1. The project is to produce 200 widgets and is scheduled to take five weeks. Each unit is planned to cost $90. The project is severely cost constrained. Performance data for the project at the end of week three is presented below:

• 120 total units were planned to be produced
• 130 units have actually been produced
• The financial manager reported that the business had actually spent $13,000 on the project by the end of week three.
   
   

Answer the following questions; show all work:           

1. Quantify cost variance. Is the project ahead or behind budget?
2. Quantify schedule variance. Is the project ahead or behind schedule? 
3. Quantify cost performance efficiency. Is the project performing better or worse than planned? 
4. Quantify schedule performance efficiency. Is the project performing better or worse than planned? 
5. What is the forecast of project cost at completion assuming current cost performance efficiency remains the same? How much budget variance is expected at completion?
6. What is the forecast of funding needed to complete the project (from this point forward)?
7. What cost performance efficiency would be required for the remainder of the project to complete the project within the original budget?
8. As the project financial manager, what recommendations would you make?

2.Barney Manufacturing Co. produces personal fitness machines. The once successful line is no longer selling well, so the company is considering production of a new improved cardio-vascular machine. This can be done by buying needed production equipment. There is a six-month manufacturing, delivery, setup, and training delay before the equipment will be ready for production. The company wants to start producing the new cardio machine in January next year. Two options are available – lease or buy.

Buy Option – The entire purchase price of the production equipment is $600K and is due at the time of the order. The cost of capital for this purchase is 10%. Assume there are no taxes.

Lease Option – A $25K deposit is due at the time of the order. The remaining portion of the first year’s lease payment ($160K) is due in January next year. The other three annual lease payments ($185K each) are due in January of production years 2, 3, and 4. The cost of capital for leasing is also 10%.

Revenue from sales of the new cardiovascular machines is expected to be:

• Year 1 - $380,000
• Year 2 – $260,000
• Year 3 – $145,000
• Year 4 – $80,000

Calculate the net present value of both the new purchase option and the lease option. Show all work. Determine the best option for Barney, and justify your answer. 

3.This question is based on the information provided in the abbreviated year-end Income Statement and abbreviated year-end Balance Sheet for Rubble Corporation shown below. 

Rubble Corporation Income Statement for the Calendar Year (January 1 - December 31)	Thousands of dollars (except stock price, earnings per share, and dividends per share)
Net sales	$3000
Cost and expenses:	$2734
EBIT	$266
Less interest expense:	$66
Earnings before taxes	$200
Taxes	$80
Net income before preferred dividends	$120
Dividends to preferred stockholders	$8
Net income available to common stock holders	$112
Per share common stock:
Stock Price	$26.50
Earnings per share	$2.24
Dividends per share	$1.84

Rubble Corporation Balance Sheet (Average of beginning and end of year)	Assets (thousands of dollars)		Liabilities and Equity (thousands of dollars)
Cash	$50	Accounts payable	$60
Market securities	$0	Notes payable	$100
Accounts receivable	$350	Accrued Wages	$10
Inventories	$300	Accrued Taxes	$130
Total Current Assets:	$700	Total Current Liabilities:	$300
Net plant and equipment:	$1300	Total Long Term Debt:	$800
		Total Stock Holder’s Equity:	$900
Total Assets:	$2000	Total liabilities and equity:	$2000

a. Calculate the Rubble financial ratios contained in the following table

Financial Ratios	Rubble Values	Industry Values
Operating Profit Margin		15%
Current Ratio		2.5 times
Quick (Acid) Ratio		1.0 times
Total Debt to Total Assets		40%
Return on Assets (ROA)		9%
Times Interest Earned		6.0
Price/Earnings Ratio		12.5 times

b. How is the ratio Return on Assets (ROA), from part 8a above, influenced by both net profit margin and total asset turnover? Support your answer with appropriate analyses.

c. Compare your results to the industry ratios and describe what Rubble Co. should do to improve its position in the market. 

4. Based on the NPV profile , what is the approximate internal rate of return (IRR?

 

 

Answer rating: 100% (QA)

The project is to produce 200 widgets and is scheduled to take five weeks Each unit is planned to cost 90 The project is severely cost constrained Performance data for the project at the end of week t... View the full answer