3. Individual Problems 8-3 Suppose that due to the outbreak of a new flu, known as H14N9, the demand for hand sanitizer has tripled. Smith & Smith, a company that produces and sells hand sanitizer, should production of its hand sanitizer. Suppose there is no vaccine for H14N9, and that a vaccine will not be developed for several decades. True or False: Smith & Smith should increase its productive capacity by leasing new plant and equipment.


Answer 1




As for the provided information, the flu is new in market and has serious issues involved, and now since no remedy or cure is possible and will not be possible even in near future,

The hand sanitizer will help as a preventive action from getting infected to the Flu. Thus, people will buy the sanitizer at huge level.

Thereby, the demand for such product will increase in market in huge, and accordingly even if the company has to increase production capacity through lease it shall do so.

As with huge turnover break even will be realized and there will be profits.

Related Questions

1. List names of all employees who are not from Department A00. 2. What is the average of all employee salaries? 3. Which employees earn more than average? 4. List names and salaries of employees earning more than $35,000. 5. Increase Ms. Haas's salary to $500,000 and then list her new monthly salary.
Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes.Activity (Cost) Cost Driver Delux Moderate EconomyMachine maintenance ($330,000) machine hours 250 750 1,000Setups ($630,000) setups 35 20 15Packing ($166,000) cartons 10 30 60Photo development ($574,000) pictures 4,400 2,400 1,400Deluxe textbooks are made with the finest quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings.Required:Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year:Deluxe Moderate Economy50,000 150,000 200,000Determine the overhead cost per book for each book type.
You learn that the Volonian government has canceled the trade licenses of several firms in the e-learning market in the past due to censorship issues. In this situation, what measures are most likely to help Gerlach Publishing acquire a trade license?
A product normally sells for $200 per unit. A special price of $180 is offered for the export market. The variable production cost is $160 per unit. An additional export tariff of 10% of revenue must be paid for all export products. What is incremental net income per unit from accepting this special order?
Anson Industries, Inc. reported the following information on its 20Y1 income statement: Sales.......................................... $4,000,000 Cost of goods sold................... 2,300,000 Operating expenses................. 1,000,000 Income tax expense................. 280,000 Other comprehensive income.. 450,000 a. Prepare an income statement, including comprehensive income, for Anson Industries. b. Prepare an income statement and a separate statement of comprehensive income for Anson Industries.

The Model E extender fits with the 2 inch heavy duty hitches.The contract calls for 247 Model E extenders per week to be delivered in equal installments over the 16 weeks of the contract. The goal of Alpha Assemblies is to work 40 hours per week. The actual work time for completing the Model E extenders has been broken down by process in the table below. Also provided is the anticipated learning rate for each process. All processes must be performed in sequence and each step has its own separate and unique workcenter. To achieve the goal of working 40 hours per week or less, the cycle time must be lower than the takt time. What is the expected Cycle Time for Model E in Week 16? Note: learning is applied to the batch quantity per week. Do not try to break out the units within a week.Process Time Required per Unit Predecessor Task Learning RateA 9 82B 12 A 86C 18 B 81D 9 C 90E 12 D 80F 17 E 88G 14 F 83H 12 G 85I 8 H 82



Cycle Time = 10.19482 minute


From the question :

The Model E can be illustrated perfectly as shown below:

Process Time Required         Predecessor Task           Learning Rate

                per Unit

A                  9                                                                          82

B                 12                                     A                                  86

C                 18                                     B                                  81

D                 9                                      C                                  90

E                 12                                     D                                  80

F                 17                                     E                                   88

G                 14                                     F                                   83

H                 12                                     G                                  85

I                   8                                      H                                  82

Now For the minutes per week for each Process; we have :

Process Time Required         Predecessor      Learning      Minutes

                per Unit                    Task                   Rate               (Week 16)

A                  9                                                      82               4.069096

B                 12                           A                         86              6.564098

C                 18                          B                          81               7.74841

D                 9                           C                          90              5.9049

E                 12                           D                         80               4.9152

F                 17                            E                         88               10.19482

G                 14                           F                         83              6.644165

H                 12                           G                        85              6.264075

I                   8                            H                        82              3.616974

The objective here is to determine the expected Cycle Time for Model E in Week 16

So, we can equally regard the Cycle Time = Bottleneck of Activity for Week 16.

Cycle Time = 10.19482 minute   in as much as it is the the largest activity time for the week 16

Given that the demand per week is : = 247

The available time per week = 40 hours = 40 × 60 hours = 2400 minutes

Talk Time = Available Time Per Week/Demand Per Week

Talk Time = 2400/247

Talk Time = 9.716599

Thus; here  the cycle time is greater than the talk time.

