a.

Log in to a search engine such as Yahoo or Google and search the news section to find
information on recent or planned stock repurchases. What reasons have the companies given for
the repurchases? Look up the companies on finance.yahoo.com. Do the repurchase programs
appear to be a substitute for dividends? b. Log

Give three examples of the types of costs incurred by firms in financial distress.

Now try to retrieve the annual report of another large company, Bell Canada Inc., by either going
to its Web site or through the SEDAR site. You can always search and find the Web site of Bell
Canada through a search engine such as Yahoo (www.yahoo.com) or Google
(www.google.com). How many issued and outstanding common

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In March 2015, the management team of Londonderry Air (LA) met to discuss a proposal to
purchase 5 short-haul aircraft at a total cost of $25 million. There was general enthusiasm for the
investment, and the new aircraft were expected to generate an annual cash flow of $4 million for
20 years. The focus of the meeting

The 2014 financial statements for Growth Industries are presented here. Sales and costs in 2015
are projected to be 20% higher than in 2014. Both current assets and accounts payable are
projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans
to increase long-term assets i

Recalculate the value of the lease to Greenfield Construction if the company pays no taxes until
year 3. Calculate the lease cash flows by modifying Table 17.1. Remember that the after-tax
borrowing rate for years l and 2 differs from the rate for years 3 through 7.

BCCI is evaluating a project with an internal rate of return of 12%. Should it accept the project?
If the project will generate a cash flow of $100,000 per year for 7 years, what is the most BCCI
should be willing to pay to initiate the project?

Go to finance.yahoo.com or ca.moneycentral.msn.com to get financial statements for companies

to calculate and compare their internal growth rates and sustainable growth rates. At Yahoo
dividend payout ratio is listed in key statistics and at MSN it is in highlights. How does each
company's growth rate compare to their

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Now suppose that Payout again changes its mind and decides to issue a 2% stock dividend
instead of either issuing the cash dividend or repurchasing 2% of the outstanding stock. How
would this action affect a shareholder who owns 100 shares of stock? Compare with your
answers to problems 8 and 9.
This chapter has provided Web site information for several venture capital sources and angel
investing networks. Use the Internet to explore these sites. Also, see whether you can identify
other interesting sites that will provide useful information on venture capital and angel investing
activity.

Jay Ritter's home page (site.warrington.ufl.edu/ritter) is a gold mine of information on IPOs.

Look up his table of under-pricing by year. Is under-pricing less of a problem now than in the
boom IPO years of 1998 - 2000? Now look at Ritter's table of "money-left-on-the-table." Which
company provided the greatest 1-day

Refer back to problem 23. Suppose Big Oil starts from the financing mix in Table 13.2, and then
borrows an additional $200 million from the bank. It then pays out a special $200 million
dividend, leaving its assets and operations unchanged. What happens to Big Oil's WACC, still
assuming it pays no taxes? What happens t

Big Door Company has 10 million shares outstanding, which are currently trading for about $15
per share and have an equity beta of 1.2. Big Door has 20,000 outstanding bonds, with a 6%
coupon rate, payable semi-annually and due in 10 years. The bonds are rated BBB. Currently the
credit spread for BBB is 150 basis point

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Assuming that Paymore's labour and administrative expenses are $65 per quarter and that interest
on long-term debt is $40 per quarter, work out the net cash inflow for Paymore for the coming
year using a table like Table 20.6, panel B.

Mutt.Com was founded in 2011 by two graduates of the University of Wisconsin with help from
Georgina Sloberg, who had built up an enviable reputation for backing new startup businesses.
Mutt.com's user-friendly system was designed to find buyers for unwanted pets. Within three
years the company was generating revenues

Retrieve the most recent annual reports of Walmart and Abercrombie & Fitch from their Web
sites. Compare the leverage ratios of 2 retailers for the past 2 years. Can you guess which
company relies more heavily on operating leases? Look care fully in the notes to the financial
statements. Why are operating leases relati

Printing World thinks it may need a new colour printing press. The press will cost $500,000 but
will substantially reduce annual operating costs by $215,000 a year, before tax. The press has a
30% CCA rate and will be in its own asset pool. The first CCA deduction is made in year 0. The
press will operate for 4 years a

QEF's Consulting Services' Web site at www.leasingcanada.com has information about leasing
in Canada. Click on "LeaseGuide" and then on "Lease Glossary." Identify the terms that deal
with the possibility of terminating (or not terminating) a lease. Likewise, identify the various
ways the asset can be disposed of at the

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For many firms, cash and inventory needs may grow less than proportionally with sales. When
we recognize this fact, will the firm's internal growth rate be higher or lower than the level
predicted by the following formula?

E-Books.com currently has a 10-year $1 million bond issue outstanding (5 years remaining to
maturity) with an 11% coupon interest rate and a $1,000 par value. The call premium on these
bonds is 5%. Because of a decline in interest rates, the firm would be able to refund the issue
with a $1 million issue of 9% 5-year bo

Here is Establishment Industries' market• value balance sheet ($ millions): The debt is yielding
7.6% and the cost of equity is 14%. The tax rate is 37%. Investors expect this level of debt to be
permanent. a. What is Establishment's WACC? b. Write out a market-value balance sheet
assuming Establishment has no debt

The Treasury Management Association of Canada is Canada's only association of treasury and
finance professionals. They list treasury management career opportunities on their site at www
.tmac-toronto.ca/careers. Pick one job posting and read the job description. Describe each of the
activities required for the position

While dividend yields in the United States in the late 1990s were at historically low levels, share
repurchases were at historical highs. Was this a coincidence?

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Look again at the backhoe-loader lease described in Table 17.1. Consider each question
separately. a. What is the value of the lease if Greenfield's tax rate is 20%? b. What would the
lease value be if Greenfield's first CCA deduction was taken at the end of year 1? Use the
formula approach to calculate the value of

True or false? MM's leverage-irrelevance proposition says that a. The value of the firm does not
depend on the fraction of debt versus equity financing. b. As financial leverage increases, the
value of the firm increases by just enough to affect the additional financial risk absorbed by
equity. c. The cost of equity

Yummy Food's financial manager believes that sales in 20 IS could rise by as much as 20% or by
as little as 5%. The planned divitdend payout ratio is 2/3, interest expense is based on the debt at
the start of the year and the percentage of sales factors are unchanged. a. Recalculate the first-
stage pro forma financial
In Appendix l5B we give you the flavor of an IPO prospectus, but you can see what an actual
prospectus or registration statement looks like by using the System for Electronic Document
Analysis and Retrieval (SEDAR) site at www.sedar.com for Canadian companies or the SEC's
huge database on www.freeedgar.com for U.S. com

Log in to ca.finance.yahoo.com and find the profile for Magna International (MGA). Construct
the debt ratio, debt/(debt + equity), for the firm. Now calculate Magna's debt ratio by using the
market value of equity, but assuming that book value of debt approximates its market value.
How does debt as a proportion of firm

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In the same Web site as for problem 25, click on "Leasing for Business" under "LeaseGuide" and
read the arguments about why businesses should consider leasing. What do you think about the
arguments? In problem QEF's Consulting Services' Web site at www.leasingcanada.com has
information about leasing in Canada. Click

Turn back to University Products' balance sheet from problem 16. If the preferred stock pays a
dividend of $2 per share, the beta of the common stock is 1.5, the market risk premium is 7%,
the risk-free rate is 4%, and the firm's tax rate is 40%, what is University's weighted-average cost
of capital?

