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engineering
introduction mechanical engineering
Financial Decision Making For Engineers 1st Edition Colin K. Drummond - Solutions
Has the Sarbanes-Oxley Act "fixed" the problems with transparency in providing financial statements to the general public? Why or why not? Analyze a situation from the cur- rent press where the act has been effective. Is the concern that the Sarbanes-Oxley Act would unfairly burden small
Consider the initial stock allocations for a start-up company shown in Table 6.11, below. An early-stage investor want to invest $\$ 1,250,000$ to secure $30 \%$ ownership of the company. Determine the Round I stock allocation portfolio and ownership percentages.Table 6.11 Stock Value Profile
Explain the "bottom line" on the meaning of the Bayh-Dole Act to research institutions. In what ways do you think the Act influenced the spirit of entrepreneurship at college campuses?
Concept maps can be fun to create, and there is some excellent software available to assist in the creation of your own maps. With the cash-flow concept map of Figure 7.6 in mind, explore the following links and describe which software you might use to create a cash-flow map; explain why. provides
The work of Jayne D. Maas and Bruce A. Leauby [9] provides an illustration of the underlying theory of a concept map as it applies to GAAP. Create your own version of a GAAP concept map, based on (a) your individual interpretation of the work of Maas and Leauby and then (b) a map derived by group
Maas and Leauby [9] describe concept maps as a "planning tool". Explain how this can be applied to your classroom learning of finance and accounting.
Figure 7.4 provides a concept map framework illustrating progressive differentiation and integrative reconciliation that are sought after in good concept mapping exercises. Explain the terms "progressive differentiation" and "integrative reconciliation," and use the concept of "depreciation" as a
Create a concept map around the focus question "How do I advocate a new capital project within a large, conservative company?"
Provide a description of "risk" and the idea of a "risk-taker" versus someone who "manages risk." What relationship exists between risk and return (if any)?
Frequently people will claim that they are "risk-averse." But it seems that many of these same people like to take a holiday in Las Vegas, and many even play the Lotto regularly. It seems like this behavior is irrational. What basis exists for being risk-averse, but still engaging in gambling?
Some people claim that putting money in the stock market is a gamble and that the return on investment can be modeled as a random variable. Is the stock market all that random? How direct is the correlation between stock price and company performance?
It seems that the idea of "putting money at risk" would apply to both the concepts of investing and gambling. Why is there such a difference in the public perception of the value of the two ideas? After all, many people manage their retirement accounts by investing, not buying secure bonds.
In July 2013, heavy rains in Cleveland caused a retaining wall inside the Terminal Tower for the Regional Transit Authority (RTA) train to collapse. It was estimated that between repairs and lost ticket sales, the occurrence of this highly unlikely event was going to cost the city about $\$
For the probability distribution shown below, calculate the expected return and standard deviation. Return Probability 6% 0.05 8% 0.20 10% 0.50 12% 0.20 14% 0.05
During Hurricane Sandy in October 2012, there was structural damage done to the Ninth Street Marina (NSM) and this is the third time since 1992 this has happened. Generally the contract engineers for the insurance company claim that the design safety margin is so large that, "Don't worry, the pier
Weekly profit on pennant flags at the baseball stadium is simply the unit profit, F, multiplied by the number of units sold, N. The product line is not really doing that well, and the concessions manager would like to discontinue the pennant flags and sell more candy and diet soda. Create a
The local ice hockey club would like to retrofit all the Zamboni machines with digital displays that fans can Tweet and text messages to in support of various popularity polls. It will take about $\$ 68,000$ to get the LED displays custom built and mounted with all the wireless support, but
An electronic health records (EHR) system costs $\$ 100,000$ to implement. Relative to other physician office practices, there are projected cost saving in the first year of operation in addition to improved workflow proficiency. Is estimated that approximately $5 \%$ cost improvements will occur
The film thickness for a conformal coating has a mean value of $40 \mu$ and a standard deviation of $\sigma=2$. What is the probability that a particular point on a sample will have a thickness of at least $35 \mu$ ?
