Water Carriers and Pipelines 293CASE 8-2CNG Pipeline CompanyAt the weekly brainstorming session, John Spychalski, president of CNG PipelineCompany (CNG), suggested that they build a new pipeline from Elizabeth, New Jersey,to the Midwest to move refined petroleum products, gasoline, and diesel fuel. Followingsome discussion, he asked the strategic planning group to consider the idea before thenext brown-bag session.Skip Grenoble, vice president for strategic planning, thought that John was not con-sidering the cost and impact of this idea. How could CNG obtain land to build the pipe-line, let alone obtain the necessary capital to finance the project? Then there was thequestion of the existing refineries located in Ohio, Indiana, and Illinois. Skip knewpetroleum products were being transported from the Gulf of Mexico refineriesvia barge and pipeline to the Midwest market areas currently.Skip turned over the project to Evelyn Thomchick, chief strategy analyst, to developa preliminary analysis of the viability of building a new pipeline. In the span of six daysEvelyn found the following strategic issues for the project:At least four Midwest refineries were being planned for closure within the nextfive years because of environmental and cost considerations.• A number of major refineries were considering building new refineries offshore,closer to the sources of foreign oil. Both cost and environmental considerationssuggested this consideration.• The New Jersey-Midwest corridor was one of the most-developed land regions inthe United States with the highest land values.• The demand for refined petroleum products was expected to increase, but thekeen interest in alternative sources of energy, new oil fields in several states, morefuel-efficient cars, and sustainability issues were matters of some concern.• The project would require approximately 10 years to complete, including the timeto obtain land via the eminent domain process.• The capital requirements for the project were estimated at $800 billion.CASE QUESTIONS1. Do you feel the project has any merit for further investigation? Why or why not?2. What likely impact will the new Shale oil fields in New York and Ohio have on theeconomic viability of this proposal?3. What is your political assessment of building a pipeline that will traverse five states?

1) Considering the feasibility studies conducted by Evelyn Thomchick, chief strategy analyst to…

CASE 8-2 CNG Pipeline Company At the weekly brainstorming session, John Spychalski, president of o Company (CNG), suggested that they build a new pipeline from Elizabeth to the Midwest to move refined petroleum products, gasoline, and diesel fu some discussion, he asked the strategic planning group to consider the id

CASE 8-2 CNG Pipeline Company At the weekly brainstorming session, John Spychalski, president of o Company (CNG), suggested that they build a new pipeline from Elizabeth to the Midwest to move refined petroleum products, gasoline, and diesel fu some discussion, he asked the strategic planning group to consider the id

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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SUBJECT: Engineering Economics Number 2
Review Question El Dorado Limited This company convened a meeting of its managers and informed them of an opportunity for investment in Lala land . The management accounting department was asked to study and recommend whether this investment is going to be profitable or not . They provide them with the following details: TABLE 1 Capital Expenditure involved $70000 Maturity period iof the project 4 yrs Revenue $18000 Salary expense $5000 Lease expense annually $3500 Supplies expense $1500 Maintenance expense $900 Utilities $1200 Cost of capital 10% Salvage value 34000 Tax rate 25% The company will need to spend $6200 on net working capital but this sum will be returned at the end of the period. The estimated sale of the capital asset at the end of the project will be $20000. The company can sublet part of the facilities for $2000 yearly during the project . The capital expenditure is depreciated using straight…
Question 3: The Muscat Electric Cormpany ventures to a new project in the eastem part of the capital city which is a 200-kilometer, 300 kV transmission lines. The company choose between an Overhead Cable Transmission System and Underground Cable Transmission System. Table Q3 shows the initial investment for each type, expected revernues during its lifetime which includes the cost savings incurred by underground transmission system over the overhead transmission system. The company has estimated a salvage value for each type of transmission to be 5% of the initial investment. As a company cost of capital is 8% per year. Using the following techniques for capital investment appraisal, perform the following, O Discounted payback period;
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Case Analysis 2: Unit 9 Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000…
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*COULD YOU ANSWER PARTS 6A-6C* “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company’s Office Products Division for this year are given below: Sales $ 22,700,000 Variable expenses 14,363,700 Contribution margin 8,336,300 Fixed expenses 6,175,000 Net operating income $ 2,161,300 Divisional average operating assets $ 5,675,000 The company had an overall return on investment (ROI) of 16.00% this year (considering all divisions). Next year the Office Products Division…
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Example#19 SW# A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market (salvage) value of $5,000 at the end of its expected life of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the value of the additional production. Suppose that E=MARR= 20% per year. Wha is the project's ERR, and is the project acceptable? Create a Cashflow diagram. IND
Question 3: The Muscat Electric Company ventures to a new project in the eastern part of the capital city which is a 200-kilometer, 300 kV transmission lines. The company has to choose between an Overhead Cable Transmission System and Underground Cable Transmission System. Table Q3 shows the initial investment for each type, the expected revenues during its lifetime which includes the cost savings incurred by underground transmission system over the overhead transmission system. The company has estimated a salvage value for each type of transmission to be 5% of the initial investment. As a company cost of capital is 8% per year. Using the following techniques for capital investment appraisal, perform the following; (i) Discounted payback period; (ii) Net present value NPV; (iii) Internal rate of return IRR. (iv) Determine which of the alternative is acceptable to the company based on the above results. Table Q3: Revenue & Expenses in Million OMR Overhead Underground Items Cable…