Rachel Gold, a newly recruited financial analyst at Halverton Corporation, had just been asked to
analyze a proposal to acquire a new dredger. She reviewed the capital appropriation request. The
dredger would cost $3.5 million and was expected to generate cash flows of $4 70,000 a year for
9 years. After that point, t

A discount bank loan has a quoted annual rate of 6%. a. What is the effective rate of interest if
the loan is for 1 year and is paid off in 1 payment at the end of the year? b. What is the effective
rate of interest if the loan is for 1 month?

A company can calculate the internal rate of return of the incremental after-tax cash flows from
financial leases when evaluating a lease. Calculate the IRR of the lease cash flows in question 5.
To what rate should this IRR be compared? How does a company decide whether to lease the
assets when they calculate the leas

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a. What is the maximum possible growth rate in 2016 for Planners Peanuts (see problem 9) if the
payout ratio remains at 50% and Income Statement, 2015 Sales................$2,000
Costs.................1.500 Net income.........$ 500 i. No external debt or equity is to be issued? ii. The
firm maintains its 2015 deb
The authorized share capital of the Alfred Cake Company is 100,000 shares. Currently 20,000
shares are issued and outstanding. The equity is currently shown in the company's books as
follows: Common stock..................................$60,000 Retained
earnings................................30.000 Common equity..

Suppose that National Waferonics has before it a proposal for a four-year financial lease. The
firm constructs a table like Table 17.1. The bottom line of its table shows the lease cash flows:
These flows reflect the cost of the machine, CCA tax shields, and the after-tax lease payments.
Ignore salvage value. Assume t

Go to Nasdaq site at www.nasdaq.com. Review the financial ratios under the "Financial" section
of "Fundamentals" for one or more of the following companies: Hertz Global Holdings (HTZ),
Sprint Nextel (S), and Rite Aid Corp. (RAD). Do you see a trend toward financial distress for
these companies? If so, what factors see

True or false? If false, correct the statement. a. A company may not generally pay a dividend out
of legal capital. b. A company may not generally pay a dividend if it is insolvent. c. The effective
tax rate on capital gains can be less than the stated tax rate on such gains. d. Corporations are not
taxed on divide

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Use the 2014 financial statements for Dynastatics, problem I6, and build a financial plan using a
spreadsheet like that in Figure 19.2. Add $3,000,000 gross long-term assets and accumulated
depreciation of ($2,200,000) to the 20I2 balance sheet. Thus 2014 net long-term assets are
$3,000,000 - $2,200,000 = $800,000. Dyn

Shares in Raven Products are selling for $40 per share. There are one million shares outstanding.
What will be the share price in each of the following situations? Ignore taxes. a. The stock splits
five-for-four. b. The company pays a 25% stock dividend. c. The company repurchases 100,000
shares.

Go to the Globe and Mail Investor Web site (www.theglobeandmail.com/globe•investor).

Search for Telus Corp. (T) and Shaw Communications Inc. (SJR). Which company has the
higher price-earnings ratio? Compare numbers for 2012 and 2013. What variables (for example,
financial ratios or growth rates) might explain the P/E

Look back at Table 14.2. a. Suppose that George Weston issues 10 million shares at $55 a share.
Rework the table to show the company's equity after the issue. b. Suppose that George Weston
subsequently repurchased 500,000 shares at $60 a share. Rework part (a) to show the effect of
the further change. Take the averag

BigCo is considering leasing the new equipment that it requires, for $155,000 a year, payable in
advance. The cost of the equipment is $900,000, has a CCA rate of 25% and will last for 6 years.
The expected scrap value is $150,000. Assume that the first CCA tax deduction would be taken
at the end of the first year. Big

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If Eagle Sports Supply's 2016 dividend payout ratio is 70% and the equity-to-asset ratio is 2/3,
what is the 2016 internal growth rate and sustain• able growth rate? Calculate the required
external financing and the new capital structure for the two growth rates. Income Statement,
2015 Sales..................$950 C

Suppose that the tax rate on dividends is 28%, and the tax rate on capital gains is zero. Eagle Net
Resources is about to pay a $2 per share dividend. a. By how much will Eagle Net's share price
fall when the stock goes ex-dividend? b. Will anything happen to the share price on the payment
date when the dividend cheq

The total market value of Muskoka Real Estate Company is $6 million and the total value of its
debt is $2 million. The treasurer estimates that the beta of the stock is currently 1.5 and that the
expected risk premium on the market is 7%. The Treasury bill rate is 4%. a. What is the required
rate of return on Muskoka

Phone Corp. stock price was $84 at the end of the year. There were 205 million shares
outstanding. What was the market capitalization and market value added? What was its market-
to-book ratio and earnings per share?

How much would you need in the previous problem if you believe that you will inherit $100,000
in 10 years?

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Blackberry used to be known as Research In Motion Ltd. Retrieve the annual reports of Research
In Motion Ltd. and Aastra Technologies Ltd. from their Web sites. Compare the major sources
and uses of funds (annual cash flow report and balance sheet) for the two companies. What
factors might explain the differences in fi

Use the spreadsheet from problem 30 to examine the impact of various scenarios. Add formulas
to calculate ratios to examine the effect on leverage (debt ratio and times interest earned),
profitability (profit margin, operating profit margin, EBIT /revenue, EBIT /assets), and
accounting rates of return (ROA, ROC, ROE).

If the profit margin of the firm in problem 23 is 6%, what is the maximum possible growth rate
that can be sustained without external financing?

Interest expense for Rhodes Manufacturing was $500,000 in 2014. During 2014, $3.7 million in
old debt was repaid and $2.0 million was raised through new borrowing. Dividends of $425,000
were paid and $1.75 million was raised through new share sales. a. Calculate the cash flow to
bondholders. Treat interest as a financ

Go to www.dbrs.com and find the bond rating of BCE (BCE) and Agrium (AGU). Which has the
higher bond rating (that is, DBRS Issuer Credit Rating)? Then go to finance.yahoo.com to learn
about the main business activities of each of these companies. Compare their ability to pay their
interest obligations by calculating th

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Free online yield-to-maturity and credit spread data for Canadian corporate bonds with different
debt ratings is not available. However, old U.S. data is available at
www.bondsonline.com/Todays.Market/Corporate.Bond.Spreads.php. You will see a table
showing credit sp reads for corporate bonds of different risk over com

There are dozens of Web sites that provide calculators to help with personal finance decisions.
Two good examples are www.quicken.com and www.financialpost.com. Log on to the Financial
Post site, and click on "Personal Finance" to find a nice savings calculator. Suppose that you
invest $1,000 today. How much will you h

Use the data for the phone corporation from question 1 to confirm that ROA = asset turnover x
operating profit margin.

You need a $10,000 car loan and are talking to two different banks. a. Big Bank offers you a
$10,000 auto loan requiring 48 monthly payments of $275, paid at the end of each month. What
is the APR of the loan? What is the effective annual rate? b. Little Bank's loan has 4 annual year-
end installments, each equal to 1

Investments in the stock market have increased at an average compound rate of about 5% per
year since 1900. a. If you invested $ 1,000 in the stock market in 1900, how much would that
investment be worth in 2011? b. If your investment in 1900 has grown to $1 million in 2011,
how much did you invest in 1900?