The market value of a Venturi pump averages $\$ 195.50$. There are a large number of suppliers of the pump, and prices vary only slightly from the mean, but are still normally distributed. If the variance in market price is 10 (units $=\$^{2}$ ), what is the probability the market price at any
In a high-speed coating system, the mass flowrate of polyester powder has an average value of $120 \mathrm{gm} / \mathrm{sec}$. There is a $75 \%$ probability the flowrate is between $110 \mathrm{gm} / \mathrm{sec}$. and $130 \mathrm{gm} / \mathrm{sec}$. What is the variance of the power flowrate?
A project has an NPV of $\$ 3,444$ and a standard deviation of $\$ 1,780$. What is the probability that NPV could be 0 or less?
In Problem 8.14 it turns out that the project manager overestimated the project NPV, and the best estimate is that now $\mathrm{NPV}=\$ 2,444$ with a standard deviation of $\$ 1,500$. What is the probability that NPV could be 0 or less?Data from problem 8.14A project has an NPV of $\$ 3,444$ and a
A polyester powder plant power has a cyclone separation system that is beginning to look like it may not meet upcoming OSHA safety and operational standards. The system is under consideration for replacement for a 5-year project horizon. The existing separation system has a value in the market of
Action Diagnostics is considering one of the following centrifuge systems:Each machine will have a 10-year life with no salvage value. If we assume a corporate MARR of 10% is reasonable, which system do you recommend? System D System E Cost $16,000 $24,000 Savings/yr $1,500 $2,200 IRR 6% 8%
Construct a sensitivity analysis of the outcome in Problem 5.2, varying the IRR of System E from 5% to 10% in increments of 0.5%. How do you interpret the results and what does the outcome suggest in terms of selecting System D over System E?Data from problem 5.2Action Diagnostics is considering
SmartLabs Diagnostics is considering one of the following three microscopes with digital recording and pattern detection software.Each machine will have a 20-year life with no salvage value. There is a lot of debate within the company as to whether these devices are really going to last that long,
Orbital Milling Services is going to replace one of its new 3-D prototyping systems. High use in the prototyping shop means the systems are not expected to last more than 5 years. If MARR is 12%, use an IRR analysis to determine which system should be purchased: System K System L Cost $14,000
Three years into a 10-year project, Consolidated Shipping Associates is considering an upgrade to a package conveyor line. A local supplier has two systems on sale as shown below; the QuickLine series is a close-out special (discounted 30% from list of $15,999) and the RFID Rider is built with RFID
At the end of FY20xx MRI Imaging has determined they need to increase their imaging capabilities to compete in the growing sports health management arena. Their closest competitor has three times the imaging capital equipment and they run at 82% capacity. MRI's board of directors estimates they
SMS Microsystems is considering the replacement of a confocal microscope (CFM) in the quality control department.The closest CFM will require at least \($19,500\) for installation and will have an estimated economic life of 10 years; its end-oflife value is estimated to be roughly\($3,000\) MV.