The leader of two postpartum women's support groups is interested in the depression levels of the women in her groups. She administers the Center for Epidemiologic Studies Depression Scale (CES-D) screening test to the members of her groups. The CES-D is a 20-question self-test that measures depressive feelings and behaviors durin the previous week. The mean depression level from the screening test for the 6 women in the first group is mu_1 = 16; the mean depression level for the 10 women in the second group is mu_2 = 12. Without calculating the weighted mean for the combined group, you know that the weighted mean is: Midway between 16 and 12 Closer to 16 than to 12 Closer to 12 than to 16 Compute the weighted mean. Enter your answer rounded to one decimal place. mu = The support group leader realizes that she should also screen for alcohol abuse, so she gives the women in her two groups the Michigan Alcohol Screening Test (MAST). The MAST is a 22-question self-test focusing on the use and abuse of alcohol. The first group has a mean score of mu_1 = 18. The second group has a mean score of mu_2 = 14. Compute the weighted mean. Enter your answer rounded to one decimal place. mu =


The mean depression level  for the first group is μ₁= 16.

The mean depression level for the second group is μ₂ = 12

The weighted mean is closer to 12 than to 16.

The calculated weighted mean  for  CES-D is 13.5

The calculated weighted mean  for  MAST is 17.25 ≈ 17.0 rounded to 17.

Calculating the weighted mean μ

μ=   (w1x1 + w2x2)/(w1+w2)      {where x1 =μ₁ and x2= μ₂ }

μ= 16×6 + 10×12/ 6+10

μ= 216/16

μ= 13.5

The first group has a mean score of μ₁= 18.

The second group has a mean score of μ₂ = 14

Calculating the weighted mean μ

{where x1 =μ₁ and x2= μ₂ ; w1= number of women in the first   group and w2= number of women in the second group}

μ=   (w1x1 + w2x2)/(w1+w2)      

μ= 18×6 + 14×12/ 6+10

μ= 276/16

μ= 17.25≈ 17



The answer & explanation for this question is given in the attachment below.

Dollar General uses a cost leadership strategy. The Dollar General slogan is "Save time. Save money. Every day!®" Dollar General will be more effective if it has a mechanistic structure. Which of the following reasons explain this? Check all that apply.-Narrow spans of management ensure that employees operate efficiently.
-Centralized decision making allows the organization to place tighter controls on the way work is done and, in the process, achieve economies of scale



Narrow spans of management ensure that employees operate efficiently.

Centralized decision making allows the organization to place tighter controls on the way work is done and, in the process, achieve economies of scale.

Explanation: When the spans of management is narrow, proper supervising and controlling and coordination of work is done to achieve effective and efficient work done by the Employees.

A centralised decision making process helps the Organisation to have a tight control on its spendings and in the way work is done, this will help the Organisation to cut cost and take strategic decisions for organisational growth and development.

4th Time posting same QUSETION; I have due on tomorrow assignment; please some one help and provide correct answer.Problem 9-17
WACC Estimation

The table below gives the balance sheet for Travellers Inn Inc. (TII), a company that was formed by merging a number of regional motel chains.

Travellers Inn: December 31, 2012 (Millions of Dollars)
Cash $10 Accounts payable $10
Accounts receivable 20 Accruals 10
Inventories 20 Short-term debt 5
Current assets $50 Current liabilities $25
Net fixed assets 50 Long-term debt 30
Preferred stock 5
Common equity
Common stock $10
Retained earnings 30
Total common equity $40
Total assets $100 Total liabilities and equity $100
The following facts also apply to TII:

1. Short-term debt consists of bank loans that currently cost 8%, with interest payable quarterly. These loans are used to finance receivables and inventories on a seasonal basis, bank loans are zero in the off-season.

2. The long-term debt consists of 30-year, semiannual payment mortgage bonds with a coupon rate of 8%. Currently, these bonds provide a yield to investors of rd= 12%. If new bonds were sold, they would have a 12% yield to maturity.

3. TII's perpetual preferred stock has a $100 par value, pays a quarterly dividend of $2.50, and has a yield to investors of 11%. New perpetual preferred would have to provide the same yield to investors, and the company would incur a 3% flotation cost to sell it.

4. The company has 4 million shares of common stock outstanding. P0 = $20, but the stock has recently traded in price the range from $17 to $23. D0 = $1 and EPS0 = $2. ROE based on average equity was 26% in 2008, but management expects to increase this return on equity to 31%; however, security analysts and investors generally are not aware of management's optimism in this regard.

5. Betas, as reported by security analysts, range from 1.3 to 1.7; the T-bond rate is 10%; and RPM is estimated by various brokerage houses to be in the range from 4.5% to 5.5%. Some brokerage house analysts reports forecast dividend growth rates in the range of 10% to 15% over the foreseeable future.

6. TII's financial vice president recently polled some pension fund investment managers who hold TII's securities regarding what minimum rate of return on TII's common would make them willing to buy the common rather than TII bonds, given that the bonds yielded 12%. The responses suggested a risk premium over TII bonds of 4 to 6 percentage points.

7. TII is in the 35% federal-plus-state tax bracket.

8. TII's principal investment banker predicts a decline in interest rates, with rd falling to 10% and the T-bond rate to 6%, although the bank acknowledges that an increase in the expected inflation rate could lead to an increase rather than a decrease in interest rates.

Assume that you were recently hired by TII as a financial analyst and that your boss, the treasurer, has asked you to estimate the company's WACC under the assumption that no new equity will be issued. Your cost of capital should be appropriate for use in evaluating projects that are in the same risk class as the assets TII now operates. Do not round intermediate steps. Round your answer to two decimal places.