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For a wider choice of financial statements, you might go to www.annualreports.com. Browse

through this site to see the wide range of companies, listed in different international stock
exchanges, included here. How many stock exchanges are covered by this site? Select a large
non-financial company and find its latest fi

Using the information in problem 26, calculate your after-tax rate of return on your bond
investment assuming that your marginal tax rate is 35%. You pay tax on the interest when it is
received. a. All coupons were immediately spent when received. b. All coupons were reinvested
in your bank account, which pays 1% int
Construct an SFP for Fincorp for 2014 and 2015. What is shareholders' equity? Here are some
data on Fincorp, Inc., Fincorp follows IFRS. The statement of financial position items
correspond to values at year-end of 2014 and 2015, while the statement of comprehensive
income items correspond to revenues or expenses duri

From www.globeinvestor.com;Servlet/Page/document/v5/data!bonds, find five different

corporate bonds and find Government of Canada bonds with similar terms to maturity. Look up
their ratings at e it her www.dbrs .com or www .standardandpoors.com. Compare the bonds'
yields to maturity to comparable-term Government of Can

Assume that the term structure is upward-sloping. How would you respond to the following
statement? Given the current yield curve, a company should borrow short-term rather than long-
term. It will be cheaper."

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A 30•year Canada bond is issued with par value of $1,000, paying interest of $60 per year. lf
market yields increase shortly after the bond is issued, what happens to the bond's a. Coupon rate
b. Price c. Yield to maturity d. Current yield

You invest $1,000 at 6% compounded monthly. How much will you have in 1 year? In 1.5
years?

You can buy a car advertised for $12,000 on the following terms: (a) Pay $12,000 and receive a
$1,000 rebate from the manufacturer or (b) Pay $250 a month for 4 years, for total payments of
$12,000, implying 0% financing. Which is the better deal if the interest rate is 1% per month?

On the Brandex Inc. SFP as the year-end 2013 the share capital was $1,100,000, retained
earnings were $3,000,000, accumulated other comprehensive income was $400,000, and total
equity was $4,500,000. Year-end 2014 SFP retained earnings were $3,300,000. In 2014 net
earnings were $900,000 and other comprehensive income w

Looking back at the previous question, use the yield-to-maturity method to compute the rate of
return on your bond investment.

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Here are incomplete 2014 and 2015 SFPs for Nobel Corp. a. What was shareholders' equity at
the end of 2014 and 2015? b. If Nobel paid dividends of $100 in 2014, what must have been
2014 net income? Assume no shares were issued or repurchased and no other comprehensive
income. c. If Nobel purchased $300 in equipment

Compute the present value of a $ 100 annual annuity for the same combination of rates and time
periods as in problem l. a. r = 8%, t = 10 years b. r = 8%, t = 20 years c. r = 4%, t = 10 years d. r
= 4%, t = 20 years
Ponzi Products produced 100 chain letter kits in the first quarter, Q1, resulting in a Q1 total cash
outlay of $10 per unit. It will sell 50 of the kits next quarter, Q2, at a price of $11, and the other
50 kits in Q3 at a price of $12. It takes a full quarter for it to collect its bills from its customers.
(Ignore pos

The Smiths are planning to retire in 35 years. They want an annual real income of $45,000, paid
at the end of each month of their expected 20-year retirement and to bequeath $500,000, in real
dollars, to their son at the end of their retirement. In addition, their son's 4-year university
education, to begin in 8 years,

Using Table 3.7, calculate the combined federal and provincial marginal and average tax rates
for both an Albertan and Newfoundlander with the following incomes: a. $20,000 b. $60,000 c. $
100,000 d. $3,000,000 Table 3.7

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In a discount interest loan, you pay the interest payment up front. For example, if a 1 year loan is
stated as $10,000 and the interest rate is 10%, the borrower "pays" .10 × $10,000 = $1,000
immediately, thereby receiving net funds of $9,000 and repaying $10,000 in a year. (L06) a.
What is the effective interest rat

What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis
of 20%?

Ink has spilled over some of the entries in the balance sheet and income Long-term debt
ratio..................................0.4 Times interest earned..................................6.5 Current
ratio............................................1.4 Quick ratio..............................................1.0 Cas

Turn back to Table 6.1. What is the current bid yield of the Canada 3.5%, June 1, 2020,
maturity? What price would you have had to pay to buy the bond that day?

Many banks provide mortgage calculators. a. For example, go to the HSBC Bank of Canada Web
site at www.hsbc.ca and select "Borrowing: Loans and Mortgages," then "Mortgage Calculator."
For a $200,000 mortgage, at annual interest of 6% and 25-year amortization, compare the
payments if you pay monthly, semi-monthly, bi-w

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Chik"s Chickens has average trade receivables of $6.333. Sales for the year were $9,800. What is
its average collection period?

Suppose you can borrow money at 8.5% per year (APR), compounded semi-annually or 8.4%
per year (APR) compounded monthly. Which is the better deal?
The following are the yields to maturity on Canada strip bonds with various years to maturity.
Years to Maturity Yield to Maturity(%) 1...................................................................1.26
2...................................................................2.00 3................................

Suppose that in June 2013 the Canada June 2014 strip was selling for $988.53, the Canada June
2015 strip was selling for $969.15, and the Canada June 2016 strip was selling for $945.51. Each
strip pays $1,000 at maturity. a. Calculate the yield to maturity for each bond. b. Calculate
annually compounded, 1-year forwa

ABCE bond has 10 years until maturity and a coupon rate of 8% payable annually, and sells for
$1,100. a. What is the current yield on the bond? b. What is the yield to maturity?

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You and your friend are avid snowboarders and bike racers. Nearly every other weekend you
travel to a race in a rented van. Now that both of you have full-time jobs, your friend is
pressuring you to purchase a van. Here's how the conversation goes: Friend: "just think of how
much we will save on rentals. The rented v

You deposit $1,000 into your bank account. If the bank pays 4% simple interest, how much will
you accumulate in your account after 10 years? If the bank pays compound interest, how much
of your earnings will be interest on interest?

A real estate appraiser is assessing the value of a piece of land in Vancouver. Currently the land
is unoccupied but is zoned for commercial use. Plans have been approved to build a five-storey
office building. Construction is expected to start in 1 year and will take 2 years to complete, at a
total cost of $3 million.

Reconsider the data in problem 10. What are the total personal and corporate taxes if you pay
yourself a salary of $50,000 and a dividend of $20,000?

You take out a $175,000 Canadian mortgage with a 25•year amortization period, a 5-year term,
and a 6% posted mortgage interest rate. What is your monthly mortgage payment? When the
mortgage expires in 5 years, what is the unpaid balance?

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If investors are to earn a real interest rate at 4%, what nominal interest rate must they earn if the
inflation rate is a. 0% b. 4% c. 6%

Burchetts Green had enjoyed the bank training course, but it was good to be starting his first real
job in the corporate lending group. Earlier that morning the boss had handed him a set of
financial statements for The Hobby Horse Company, Inc. (HH). "Hobby Horse," she said, "has a
$45 million loan from us due at the e
Suppose the broad stock market falls 5% in one day and Air Canada's stock price also falls by
5%. (L01) Using stock prices as given on page 97: a. What will happen to our assessment of
market value added? b. Should this decline affect our assessment of the performance of Air
Canada's managers? c. Would you feel diff

Refer back to question 6A.l. Years to Maturity Yield to Maturity(%)

1...................................................................1.26 2...................................................................2.00
3..................................................................2.47 4.........................

Log on to sedar.com to find the latest simplified financial statements for Westjet. Recalculate
Wj's financial ratios. What have been the main changes from those shown in these tables? If you
owned some of Wj's debt, would these changes make you more or less happy?

