Exercise 1: A few years ago, Heineken, the Dutch brewing company, decided to reduce the length of its average lead-time from 16 weeks to 6 weeks. Assume that the standard deviation of LT is also changed from 3 weeks to 1 week. To make this change, Heineken

Exercise 1: A few years ago, Heineken, the Dutch brewing company, decided to reduce the length of its average lead-time from 16 weeks to 6 weeks. Assume that the standard deviation of LT is also changed from 3 weeks to 1 week. To make this change, Heineken

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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Hickory Manufacturing Company forecasts the following demand for a product (in thousands of units) over the next five years. 1 2 3 4 5 76 79 82 82 55 Year Forecast demand Currently the manufacturer has eight machines that operate on a two-shift (eight hours each) basis. Thirty days per year are available for scheduled maintenance of equipment with no process output. Assume there are 250 workdays in a year. Each manufactured good takes 25 minutes to produce. a. What is the effective capacity of the factory? Round your answer down to the nearest whole number. units/year b. Given the five-year forecast, how much extra capacity is needed each year? Use a minus sign to enter an answer, if there is excess capacity. Round your answers to the nearest whole number. Year Extra capacity needed (units) c. Does the firm need to buy more machines? If so, how many? When? If your answer is zero, enter "0". Round your answers up to the nearest whole number. Year Additional machines needed 1 1 2 2 3 3 4…
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You are the manager of a large crude-oil refinery. As part of the refining process, a certain heat exchanger (operated at high temperatures and with abrasive material flowing through it) must be replaced every year. The replacement and downtime cost in the first year is $165,000. This cost is expected to increase due to inflation at a rate of 9% per year for five years (i.e. until the EOY 6), at which time this particular heat exchanger will no longer be needed. If the company's cost of capital is 18% per year, how much could you afford to spend for a higher quality heat exchanger so that these annual replacement and downtime costs could be eliminated? Click the icon to view the interest and annuity table for discrete compounding when i = 9 % per year. Click the icon to view the interest and annuity table for discrete compounding when i = 18% per year. You could afford to spend $ 694,470.6 thousands for a higher quality heat exchanger. (Round to one decimal place.)
You are the manager of a large crude oil refinery. As part of the refining process, a certain heat exchanger (operated at high temperatures and with abrasive material flowing through it) must be replaced every year. The replacement and downtime cost in the first year is $175,000. This cost is expected to increase due to inflation at a rate of 6% per year for six years (i.e. until the EOY 7), at which time this particular heat exchanger will no longer be needed. If the company's cost of capital is 20% per year, how much could you afford to spend for a higher quality heat exchanger so that these annual replacement and downtime costs could be eliminated? Click the icon to view the interest and annuity table for discrete compounding when i = 6% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 20% per year. You could afford to spend S thousands for a higher quality heat exchanger. (Round to one decimal place.)
[The following information applies to the questions displayed below.] Kate's Candy Corporation makes chewy chocolate candies at a plant in Winston-Salem, North Carolina. Steve Bishop, the production manager at this facility, Installed a packaging machine last year at a cost of $500,000. This machine is expected to last for 10 more years with no residual value. Operating costs for the projected levels of production, before depreciation, are $100,000 annually. 1. Steve has just learned of a new packaging machine that would work much more efficiently in the production line. This machine would cost $580,000 Installed, but the annual operating costs would be only $40,000 before depreciation. This machine would be depreciated over 10 years with no residual value. He could sell the current packaging machine this year for $250,000. equired: What is the estimated net present value of purchasing the new machine? (Do not round Intermediate calculation. Round your nswers to the nearest whole…
Consider how Cherry Valley, a popular ski resort, could use capital budgeting to decide whether the $8.5 million River Park Lodge expansion would be a good investment. (Click the icon to view the expansion estimates.) Assume that Cherry Valley uses the straight-line depreciation method and expects the lodge expansion to have a residual value of $750,000 at the end of its nine-year life. Read the requirements.
Paula Boothe, president of the Bramble Corporation, has mandated a minimum 8% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 10%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 12% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,816,000 in a new line of energy drinks that is expected to generate $319,000 in operating income. Assume that Monty Corporation's actual weighted average cost of capital is 10% and its tax rate is 30%. Calculate the economic value added of the proposed new line of energy drinks. Economic value added $______________
Determine the net advantage of continued operations compared to the shutdown
Current Attempt in Progress You have been asked to help the local commercial radio station prepare its business plan for the upcoming year. The radio station operates for 18 hours a day (6 a.m. to midnight) seven days a week, all year. It broadcasts on average 15 minutes of on-air advertising per hour. To sell the advertising time, the station uses commissioned sales staff who are paid a base salary plus commission that varies according to the volume of sales. The station manager asks you to calculate how many hours of advertising it would need to sell in order to break even. (a) Select the fixed costs and the variable costs. Rent • Utilities (heat, light, water) Property and business taxes Management salaries and benefits Marketing costs for the station • Sales force base salaries Costs of production of on-air commercial • Advertising sales commission
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