SCENARIO 1:
Bonnesante Research is a start up business in Irvine, California focusing on biotech, and is based on 30 employees. As it grows, company's asset acquisition needs to be focused. Bonnesante needs to submit its first drug to Food and Drug Administration within six months. In order to run advanced analytical software for the preparation of the drug, it needs to acquire mainframe computer. Now the decision needs to be taken to either lease or buy the mainframe computer.
SOLUTION 1:
As a CFO of Bonnesante Research company, by taking my colleagues opinion into consideration, I have decided to lease the mainframe computer for 18 months instead of buying it.. The reason being is that the loan options were proposing significantly higher outflows and the leasing option of 18 month with no money down proposed the lowest present value of the cash outflows of the duration. Since Bonnesante is not a profitable company due to this reason the expenses for buying an asset will not be tax deductible, and loaning option will also require to record the transaction and corresponding liability on the balance sheet. But through the operating lease option, an asset will not need to be reported on balance sheet. Moreover, the technology can be outdated in the future and there could be a need of upgrading it. Due to all those reason, operating lease is the best option that a company has at this moment.
SCENARIO 2:
Another scenario is that the Bonnesante requires an advanced spectrometer for its Research and Development program. The cost of this spectrometer is $2,000,000 but Bonnesante is now operating as a profitable firm. The options are to do a short term operating lease, a long term capital lease or to buy the spectrometer.
SOLUTION 2:
Since Bonnesante is running as a profitable company now, and the need of spectrometer is a great asset for a company to have in Research and Development field and will not be obsolete in the long run and can be utilized through its entire economic life which is in this case is five years, this is why buying spectrometer on a 40 year loan with the down payment of $113,608 seems to me a good decision over all. By buying this asset, Bonnesante will also have a benefit of claiming it as an asset depreciation whereas it will not be an option in operating lease since in the leasing option lessor has the benefit of claiming for depreciation, not lessee.
This case study examines various real estate contracts – the Real Estate Purchase Contract (REPC) and two addendums labeled Addendum No. 1 and Addendum No. 2 – pertaining to the sale of 1234 Cul-de-sac Lane in Orem, Utah. The buyers in this contract are 17 year old Jon D’Man and 21 year old Marsha Mello; the seller is Boren T. Deal. The first contract created was Jon and Marsha’s offer to purchase Boren’s house. This contract was created using the RESC form, which was likely provided by their real estate agent as it is the required form for real estate transactions according to Utah state law. The seller originally listed the house on a Multiple Listing Service (MLS); Jon and Marsha agreed that the asking price was too high for the neighborhood (although we are not given the actual listing price), and agreed to offer two-hundred and seven-thousand dollars ($207,000) and an Earnest Money Deposit of five-thousand dollars ($5,000). Additionally, the buyers requested that the seller pay 3% which includes the title insurance and property taxes. After the REPC form was drafted, the two addendums were created. Addendum No. 1 is from the seller back to the buyer, and Addendum No. 2 is the buyer’s counteroffer to the seller.
In the second year of business at Golf Challenge Corporation the company is struggling. The cost of their inventory is rising, and they are in grave danger of losing their bank loan (their prime source of financing) due to not meeting the required financial ratios agreed and set forth by the bank at the time the loan was given. The owner comes up with a solution, and figures that instead of using Last in-First out (LIFO) the company can use First in-First Out inventory cost system (FIFO) and meet their required financial ratios set forth by the bank. Ultimately, Golf Challenge Corporation should not submit documents to the bank using FIFO as opposed to their previous system LIFO in order to meet the bank requirements
The purpose of this paper is to investigate capital budgeting decision under Galaxy Science Centre (GSC), which is non-profit organization. The need for such an analysis emerges from the case that only provides general information concerning the impact of capital budgeting decisions in the presence of strategic interactions among GSC. We are facing significant problems in different conditions, then through all given figures to make the best recommendations fro GSC.
Moncrief Company agreed to pay Jim Lester 20% of the gross profit made from the 2013 sales of the Zelenex. Between January 1, 2013 and December 28, 2013, Moncrief’s total available units for sale were, 50,000 units of Zelenex for $30.00 per unit ($1,500,000). Also in addition to the former activities, Moncrief sold 35,000 units for $60.00 per unit ($2,100,000). Moncrief Company uses periodic LIFO inventory method as a result, Jim Lester was to receive $210,000. (Textbook pg.469)
First of all an analysis of the packaging machine investment’s hurdle rate is required. I will use comparable firm parameters approach to figure out the hurdle rate (WACC) of the firm using the information provided in Exhibit 5. The cost of debt should be calculated using the bond information given in footnote 2 of case under Exhibit 2. The cost of equity should be calculated using the Capital Asset Pricing Model.
Next, given that Tremont has two mutually exclusive options for what to do with their property, it is important to review the different metrics we have calculated and focus on which is the better approach for Tremont. While EAA is calculated in the analysis, the equal timelines of the two mutually exclusive projects are the same, so EAA is largely irrelevant in this case. Additionally, the CFO’s requested Payback Period metric is simplistic and doesn’t consider time value of money, so it also should not be considered. Even Discounted Payback Period, which does take time value of money into account, still is based on an arbitrary cutoff point for decisions, so it is not helpful with our investment decisions. Additionally, Tremont should be looking to generate the maximum amount of value possible from their mutually exclusive projects, rather than just getting their money back as soon as possible.
The book Renting Lacy: A Story of America’s Prostituted Children by Linda Smith addresses the topic of the underground world of child sex trafficking. Unfortunately, it is a topic that has been purposefully neglected in our society for many years. The author presents every chapter with a real story of a sexually exploited child. The stories are intense, powerful but especially touching which makes the reader feel frustrated, desperate, and vexed. After every chapter, Smith tries to include commentaries that presents a deeper understating about human trafficking. It seems that the purpose of her commentaries is to make the reader think deeper about the problem of sex trafficking and accumulate desires to act towards this issue as they continue
The sales director proposed that if the firm were to reduce the price of Item 345 to FF15.00/m, they would be able to increase sales to 175,000 units (or 25% of industry volume). But if they were to keep the price at the current value of FF20.00/m, they would be able to sell not less than 75,000 units (or 11% of industry volume).
Buying a home can be an exciting experience for anyone. However, in some cases you just might be better off continuing to rent your home. There are many advantages to buying a home. However, it is not for everyone and buying varies from individual to individual. Currently more people are leaning towards renting but this could change in the near future.
...n. Based on the definition of asset/liability, the operating leases items meet it. Therefore the amount should show as asset/liability off balance sheet as well.
The Board of Directors unanimously voted for the immediate construction of a new state of the art facility to meet the increased demands. Unfortunately, the construction of the new facility will take three years to be completed. Jim Elliot recognizes this gap and believes that the three year gap will be too long and suggests developing short range solution while the facility is under construction.
There is a range of criteria relevant for a decision of financing a new venture. To construct my list for the evaluation of a new company as an opportunity I have selected to refer to t...
Roth, A.V., C. Gaimon, and L. Krazewski. " Optimal Acquisition of FMS Technology Subject to Technological Process. " Decision Sciences, Vol. 22, No. 2, Spring 1991, pp. 308-334. 15.
Zachariassen, F., & Arlbjørn, J. (2011). Exploring a differentiated approach to total cost of ownership. Industrial Management & Data Systems , 111 (3), 448-469.
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task.