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Barclays Canada provides many of the exchange-traded funds listed on the TSX. Go to
www.ishares.ca and explore 3 different ETFs. The list is found on the home page under
"products." For each ETF, find out the name of the market index that the ETF is replicating. Note
the EFT's top 5 holdings, past returns, and fund fee

In Table 4.8, we report WestJet's sustainable growth rate as 13.62%. a. What would the
sustainable growth rate be if Westjet's payout ratio increased to 70%? b. What would the
sustainable growth rate be if Westjet's return on equity was 30%? Table 4.8

A cottage is for sale for $580,000. Currently it generates annual cash flows, net of all expenses
and taxes, of $35,000. If the cottage lasts forever, what rate of growth of the annual cash flows
will be necessary for you to earn an 8% annual rate of return on your investment?

Construct a statement of cash flows for Fincorp for 2015 using Table 3.4 as a guide. Treat
interest as an operating expense and assume that interest paid is equal to finance expense for the
year. Here are some data on Fincorp, Inc., that you should use. Fincorp follows IFRS. The
statement of financial position items c

A factory costs $400,000. You forecast that it will produce cash inflows of $ 120,000 in year 1,
$180,000 in year 2, and $300,000 in year 3. The discount rate is 12%. Is the factory a good
investment? Explain.

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What happened to net working capital during the year? What about noncash net working capital?
Here are some data on Fincorp, Inc., that you should use for problems 23 to 32. Fincorp follows
IFRS. The statement of financial position items correspond to values at year-end of 2014 and
2015, while the statement of compreh
Use historical yield-to-maturity data from the Bank of Canada Web site at www.bankofcanada.ca
to look at bonds of different types. Go to www.bankofcanada.ca/rates/interest-rates/lookup•
bond-yields and follow the instructions. Download 60 months of yield-to-maturity data for long-
term corporate bonds (series V122518),

You have been told that the yield to maturity on 3-month treasury bills is 4% and t he current
inflation rate is 2%. Estimate the real rate of interest.

A 6.25% 15-year bond, paying interest annually, can be called at 110% of par value in 10 years.
The bond currently sells for $1,048. a. What is the yield to maturity? b. What is the yield to call?

You are thinking of buying a used car for $4,000 for driving to school. Your parents are willing
to lend you the $4,000 and charge only 2.4% APR. They want the loan repaid equally in 48
monthly payments, with the first payment due at the end of the month in which you buy the car.
You estimate that the monthly cost of o

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Phone Corp's cost of capital was 8.3 %. Estimate the tax rate (taxes/ income before taxes) and
calculated net operating profit after taxes. What was Phone Corp's economic value added?

a. Using the data for Fincorp, determine the cash flow from assets, cash flow to bondholders,
cash flow to shareholders, and financing flows. Treat interest as a financing flow. b. Assuming
that Fincorp's tax rate is 28%, calculate its after-tax interest expense. Why is it appropriate to
convert the interest expense t

You invest $1,000 today and expect to sell your investment for $2,000 in 10 years. a. Is this a
good deal if the discount rate is 5%? b. What if the discount rate is 10%?

Use the Rule of 72 to figure out how long it will take for your money to quadruple in value if the
interest rate is 8% per year.

Using the Bank of Canada inflation calculator, www.bankofcanada.ca/enlinflation_calc.htm,

answer the following questions: a. What annual salary in 2010 was equivalent to $5,000 a year in
1940? b. Find the average annual inflation rate from 1914 to the current year. Now access the
investment calculator by either cli

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What are the key advantages of a defined contribution pension plan as a vehicle for retirement
savings?

Go to www.theglobeandmail.com/globe-investor/funds-and-etfs/fund-lookup, find "Fund

Lookup." Next, click on "Fund Company." Select a fund company, then pick 3 funds operated by
the fund company and get the fund profiles for each. Note the funds' investment objectives, top 5
holdings, risks, past returns, and fund fees.

You are arranging a $350,000 Canadian mortgage with a 25•year amortization period and a 7%
posted interest rate. What is the monthly mortgage payment? Suppose the bank offers you the
opportunity to pay your monthly payments in two equal installments (pay one-half of the
monthly payment every 2 weeks). How much faster

South Sea Baubles has the following incomplete balance sheet and income statement. a. What is
shareholders' equity in 2014 and 2015? b. What is net working capital in 2014 and 2015? c. What
is taxable income and taxes paid in 2015? Assume the firm pays taxes equal to 35% of taxable
income. d. What is cash flow prov

You are working as a financial planner. A couple has asked you to put together an investment
plan for the education of their daughter. She is a bright 7-year-old (her birthday is today), and
everyone hopes she will go to university after high school in 10 years, on her 17th birthday. You
estimate that today the cost of

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A firm's income statement includes the following data. The firm's average tax rate was 20%. No
depreciation is included in cost of goods sold or administrative expenses. Cost of goods
sold......................$8,000 Income taxes..............................2,000 Administrative
expenses.................3,000 Inter

Go to the Yahoo Finance site (ca.finance.yahoo.com) and look up Thomson Reuters Corp. (TRI).
Briefly describe its main business activities. Using its annual income statement, calculate the
compound annual growth rate over the past 3 years for sales and net income. Convert these
results into real growth rates, using the

A 7% corporate bond with 6 years to maturity has a Canada call. The bond's yield to maturity is
4.8%. The call price must offer an equivalent yield to a Canada bond plus .35%. Currently, 6-
year Government of Canada bonds are yielding 4%. Assume coupons are paid annually. a. What
is t he current bond price? b. What is

The following table shows the prices of strips of Canada bonds in November 2012. Each strip
makes a single payment of $100 at maturity. a. Calculate the annually compounded, yield to
maturity (spot interest rate) for each bond. b. Is the term structure upward- or downward-
sloping? Maturity Price ($) June 2010....

If investors receive an 8% interest rate on their bank deposits, what real interest rate will they
earn if the inflation rate over the year is a. 0% b. 3% c. 6%

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If you earn 8% per year on your bank account, how long will it take an account with $ 100 to
double to $200?

Explain why profit (net earnings) generally differs from a firm's cash inflows.

You believe you will spend $40,000 per year for 20 years once you retire in 40 years. If the
interest rate is 5% per year, how much must you save each year until retirement to meet your
retirement goal?

Acme needs a new $20,000 copier machine and must decide whether to lease or buy it. If the
company buys the copier, they expect to sell it for $5,000 in 5 years. The bank has offered a 5-
year amortizing loan of $20,000 at 8%, compounded monthly. Loan payments will be due at the
end of each month. If Acme leases the cop

Old Time Savings Bank pays 5% interest on its savings accounts. If you deposit $ 1,000 in the
bank and leave it there, how much interest will you earn in the first year? The second year? The
10th year?

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Calculate Fincorp's operating cash flow starting with profit before taxes. Treat interest as a
financing flow. Here are some data on Fincorp, Inc., that you should use. Fincorp follows IFRS.
The statement of financial position items correspond to values at year-end of 2014 and 2015,
while the statement of comprehensiv

Now suppose that the market value (in thousands of dollars) of Fincorp's fixed assets in 2015 is
$6,000, and that the value of its long-term debt is only $2,400. In addition, the consensus among
investors is that Fincorp's past investments in developing the skills of its employees are worth
$2,900. This investment of c

John Flynn lives in Nova Scotia. In 2014 he earned $1,500 in interest income and $3,000 in
dividend income, and realized a $2,000 capital gain. Calculate his after-tax income and tax rate
for each type of income, assuming that his marginal federal tax rate was 26%, his marginal
provincial tax rate was 16.67%, the divid

Examine the values for depreciation in 2015 and the balance for property, plant, and equipment
in 2011 and 2015. What was Fincorp's gross investment in property, plant, and equipment during
2015? Here are some data on Fincorp, Inc., that you should use. Fincorp follows IFRS. The
statement of financial position items c

Construct an income statement for Fincorp for 2014 and 2015. What was the addition to retained
earnings for 20 15? How does that compare with the increase in shareholders' equity between the
2 years? Here are some data on Fincorp, Inc., that you should use for problems 23 to 32. Fincorp
follows IFRS. The statement of
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Big Time Company is planning to raise $15 million by selling 10-year bonds. The bond rating
agency has advised the company that the bonds will have an A rating. Currently, the difference
between the yield to maturity of A-rated corporate bonds over similar-maturity Government of
Canada bonds is 150 basis points (1 basi

A firm uses $1 million in cash to purchase inventories. What will happen to its current ratio? Its
quick ratio?