A detached warehouse cooling system station was destroyed by highwater flooding, and that substation will have to be scrapped and entirely re-built. If the original system is replaced the substation will cost\($50,000\) and it is estimated that with maintenance of \($2,800\) annually the substation
Darshan Engineering, LLC anticipates the need for a high-speed profilometer with digital recording capability for a multi-year quality control subcontract they believe they will win within the next 6 months.Although the system costs \($43,000\) there is enough time to order a system and have it
Darshan Engineering, LLC also is interested in an automatic board etching system to reduce labor of specialized MEMS packaging. Which machine should be purchased? The company MARR is 12%. Problem data is gathered below. First cost Operating costs Service period Salvage value Manual Automatic
Darshan's management is pondering whether to lease the machine for \($3,000\) per year or whether to buy it outright. The company MARR is 12%. Problem data is gathered below.What is your recommendation? Project Parameter First cost Operating costs Service period Salvage value Buy Lease $15,000
Darshan Engineering, LLC has decided they need to conduct an after-tax analysis for problem 5.13 and so the estimated annual receipts and expenses are shown below. The company MARR is 12%. Which system is preferred? First cost Revenue Operating costs Service period Salvage value Manual Automatic
Jason anticipates investing about\($75,000\) in a high-end 3-D laser cutter that he estimates will generate \($20,000\) annually for the next decade.Expenses are reasonable and projected to be about \($6,500\) per year.Assuming straight-line depreciation, no salvage value, and combined taxes of
Jason moves ahead with the investment in Problem 5.14, but the business turns out to be much better than expected and a competitor wants to buy Jason's system for \($50,000\) two years after he started. How would you handle the depreciation of the system? Create at least 2 depreciation scenarios
Given the interest of the competitor in his laser cutter activity, Jason is considering not selling but quadrupling the production facility size and investing in 3 more systems at a cost of \($250,000.\) Given this new \critical mass," Jason believes revenues will \skyrocket" and reach \($90,000\)
In Problem 5.16, how much of a difference does MACRS depreciation versus straight-line depreciation change the calculation outcomes?Data from problem 5.16Given the interest of the competitor in his laser cutter activity, Jason is considering not selling but quadrupling the production facility size
Jason discovers that he can take an investment tax credit in the current fiscal year on any capital equipment purchased for his expansion plans in Problem 5.15. The state credit is 33% for investments up to \($500,000\) (for small businesses). How much more attractive does this make the
In Problem 5.16, suppose Jason ends up with revenues of \($45,000\) and recaptured depreciation of \($1,200\) for the current year-end. Expenses were \($23,500,\) and depreciation expenses were \($11,575.\) What is Ted's taxable income?Data from problem 5.16Given the interest of the competitor in
Treadway Moving Service specializes in transferring sensitive electronic instruments.The prospect of some new 3-D dual-material prototyping machines exists but the trailer setup is just over $125,000 to purchase.The investment is still appealing since Boston Consulting Group surveys show that the
On average it is generally much more expensive to lease an asset than to buy it outright. And, as we saw in Section 5.8.3, there are regulations that erase some other traditional advantages to leasing (o-balance-sheet financing). Why, then, has leasing continued to grow in popularity? 5.8.3
Treadway has gotten used to the idea of leasing and is now considering an equipment lease of a computer. The lease terms call for a lease amount of \($3,280,\) a residual value of \($750\) and 18 monthly payments. The lease carries an interest rate of 12% per year.How much is Treadway's monthly
A credit check on Treadway shows that the owner has co-signed on his son's student loans, and this has dropped his credit rating by 110 points. The leasing company would feel \more comfortable" if Treadway would make a 3-month payment up front. What is the monthly payment in this case?
Treadway is really having fun "getting stuff cheap" and wants to buy his brother-in-law a car for "company sales" that costs \($22,765.\) The lease would be for a standard 36 months with a residual value of 50% cost (\($11,382).\) If the interest rate is 12% compounded monthly, what is the monthly
Briefly explain the difference between accounting, finance, and engineering economics. Try to put the concepts in your own (or your team's) words and compare the concepts where appropriate.
What mechanisms are in place to guide the identification, measurement, categorization, and communication of information to stakeholders and users? Discuss differences between users and stakeholders.
Among your colleagues in class, identify a term or phrase italicized in this chapter that you think is the most significant from your reading. Absent team consensus, then just provide your perspective.
What is the purpose of financial statements? Would you want to produce them even if they were not required, say, for entity tax reporting?
What are the two key financial objectives in the management of a company? How can a focus on these objectives create ethical dilemmas?
Distinguish between accounting and bookkeeping - be brief and think in terms of, say, what the differences in training would need to be for employment in those professions.
Which of the three components of Figure 1.2 might be a source of concern regarding "ethics"? Products Management Decisions Information Customer Transactions Data Analyze Measure, the + Categorize Synthesize and Transaction & Record Report D Accounting
What are the major forms of a business? Why would there need to be any difference between them? What are some advantages and disadvantages to each form?