Wrong Answers:
14.29% & 14.76% --> Please someone give me right answer, I am posting same question 4th time; please dont post spam.

--> It's Problem 9-17 of mangerial finance course WACC Estimation problem; required to consider above table with given 8 assumption to get WACC value; it will be only one answer liike 15.12%; 17.32%.....




(1) Cost of short-term debt after tax : 8% ( 1 – tax rate)

                                                                 = 8% ( 1 – 35%)

                                                                = 8% (65%)

                                                                = 5.2%

Market value of Short term debt ( in million $) = 5

(2) Cost of long-term debt after tax: 8% ( 1 – tax rate)

                                                 = 8% ( 1 – 35%)

                                                 = 8% (65%)

                                                 = 5.2%

Market value of long term debt ( in $ million) = ( par value of Debt * coupon rate) / Yield

                                                                                 = (30 * 8%) / 12%

                                                                                  = 2.4 / 12%

                                                                                  = 20

(3) Market price of preferred stock = annual Dividend / Yield to investor

                                                              = ($2.50*4) / 0.11

                                                              = $ 10 / 0.11

                                                              = $ 90.909


Cost of new preferred stock = Annual dividend / Current market price – floatation cost

                                                        = ($2.50*4) / $ 90.909 – ( 3% * $ 90.909)

                                                        = $ 10 / $ 90.909 – $ 2.727

                                                        = $ 10 / $ 88.182

                                                        = 0.1134

                                                        = 11.34%

Market value of Preferred stock ($ millions) = Par value of Preferred * Annual Dividend rate / Yield

                                                                              = 5 * ( $ 10 / $ 100) / 0.11

                                                                             = 5 * 0.1 / 0.11

                                                                             = 0.5 / 0.11

                                                                             = 4.545454

(4)  Market value of Common stock ($ millions) = No of common stock outstanding * Current market price

                                                                             = 4 * 20

                                                                             = 80

Retention ratio = (1 – dividend pay-out ratio)

                           = (1 – $1 / $ 2)

                          = (1 – 0.5)

                          = 0.5

                          = 50%

Growth rate = return on equity * retention ratio

                      = 26% * 0.5

                      = 13%

Cost of common stock (Alternative 1) = (Dividend for next year / Current market price) + growth rate

                                                                  = [1 ( 1+ 0.13) / 20 ] + 13%

                                                                  = [1 ( 1.13) / 20 ] + 13%

                                                                  = [1.13 / 20 ] + 13%

                                                                 = 5.65% + 13%

                                                                 = 18.65%

Cost of common stock (alternative 2) = Risk free rate + Beta (Market risk premium)

                                                                 = 10% + [(1.3 + 1.7)/2] [(4.5% + 5.5%) /2]

                                                                = 10% + [(1.3 + 1.7)/2] [(4.5% + 5.5%) /2]

                                                               = 10% + (1.5)( 5%)

                                                               =10% + 7.5%

                                                              = 17.5%


Cost of Common stock (Alternative 3) = Yield on TII Bond + Average Risk premium

                                                                       = 12% + (4% + 6%) / 2

                                                                       = 12% + (10%) / 2

                                                                       = 12% + 5%

                                                                       = 17%

Cost of common stock = Highest of Alternative 1, Alternative 2 & Alternative 3

                                         = Highest of (18.65%, 17.5% and 17%)

                                        = 18.65%

Answer : Weighted Average cost of capital (WACC) of Company is 15.28% (take a look to the document attached)

A loan of 1000 is taken out at an annual effective interest rate of 5%. The loan will be repaid using the Sinking Fund Method. That is, level annual interest payments are made at the end of each year for 10 years, and the principal amount for the loan is repaid at the end of 10 years by making equal size payments into the fund at the end of each year for 10 years. If the sinking fund earns an annual effective interest rate of 4%, then find the difference between the interest payment on the loan and the interest earned by the sinking fund in the fifth year. Round your answer to the nearest whole number.



Interest paid each year = 5% of 1000 = $50

$1000 is to be paid at the end of 10 years.So payment each year = pmt(rate,nper,pv,fv) where rate = 0.04,nper=10 and fv =1000.

Payment into the fund =pmt(0.04,10,0,1000) = $83.29 each year

Value of the sinking fund at the end of the 4th year =pv(rate,nper.pmt) =pv(0.04,4,83.29) = 302.34

Interest earned by sinking fund in year 5 = 0.04*302.34 = 12.09

Interest on loan in 5th year = $50

So difference between the interest payment on the loan and the interest earned by the sinking fund in the fifth year. = 50-12.09 = 37.91 = $38 (to nearest whole number)

Companies prepare direct labor budgets to ________. avoid labor shortages determine the direct labor-hours per unit ensure timely supply of raw materials reduce inventories



direct labor-hours per unit


A labor budget is prepared to determine the business` need for planned labor in the budget period.

It can be prepaid to show :

  1. the number of labor hours required
  2. the number of workers required
  3. cost of hiring the required number of workers

All of this also applies for a unit production.

Other Questions