Can cash flow from operating activities be positive if profit before tax is negative? Can operating
cash flow be negative if profit before tax is positive? Give examples.

Are the following statements true or false? Provide simple examples to support your assessment.
a. If interest rates rise, bond prices rise. b. If the bond's yield to maturity is greater than its
coupon rate, the price is greater than the bond's face value. c. High-coupon bonds of a given
maturity sell for lower pric

Sheryl's Shingles had sales of $10,000 in 2014. The cost of sales was $6,500, general and
administrative expenses were $1,000, and interest expenses were $500. Net working capital
increased $200 and capital expenditures were $900. Total depreciation expense included in the
costs was $1,000. The firm's tax rate is 35%.

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Diamond Corporation is planning a bond issue with an escalating coupon rate. The annual co
upon rate will be 4% for the first 3 years, 5% for the subsequent 3 years, and 6% for the final 3
years. If bonds of t his risk are yielding 5%, estimate t he bond's current price.

When ABC Company originally issued its callable 5.5%, 10-year bond, it was rated AA and
priced to sell at par. The bond is callable at t he price that offers an equivalent yield to a Canada
bond plus .15%. At that time, the credit spread over 10-year Canada bonds was .25%. The bond
pays interest annually. a. What was

Compute the future value of a $100 annual annuity for the same combination of rates and time
periods as in problem l. a. r = 8%, t = 10 years b. r = 8%, t = 20 years c. r = 4%, t = 10 years d. r
= 4%, t = 20 years

A top-ranked quarterback just signed a 5-year contract, providing $3 million per year, payable at
the end of each month. A hockey superstar accepts a 5-year contract, with a $4 million signing
bonus, payable immediately and $2.1 million per year, payable at the end of each month. The
quarterback brags that his contract
a. What would happen to Air Canada's economic value added its cost of equity were 8% rather
than the 6.7% value we assumed? b. Would this have any impact on its accounting profits? c.
Which do you think is a better measure of the firm's performance?

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Why are mutual funds and exchange-traded funds called financial intermediaries? Why does it
make sense for an individual to invest her savings in a mutual fund or ETF rather than directly in
individual stocks and bonds?

In April, Candy Canes, Inc., buys $50,000 of raw materials, sugar and peppermint, and pays for
them in May. In May it uses all of the raw materials to produces candy. Total cost of the candy is
$ 100,000 and all costs are paid in May. All candy is sold to distributors in May for $150,000,
but it does not receive paymen

You would like to travel around the world in a sailboat for 2 years, leaving 5 years from now.
One year before you leave, you will purchase the sailboat at an expected cost of $ 150,000.
During the pre-trip year, you will learn how to sail the boat. Once the trip is under way, you
forecast that your monthly expenses wi

Using the financial statements for Small Time Products, calculate cash flow from assets and
financing flow in 2015. Treat interest as a financing flow. 2015 Income Statement
Revenue............................................$ 1,301 Cost of goods sold..................................1,031
Depreciation.............

The schedule of tax rates for individuals changes periodically. Find the latest schedules on
www.cra-arc.gc.ca, click on "Individuals and families• and then "All rates." What is your
marginal tax rate if you are single with a taxable income of $70,000? What is your average tax
rate?

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Alfred Road has reached his 70th birthday and is ready to retire. Mr. Road has no formal training
in finance but has saved his money and invested carefully. Mr. Road owns his home- the
mortgage is paid off and does not want to move. He is a widower, and he wants to bequeath the
house and any remaining assets to his da

You bought a 10-year, 5% coupon bond for $ 1,000 and sold it 1 year later for $1,100. What is
the rate of return on your investment if the bond pays interest annually?

General Matter's outstanding bond issue has a coupon rate of 7% and a current yield of 7.6%,
and it sells at a yield to maturity of 9.25%. The firm wishes to issue additional bonds to the
public at par value. What coupon rate must the new bonds offer in order to sell at par?
Margaret River Winery has developed the following analysis of its environmental costs and
revenues for the last financial year: Employee training cost to improve the management of
effluent disposal..............$5,600 Scrap value of broken
bottles................................................................(12,560

Describe the similarities and differences between total quality management and Six Sigma.

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Bill needs a new car and can afford monthly car payments of $400. The interest rate on new car
loans is 7%, APR and payments are made at month-end. Bill wonders whether to arrange a 48-
or 60-month loan. With either loan, Bill will borrow the maximum amount and buy the most
expensive car possible. The average annual ra

Your consulting firm will produce cash flows of $ 100,000 this year, and you expect cash flow to
keep pace with any increase in the general level of prices. The interest rate currently is 8%, and
you anticipate inflation of about 3%. a. What is the present value of your firm's cash flows for
years 1 through 5? b. How

Five years ago you purchased an 8% coupon bond for $975. Today you sold the bond for $1,000.
What is your rate of return on the bond in each of the following situations? a. All coupons were
immediately spent when received. b. All coupons were reinvested in your bank account, which
pays 1% interest until the bond is s

Provide two examples to illustrate how organisations can work with Customer to reduce
environmental impacts.

The 'Real life' states that an increasing number of companies are reporting their sustainability
performance. Explain why organisations report their sustainability performance, particularly
when in many countries such reporting is voluntary.

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East Ltd manufactures Blu-ray players using a completely automated production process. West
Ltd also manufactures Blu-ray players, but its products are assembled manually. How will these
two firms cost structures differ? Which company will have a higher operating leverage factor?
Explain your answer.

Describe the four steps used in activity based management to reduce costs.

The concept of sustainable development applies to national economies but has nothing to do with
individual businesses. Discuss.

Explain how the formula to estimate break-even sales revenue can be adjusted to estimate the
sales revenue required to achieve a target net profit (both before and tax).
Provide three examples of social impacts that may be associated with the block of residential
apartments in a Brisbane inner suburb.

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Teskor Pty Ltd manufactures paintbrushes at Lonsdale. The management accountant, Mary
Malone, has developed an activity-based costing system for the company. The activities in the
timber handle area are as follows: From the cost assignment module in her ABC system, Malone
knows that the activities 'Inspect handles' an

Mick and Donald run a fast food outlet on the road between Hay and Narrandera in New South
Wales. This road is one of the main transport corridors between Adelaide and Sydney. For most
of the day, Mick and Donald are able to keep up with demand and serve customers quickly.
However, from 4 pm to 8 pm the shop is inundat

Outline the challenges for organisatioris that seek to measure the future impact of their current
activities on the environment and society.

Explain why managers might wish to recognise Tier 4 and Tier 5 environmental costs, both of
which are external to the organisation?

Zelda Ltd manufactures toys and games. The table below shows the costs and revenues of a toy
called Dragon Mouth over the first five years of its life. Dragon Mouth is a plastic monster that
swallows and regurgitates miniature animals. Required: 1. What is the break-even time (BET)
for Dragon Mouth? 2. How can Ze

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When managing the costs of quality, explain why it is not necessarily a problem if appraisal
costs and prevention costs increase.