How would a company know that its product or service was preferred in the marketplace? What could a competitor do to erode this favorable position?
This chapter placed emphasis on a "transaction-based perspective" related to customers. What would be different about a transaction involving an investor? What do we mean by transaction?
How might the market value of a firm differ from its intrinsic value?
With Figure 1.5 in mind, how could changes in government policies affect accounting activities? All Stakeholders Financial statements Bank & agency reports Accounting System Tax returns Management & data reports Engineering Management Leadership
It is claimed that problem definition and decision-making are intertwined. Explain.
Managers must be problem-solvers but are not always decision-makers. Do you agree? Disagree? Provide an example that clarifies your position.
Engineers are often accused of having a narrow view of problems, and are claimed to lack skills to deal with ambiguity. In what ways might an engineering manager differ in this regard?
Why are most engineers likely to have experience with deterministic risk and not probabilistic risk?
Clarify the difference between risk and regret.
It was stated that the topic of tax accounting would not receive extensive treatment in this textbook. In what way could this be justified? What might be the impact on what can be learned from the text?
Why is the concept of an ongoing concern important to the interpretation of financial statements?
It is mentioned that for a "decision to be made" there must be more than one alternative under consideration and the possible outcomes must be of unequal value. What are the three general types of problem outcomes?
In the decision-making process, what are the ways in which context can impact outcomes?
Intuition in decision-making can expedite decision-making (versus cognitive domains that are slow and deliberate), but it can fail or mislead us, too. How can that be?
We live in a global economy, and many different external activities have an impact on the business. On what basis would we narrow the scope of this book to de-emphasize tax law, currency exchange, inflation, and financial accounting for the engineering manager?
You are in a meeting to decide on a new product development investment. The VP in charge of the meeting seems to be asking a lot of questions of the design engineers. And it also seems like the VP changes position on controversial issues, which is frustrating the engineers, too. If the VP just a
1. Describe "intangible" assets.2. Is it possible for working capital to be negative? Retained earnings? Why?3. The liquidity of assets is important to creditors. Does the liquidity of assets affect OE? Why?4. What might be of consideration in an exchange of intellectual property (IP) for common
It seems that there are many ways for fraud and abuse to take place in the field of accounting. How can this occur when there are so many regulatory bodies and professional accounting standards in place?
In several accounting situations it seems like there is more than one acceptable way to account for a transaction. Is this a significant issue? Are there situations where it can lead to ethical problems?
Assume you work for an accounting firm and you are part of a team that does work for two clients that are competitors. Describe some ways in which ethical considerations might be an important part of day-to-day work.
Managers seem to be concerned about EBITDA quite a bit. What is it that EBITDA really communicates to managers?
Adjusting entries are often required in accounting. Please describe the various types of adjusting entries and give at least three examples.
Sometimes financial statements will show "unearned revenue." How does this arise? What type of transactions might be typical examples?
Two key performance indicators for a company are profitability and solvency. Why are these so important? Is the value of accrual accounting more evident when centered on profitability or solvency?
What does it mean to recommend that an expense or revenue should be "accrued?" Would this be considered "normal?"
What is the implication of the statement "the books are not in balance"? What corrective action should be taken?
Items in the table below need to be categorized (if relevant) as part of an income statement. Indicate whether each of the accounts falls under the category of operating expense, cost of goods sold, net sales, "other" or is not found on the income statement.a. Unearned revenueb. Cost of salesc.
Data extracted from a year-end balance sheet are shown below. Compute the working capital for this firm. What would the current ratio be, and what is the significance for this firm? Accounts payable $6,250 Accounts receivable $15,000 Cash $4,500 Securities $10,000 Inventory $8,760 Long-term bonds
Describe how trend analysis can provide insight on whether a firm's financial position is improving or deteriorating.
