market more profitable and diminish the seller's profit potential.
Answer:
The correct option is D, a single organization without subdivisions or individual teams.
Explanation:
Typically organizations are divided along functions and divisions.
A functional structure consists of different departments such as production,marketing ,finance.supply chain,maintenance, human resources and so on,with each function saddled with distinct responsibilities and having its own performance metrics.
Under a divisional structure, the firm is divided into division based on location or products with each division having different functions under it.
However, the Japanese method does not support divisionalization or departmentalization, instead advocated for an organization where everyone irrespective of specialty is seen as a member of a single team
In this item, we let the number of tickets sold to the adults as x. With this, we can let the number of tickets sold to students with y.
In this item, we are given that the sum of the number of students and adults is equal to 600. Further, we are also given that the difference is 150. The system of linear equation that would allow us to solve this item is,
x + y = 600
x - y = 150
Adding up the two equations will give us,
2x = 750
Dividing by 2,
x = 375
Substituting this value to the first equation,
375 + y = 600
y = 225
Therefore, there are 375 and 225 number of tickets sold to adults and students, respectively.
Answer:
$607,250 outflow
Explanation:
Net Working Capital is the amount of money needed to maintain operations on a day to day basis.
Net Working Capital = Current Assets - Current Liabilities
where,
<u>Current Assets are calculated as :</u>
Inventory $216,000
Accounts Receivable ($525,000 x 1.09) $575,250
Total $788,250
and
Current Liabilities = $181,000
therefore,
Net Working Capital = $788,250 - $181,000 = $607,250
Conclusion
The project's initial cash flow for net working capital is $607,250 outflow.