Outline the differences between root cause cost drivers and activity cost driver.

Review the sustainability balanced scorecard in Exhibit 17.10. For each of the four perspective
provide an additional performance indicator that addresses an aspect of environment impact
social impact. Exhibit 17.10

Farm Fresh Ltd is a manufacturer of farm equipment that is sold by a network of distributors
across Australia and New Zealand. The Service Division manufactures spare parts for the various
models of farm equipment and sells these through the distribution centres. In January last year, a
JIT system vas implemented in th

What is operating leverage? How can an understanding of this concept be useful to managers?

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Refer to the 'Real life'. Explain how a supply chain perspective enables GH Michel; reduce the
costs and environmental impact of its wool processing.

East Asian Publications specializes in reference books that keep abreast of the rapidly changing
political and economic issues in the Asia-Pacific region. The results of the company's operations
during the past year are given below. All units produced during the year were sold. (Ignore
income taxes.) Required: 1. Pre

Provide two examples of how management accounting information can be used to support a
sustainability approach.

Refer to the data given in Exercise 18.29. In E18.29 A contribution margin statement for Pavlova
Lodge is shown below. (Ignore income taxes.) Required: Prepare a new contribution margin
statement for Pavlova Lodge in each of the following independent situations (ignore income
taxes): 1. The hotel's volume of sales

Risky Scaffolding provides services to building contractors. The firm's contribution margin ratio
is 0.25 and its annual fixed costs are $400 000. The firm's income tax rate is 40 percent.
Required: 1. Calculate the firm's break-even revenue. 2. How much before-tax profit must the
firm earn to make an after-tax net

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Customer profitability analysis: manufacturer Feather Light manufactures optic cables for the
telecommunications industry. The cost management staffs have just completed a customer
profitability analysis, at the request of the marketing manager. The following information forms
the basis for the analysis: Customer-dri

The following costs were incurred by Valley Fabrications Ltd to maintain the quality of its
products during April • Operating an X-ray machine to detect faulty welds, $5400 • Repairs
to faulty products returned by customers, $6000. • Cost of rewelding faulty joints discovered
during processing, $38 • Cost o

What is a product life cycle and why is this concept important for managing process costs?

Parks Spice Company is considering making dramatic changes to the company. It currently has
production facilities in Wollongong. New South Wales. as well as in South East Asia. The CEO,
Jayne Mitchell, is concerned about several issues currently facing the company and she would
like to solve these using a sustainabilit

Take a walk around your campus with your friends. Make a list of any potential environmental
costs for which you see evidence. Classify each of these costs according to the framework in
Exhibit 17.5. Choose two costs from your list and describe the management accounting
information that could be used to help management
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Life is simple at the Sleepy Time Company. The business produces a single product in a
straightforward production process involving machines A, B and C, each run by a separate
department. The process begins at machine A, where raw material is converted into a single
component. The component passes through machine B whe

What are the likely implications for a business that uses EOQ data, if some of the underlying
assumptions do not match reality? Provide an example to illustrate your answer.

Briefly explain how the break-even point is calculated (a) In sales units (b) In sales dollars. (c)
Using a graph.

What is an environmental management system (EMS) and how does this relate to environmental
management accounting (EMA)?

Surf Life Saving Australia (SLSA) is Australia's major water safety, drowning prevent rescue
organisation. SLSA aims to create a safe environment at beaches around Australia water patrols
and through education and training programs. Required: 1. Identify five performance indicators
that SLSA might use to reflect its

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Refer to the data given in Exercise 18.23. (Ignore income taxes) Required 1. Prepare a fully
labelled profit volume graph for the Sydney HiTops. 2. What is the safety margin if the team
plays a 1o-game season and the team management expect the stadium to be 45 per cent full for
each game? 3. If the team plays a 10-

Under EOQ approaches, order costs can be minimised by placing large infrequent orders of
inventory. However, under JIT, inventory-related costs are reduced by ordering frequently and in
small quantities. Can you explain why both of these statements are correct?

Describe the traditional approaches to controlling costs used by many Australian businesses.
How does cost management differ from these approaches?

Non-value-added activities also occur in service firms. Identify four potential non-value-added
activates in a: 1. Library 2. Sports equipment retailer 3. Hospital. Provide your reasons.

Solarcare Ltd manufactures plastic lenses for sunglasses at Queanbeyan in New South Wales one
of its too selling lines is the XRP Lens, which has a scratch-resistant polarised surface. Earlier
this year, a Taiwanese company entered the market offering a similar lens at a price 20 per cent
below the XRP price of $1.50 p

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Penmark Orchards and Cannery is considering buying high pressure cleaning equipment that
vacuums waste liquids into a storage tank and then purifies the waste. The waste water can then
be pumped back onto orchards The system will avoid any leakage of liquid waste into the
Murray River, which has happened once every two

What are integrated reports and how do they relate to sustainability reports?

Refer to the Real life on page 815. How could cost volume profit analysis be used in budgeting
and making decisions about pricing coffee and cakes in a cafe?

Origin Energy is an integrated energy company, involved in gas exploration and production,
power generation and energy retailing. The company operates Australia's market. Origin supplies
electricity to more than 4.3 million customers throughout Australia. On the following page you
will find a description of some of Ori

A contribution margin statement for Pavlova Lodge is shown below. (Ignore income taxes.)
Required: 1. Show the hotel's cost structure by indicating the percentage of the hotel's revenue
represented by each item on the contribution margin statement. 2. Suppose the hotel's revenue
declines by 20 percent. Use the contr

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Refer to the data for Pickwick Paper Company in Problem 16.39. Required: 1. Draw a diagram
of the current production process. 2. Suggest ways in which the process could be re-engineered.
3. Throughput management has been criticised for its short-term perspective. Does your re-
engineer process reflect a short-term p

How can a business use target costing to reduce costs and plan profits?

Jack Smart recently ran into an old colleague, Bob Lee, at a cocktail party. They had both
worked together at a major accounting firm until five years ago. Jack started telling Bob about
the just-in-time inventory management system that his company was planning to implement:
Jock: It really is a different approach. W

Freaky Furniture Ltd is looking at two alternatives for disposing of an annual production of 300
kilolitres of waste paint, both of which are acceptable to the Victorian Environment Protection
Authority. • Freaky can pay paint recyclers to remove the waste paint at a cost of $50 per
kilolitre. The recycler would the

Bundaberg Glass Company is a distributor of ear windscreens. The windscreens are

manufactured in Japan and shipped to Bundaberg. Management is expecting an annual demand
of to 10 800 windscreens. The purchase price of each windscreen is $400. Other costs associated
with ordering and maintaining and inventory of these w

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Explain briefly how an activity based approach to analysing production costs and customer-
related costs would affect cost volume profit analysis.

Describe how the capital expenditure evaluation process can take into account environmental
social impacts.

Suppose you have just started a business to manufacture your latest invention, the Glammaglob
gadget. You estimate that after a few years on the market these gadgets will sell for about $250.
This estimate takes account of the introduction of similar devices by your competitors.
Furthermore, let's say you want to make

Prepare a life cycle analysis for the production of a McDonald's burger. Identify possible
environmental and social impacts for each stage of your life cycle analysis.

Explain the trade-off between pre-production costs and production costs over the product life
cycle. How can understanding this trade-off help a business manage its costs?