Would the combination of a high current ratio and a low inventory turnover ratio suggest a firm is maintaining too high an inventory level? Why or why not?
A senior VP has proposed that "we pay too much tax, so we should issue new debt and use the proceeds to buy back common stock." What would be the logic behind this statement?
Jameson Polymers, Inc. has common stock that is currently selling at $\$ 100$ per share. If Jameson has 100 shares of common stock outstanding, what is its return on total assets (ROA)? Supplementary financial data are given below. Price/Earning Ratio 11.5% ROE Debt Ratio 21% 55%
Blair Company has $\$ 5$ million in total assets. The company's assets are financed with $\$ 1$ million of debt and $\$ 4$ million of common equity. The company's income statement is summarized below:The company wants to increase its assets by $\$ 1$ million, and it plans to finance this increase
A healthcare home-care firm has a profit margin of 15 percent on visiting nurse sales of $\$ 20,000,000$. If the firm has debt of $\$ 7,500,000$, total assets of $\$ 22,500,000$, and an after-tax interest cost on total debt of 5 percent, what is the firm's ROA?
Independent Nursing Consultants (INC) has the following data:If INC could streamline operations, cut operating costs, and raise net income to $\$ 300$, without affecting sales or the balance sheet (the additional profits will be paid out as dividends), by how much would its ROE increase? Sales Net
Dogway Candy Company sells candy on consignment to "big-box" stores and currently has $\$ 1,000,000$ in accounts receivable. Its days sales outstanding (DSO) is 50 days (based on a 365-day year). The company wants to reduce its DSO to the industry average of 32 days by pressuring more of its
Custom Baseball Hats sells all its merchandise on credit. It has a profit margin of 4 percent, days sales outstanding equal to 60 days (based on a 365-day year), receivables of $\$ 147,945.20$, total assets of $\$ 3 \mathrm{mil}-$ lion, and a debt ratio of 0.64 . What is the firm's ROE?
ABC, Inc. had the following partial balance sheet and partial annual income statement:The industry average DSO is 30 (based on a 365-day year). ABC plans to change its credit policy so as to cause its DSO to equal the industry average. If the cash generated from reducing receivables is used to
Raster Imaging Company has a new management team that has developed an operating plan to improve upon last year's ROE. The new plan would place the debt ratio at 55 percent, which will result in interest charges of $\$ 7,000$ per year. EBIT is projected to be $\$ 25,000$ on sales of $\$ 270,000$,
Circuit Board Systems (CBS) has the following data: Assets: $\$ 100,000$; Profit margin: $6.0 \%$; Tax rate: $4.0 \%$; Debt ratio: $40.0 \%$; Interest rate: 8.0\%: Total assets turnover: 3.0. What is CBS's EBIT?
For the balance sheet for Bethesda Imaging, shown in Table 2.6, identify three financial ratios that might be of interest to an investor in the company. What do the 5 -year trends for the ratios suggest?Table 2.6 Balance Sheet Five-Year Projection (8000) 31 December 20xx Bethesda Imaging, Inc. Year
An advanced engineering computer was purchased for $\$ 22,750$ and its expected life is 4 years. It is estimated the company could sell the computer for $\$ 500$ after 5 years. Compute and compare the book value of the computer using straight-line and MACRS depreciation for a 5year life. If the
Chase Publishing Company purchased the copyright to a financial textbook for $\$ 25,000$. Although the author thought the book would serve academia for 10 years, the reality is that the typical life of a textbook is 4 years. Still, the copyright has a length of 75 years. Compute the annual
Chase Publishing was disappointed with the financial textbook and decided to purchase the trademark from a well-known record store for $\$ 250,000$. How can the cost of the trademark be accounted for if management thinks the trademark has indefinite life?
You just received an unexpected bonus at work of \($10,000.\) While you plan on using a bit of it to celebrate by purchasing all the accounting books you ever dreamed of, how much should you deposit in an account earning 6% per year if you'd like to have \($10,000\) in the account in 10 years?
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