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Pandana Fashions Ltd produces clothes for the 'young professionals' market. The desing
department currently working on two potential product lines: After-five Wear and Weekend
Wear. The market department is keen to introduce both, but currently the company has only
enough surplus product capacity to introduce one new p

Explain how sensitivity analysis can be used to help deal with uncertainty in cost volume profit
analysis. How can computer modelling help with sensitivity analysis?

In a recent state government budget, the Motor Registration and Licensing Office suffered
substantial cutbacks. As a result, each department has been asked to submit a cost budget for the
coming year 1 is 10 per cent lower than the costs for the current year. The Licensing Department,
which employed 50 people, issues

Explain why it is important for organisations to create collaborative relationship with suppliers.
To illustrate your answer, search the web to find a company that has created such relationships.

The EPA Victoria website (www.epa.vic.gov.au/business-and-industry/lower-your-

imact/ereps/erep-case-studies) has a series of case studies of organisation ions that have
undertaken environmental and ties. Select resource efficiency Programs to reduce their
environmental impact and the cost of their activities. Select tw

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Explain how activity-based costing can be used to determine the total cost of ownership.
A car rental agency rents small, medium and family-sized cars. What assumptions would be
made for the purpose of a cost volume profit analysis? Does this mean that CVP analyst is of
little value to this business? Explain your answer.

Brighton Electronics Ltd produces a single product called The Gismo. To produce this product,
Bright purchases a key component from Supplier A. Supplier A has two versions of this
component and both are suitable for insertion into The Gismo. However, the two alternative
components, Model 1 and Model 1 and Model attract

Explain the theory of constraints and how it may be used to manage costs.

An aluminium refinery in Gladstone is planning to implement an environmental management

project. The project is to purchase new equipment that will lower operating costs and reduce
emissions from the refineries, which are currently spread over nearby residential districts. It is
estimated that each tonne of emissions

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Define quality and explain the difference between quality of design and quality of conformance.

Describe some measures that can be used to evaluate supplier delivery performance and supplier
quality performance.

Explain how income taxes affect the calculation of a firm's break-even point.

Target costing is often used to manage costs in the electronics industry and automotive industry.
Required: Visit the website of a company that manufactures electronic products. Select a new
product that has recently been launched and explain how the company could have used target
costing to manage costs. Make sure y

Alexis Klark, managing director of Pharsalia Electronics (PE), is concerned about the prospects
of one of its major products. She has been reviewing a marketing report with Jeff Keller,
marketing product manager, for their 10-disc car compact disc (CD) changer. The report
indicates a price reduction is needed to meet a

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Eric's Engines Ltd (EEL) manufactures a variety of small engine parts for The company's
manufacturing overhead cost budget for the current year is as follows: These budgeted overhead
costs total $1 536 000, and the budgeted amount of direct labour for the year is 40 000 hours.
Required: 1. Calculate the predetermine

The 'Peal life' explains ho Arriurn has structured its sustainability approach around five
sustainability drivers-economic community environment, people and market-and the two core
values of safety and customer. For each driver, key sustainability principles, performance
outcomes and planned initiatives are reported

Explain how management accounting systems can be adapted to enable an organisation 'to
engage in sustainability reporting.

A company with capital intensive processes typically will have a higher break-even point, greater
operating leverage, and larger safety margin than will a labour intensive firm. True or false?
Explain your answer.

Explain how environmental and social cost information may change management decision
making. Provide two examples.

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How can the balanced scorecard be adapted to include sustainability measures?

Refer to the 'Real life'. What did the life cycle assessment for Oxford outstanding win show?
How might managers across the value chain use this information to reduce the environmental
impact of this wine?

I've studied economics, so I know that the price of a product can influence the quantity sold.
CVP ignores this. Discuss.

You are the management accountant for Runmoe Springs Ltd, a company that manufactures
suspension components for the automotive industry. Currently, costing in the manufacturing area
is based on a standard costing system using overhead applied on direct labour hours.
Departmental budget are use to monitor costs in the n

Explain how computer modelling can help a business to use a CVP approach when its cost
structure is not consistent with the assumptions underlying CVP analysis.

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What is value-engineering, and what role does it play in target costing?

Landers Ltd is a major Australian bicycle manufacturer. Over the last decade, bicycle
manufactures. Taiwan and Korea have been able to price their bikes below those of the Landers
products, but the company has retained its market share due to the poor quality of the imported
bikes. Recently, but the the quality of the

Fast Lane Ltd manufactures motorbikes and is located in Brisbane. More than 70 percent of the
caste the company's motorbikes consists of material and components, which are purchased from
Australia, suppliers. About three years ago, Fast Lane introduced a comprehensive supplier
evaluation system to monitor the performan
Return to the Windsor General Hospital problem, P12.34. For each of the five departments,
provide two different examples of performance measures that could be used to monitor
economic, environmental and social factors.

Clean Living Ltd is a travel companies that specialises in 'green' tours-package tours to
environmentally sensitive destinations. These types of tours are growing in popularity, and while
Clean Living has had little problem attracting customers it has noticed that a number of
competing businesses have just commenced op

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According to throughput accounting, how should performance is measured at the operational

level? What advantages and disadvantages do these measures offer?

Explain the difference between Tier 2 and Tier 3 environmental costs and provide two examples
of each.

Outline some criteria that may be used to select suppliers. Explain how these criteria can also be
used to evaluate supplier performance.

Provide an example of an environmental and social impact that, if reduced could not reduce costs
for: (a) A local government council (b) A motor vehicle repairer (c) A university.

Racing Wheels Bicycle Shop sells racing bicycles. For the purposes of a cost volume profit
analysis, the shop owner has divided sales into two categories, as follows Three-quarters of the
shop's sales are mountain bikes. The shop's annual fixed costs are $390 (In the following
requirements, ignore income taxes.) Req

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Stakeholder groups, such as employees, customers and community groups may influence
organisations to adopt sustainable work practices. For each stakeholder group, provide an
example of how it can influence organisations.

A target cost cannot lead to cost reduction, when it is simply the outcome of setting a target
selling price and a target profit margin: Provide a response to this statement?

Penrith Parts manufacturer's components for the European auto industry auto and needs to be
complaints ISO 14031. Oriana Davies has been hired by the CEO to develop a system of
performance measures far; she has found that the company uses the following measures: Staff
occupational health and safety training...........

Hungry Jills (Ws) makes and delivers burgers for the takeaway market. Its home delivery service
is a source of competitive advantage for the company, as most other fast food burger restaurants
cater to the takeaway market but do not offer home delivery. Because speedy, reliable delivery is
a critical success factor for

Using the example of the salmon producer Tassal, as described in the Real life, explain what
sales mix means. How could a weighted average contribution margin and used in CVP analysis?

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Lucid Images Ltd manufactures premium high definition televisions. The firm's fixed costs are
$4 000 000 per year. The variable cost of each TV is $2000, and the TVs are sold for $3000
each. The company sold 5000 TVs during the previous year. (In the following requirements,
ignore income taxes.) Required: Treat requi

The environmental Guidelines of Lufthansa Airlines state: Environmental protection is a high

priority goat-Protecting the environment is an expression of corporate responsibility. We aim for
constant improvement-We adhere to regulation. However, we want to do more: we employ the
best available technology within the li

Ellipsis Electrocs Ltd produces speakers for high fidelity sound systems. Because of the rapid
rate of technological innovation in the hi-fi market, most of the company's products have short
life cycles. The marketing manager, Jean Wills, believes that new product introductions are the
key to Ellipsis's success However

Find three errors in the diagrambelow.

Given the following network, (a) What is the critical path? (b) How long will it take to complete
this project? (c) Can activity B be delayed without delaying the completion of the project? If so,
how manydays?

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Favio Ltd manufactures high-impact plastic bike helmets. The A-1 helmet is produced in two
processes: plastic extruding and assembly. The company has adopted an activity-based costing
system. The following activities have been defined: • Design A-1 helmet. • Store materials.
• Move raw materials to production.

Refer to the data given in Problem 15.35 for Pally Communications Company prior to the JIT
purchasing agreement. The lead time required to receive an order of XL-20 is one month.
Required: 1. Assuming stable usage of XL-20 each month, determine the reorder point for XL-
20. 2. Draw a graph showing the usage, lead

Outline the major types of performance indicators that may be used under ISO 14031. Provide
examples of each type.
Scenario analysis—the brainstorming of possible crises and anticipation of their
outcomes—seems like another useful tool here. How does this approach compare to the tools
described?

When should an audit be conducted during a project? Is there a “best” time?

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How is uncertainty in project scheduling dealt with?

Convert each of the following AOA diagrams into AONdiagrams.

The following network is a compressed representation of the prospectus of a start-up firm that
plans to develop a new, bio electronic computer chip. Note that four activities, the biological
elements, can start immediately. Find: (a) The critical path. (b) The earliest time to complete the
project. (c) The slack on

a. Draw the AOA diagram. b. Find the critical path. c. Find the completion time. Activity †TE
AB .....1 AC .....2 AD .....3 DC .....4 CB .....3 DE .....8 CF .....2 BF .....4 IJ .......2 CE .....6 EF .....5
FG .......10 FH .......11 EH .....1 GH .....9 EJ .....3 GI .....8 HJ.....6

Was the purpose of the audit to exert cybernetic control, go/no-go control, or post-project
control? Explain. MINI CASE It was July 2004. John West and Joy Adams had been through a
lot since the THAAD program had begun in 1992. Eleven THAAD flight tests had been
conducted in the Program Definition an

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How does an understanding of how people learn affect project audits and evaluations? MINI
CASE Overall, in the light of this study, we would come out strongly in favor of post-project
reviews (provided you do not call them post mortems). We could spot flaws in the ones we saw,
but they were still valu

Did the project team always have to work in 3-hour segments? What would you expect their
longest shifts to run?

What characteristic of the critical path times makes them critical?

How can an auditor/evaluator avoid the shortfalls described in the article? MINI CASE Overall,
in the light of this study, we would come out strongly in favor of post-project reviews (provided
you do not call them post mortems). We could spot flaws in the ones we saw, but they were still
valuable. A

Compare this project with the Project Portfolio Process and Hewlett-Packard’s project
management process in the reading for Chapter 2. MINI CASE Heublein, Inc., develops,
manufactures, and markets consumer food and beverage products domestically and
internationally. The business of Heublein, Inc.,

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What could be some advantages and disadvantages of the following sources of information: (a)
Charts, (b) Written reports, and (c) Firsthand observation?

Convert the AON diagram below to an AOAdiagram.

How could the concept of making such evaluations mandatory be implemented? MINI CASE
Overall, in the light of this study, we would come out strongly in favor of post-project reviews
(provided you do not call them post mortems). We could spot flaws in the ones we saw, but they
were still valuable. And

How is the critical path determined?

Given the following network (times are in weeks), determine: (a) The ES, LS, EF, and LF for
each activity. (b) The slacks on all activities. (c) The critical activities andpath.

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How do you imagine work gets done with grizzly bears around?

What are some benefits of the network approach to project planning? What are some drawbacks?

Given the following information, draw the AON diagram: Activity Immediate Predecessor
1 ..........— 2 ..........— 3 .........1, 4 4 ...........2 5 ...........2 6 .........3, 5

How do you think the network technique could be used to estimate costs for manufacturing?

The following chart was prepared at the beginning of a HRM (Human Resource Management)
crash hiring project. The project begins with two activities: Assemble interview team (A) and
Budget resources (B). The duration, in days, follows the letter of each activity. What is the
critical path? Which activities should be

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General Ship Building Company General Ship Building has a contract with the Department of
the Navy to build three new aircraft carriers over the next five years. During the construction of
the first ship, the project manager formed an auditing team to audit the construction process for
the three ships. After picking th

In a typical project, do you feel frequent brief evaluations or periodic major evaluations are
better in establishing control? Why?
Why is it better to rely on several sources of information than just a few?

What feedback, if any, should the project team get from the evaluation?

When is each scheduling technique appropriate to use?

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Define “late start time,” “early start time,” and “early finish time.”

Should BWNS try to win back NLP’s business at this time? How could Brown eventually
win back NLP’s business? What should he do? MINI CASE Reggie Brown, B&W Nuclear
Service Companys (BWNS) project manager for Nita Light and Powers Green Meadow plant,
reflected on the dilemma that had plagued him f

Given the schedule in Table B for a liability work package done as part of an accounting audit in
a corporation, find: (a) The critical path. (b) The slack time on “process confirmations.” (c)
The slack time on “test pension plan.” (d) The slack time on “verify debt
restrictioncompliance.”

Why did lagging depreciation legislation increase the importance of using capital funds
optimally? MINI CASE Heublein, Inc., develops, manufactures, and markets consumer food and
beverage products domestically and internationally. The business of Heublein, Inc., their sales
revenue, and some of the

Given the comments in the case, do you surmise that the reason for the audit was to improve
future projects or to ascertain the reasons for not meeting the project’s goals, and if the latter,
its direct goals or ancillary goals? MINI CASE It was July 2004. John West and Joy Adams had
been through a

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Was this a good use of the audit concept?

Planning for inevitable crises seems to be quite logical, yet is rarely done in projects. Why?

Evaluate their advice for conducting post-project evaluations. MINI CASE Overall, in the light
of this study, we would come out strongly in favor of post-project reviews (provided you do not
call them post mortems). We could spot flaws in the ones we saw, but they were still valuable.
And most of the

What are the essential conditions of a credible audit?

In spite of the recommendation, ASCL had already had a “problem project” list and system
in place. Why do you think it may not have caught this particular project? Will the new
procedure do any better?
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Give some examples of ancillary project objectives.

Precedence diagramming extends the standard task relationship in a network to three additional
situations. Can you think of any others?

Which of the four tools would have the most value? Which would be easiest to implement?

Construct a network for the following training and development project. (a) Draw the network.
(b) Find the critical path. (c) From where would you suggest transferring resources, and to what
activities, so that the original target training date may bemaintained?

One requirement of the project was to keep the oil flowing while replacing the pipeline section.
How do you think they managed to do this?

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Find (a) The AOA network and the critical path. (b) All event slacks. (c) Critical path to event D.
(d) Critical path probability of completion in 14 days. (e) The effect if CD slips to 6 days; to 7
days; to 8days.

Define activity, event, and path as used in network construction. What is a dummy activity?

Elaborate on the uniqueness of this work breakdown structure.

What is “slack” and why is it important?

Construct a network for the aerospace launch project below and find its criticalpath.

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What steps can be taken to ease the perceived threat to team members of an external evaluation?

What was the purpose of the PM&C project? Was it successful? MINI CASE Heublein, Inc.,
develops, manufactures, and markets consumer food and beverage products domestically and
internationally. The business of Heublein, Inc., their sales revenue, and some of their better
known products are shown in

What was wrong with the previous focus on cost-benefit? Does the PM&C system still include a
cost-benefit analysis? MINI CASE Heublein, Inc., develops, manufactures, and markets
consumer food and beverage products domestically and internationally. The business of
Heublein, Inc., their sales revenue

How does simulation determine the probabilities of various project completion times?

What kinds of reports might be sent to customers?