DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. $MARR$ is 6 percent/year.

$$\begin{array}{|c|c|c|} \hline \text { End of Year } & \text { Receipts } & \text { Disbursements } \\ \hline 0 & \$ 0 & \$ 5,000 \\ \hline 1 & \$ 0 & \$ 200 \\ \hline 2 & \$ 2,000 & \$ 300 \\ \hline 3 & \$ 4,000 & \$ 600 \\ \hline 4 & \$ 3,000 & \$ 1,000 \\ \hline 5 & \$ 1,600 & \$ 1,500 \\ \hline \end{array}$$

a. What is the annual worth of this investment?

b. What is the decision rule for judging the attractiveness of investments based on annual worth?

c. Should DuraTech implement the proposed process improvement?

A company stocks an SKU with a weekly demand of $600$ units and a lead time of $4$ weeks. Management will tolerate one stock out per year. If sigma for the lead time is $100$ and the order quantity is $2500$ units, what is the safety stock, the average inventory, and the order point?

Merger Offers [LO1] Suppose a company in which you own stock has attracted two takeover offers. Would it ever make sense for your company's management to favor the lower offer? Does the form of payment affect your answer at all?

Trent earns scores of 66, 84, and 72 on three chapter tests for a certain class. His homework grade is 60 and his grade for a class project is 85. The overall average for the course is computed as follows: the average of the three chapter tests makes up 50% of the course grade; homework accounts for 20% of the grade; the project accounts for 10%; and the final exam accounts for 20%. What scores can Trent earn on the final exam to pass the course if heeds a "C" or better? A "C" or better requires an overall score of 70 or better, and 100 is the highest score that can be earned on the final exam. Assume that only whole-number scores are given.

A company stocks an SKU with a weekly demand of $225$ units and a lead time of $3$ weeks. Management will tolerate one stock out per year. If sigma for the lead time is $175$ and the order quantity is $800$ units, what is the safety stock, the average inventory, and the order point?

DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. $MARR$ is 6 percent/year.

$$\begin{array}{|l|c|c|c|c|c|c|} \hline \text { End of Year } & 0 & 1 & 2 & 3 & 4 & 5 \\ \hline \text { Receipts } & \$ 0 & \$ 0 & \$ 2,000 & \$ 4,000 & \$ 3,000 & \$ 1,600 \\ \hline \text { Disbursements } & \$ 5,000 & \$ 200 & \$ 300 & \$ 600 & \$ 1,000 & \$ 1,500 \\ \hline \end{array}$$

a. What is the future worth of this investment?

b. What is the decision rule for judging the attractiveness of investments based on future worth?

c. Should DuraTech implement the proposed process improvement?

DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. $MARR$ is 6 percent/year.

$$\begin{array}{|l|c|c|c|c|c|c|} \hline \text { End of Year } & 0 & 1 & 2 & 3 & 4 & 5 \\ \hline \text { Receipts } & \$ 0 & \$ 0 & \$ 2,000 & \$ 4,000 & \$ 3,000 & \$ 1,600 \\ \hline \text { Disbursements } & \$ 5,000 & \$ 200 & \$ 300 & \$ 600 & \$ 1,000 & \$ 1,500 \\ \hline \end{array}$$

a. What is the external rate of return of this investment?

b. What is the decision rule for judging the attractiveness of investments based on external rate of return?

c. Should DuraTech implement the proposed process improvement?

We've emphasized that the firm should pay attention only to cash flows when assessing the net present value of proposed projects. Depreciation is a noncash expense. Why then does it matter whether we assume straight-line or MACRS depreciation when we assess project NPV?

A possible disadvantage of the ABC method is: (a) It does not allocate costs to the way production work occurs (b) It is more expensive to operate than a traditional allocation system (c) It does not help understand the economic impact of management decisions (d) It cannot identify wasteful products and unnecessary costs

Among companies doing highway or bridge construction, 80% test employees for substance abuse (based on data from the Construction Financial Management Association). A study involves the random choosing of 10 such companies.

a. Find the probability that exactly 5 of the 10 companies test for substance abuse.

For a class project, Jane "bought" shares of stock in three companies. She bought 150 shares of a utility company, 100 shares of a computer company, and 200 shares of a food company. At the end of the project, she "sold" all of her stock.

$$\begin{array}{|c|c|c|}\hline \text{Company}&\text{Purchase Price per share (\$)}&\text{Selling Price per share (\$)} \\ \hline \text { utility } & {54.00} & {55.20} \\ \hline \text { computer } & {48.00} & {58.60} \\ \hline \text { food } & {60.00} & {61.10} \\ \hline \end{array}$$

Organize the data in two matrices and use matrix multiplication to find the total amount that Jane spent for the stock.

DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6 percent/year.

$$\begin{array}{|l|c|c|c|c|c|c|} \hline \text { End of Year } & 0 & 1 & 2 & 3 & 4 & 5 \\ \hline \text { Receipts } & \$ 0 & \$ 0 & \$ 2,000 & \$ 4,000 & \$ 3,000 & \$ 1,600 \\ \hline \text { Disbursements } & \$ 5,000 & \$ 200 & \$ 300 & \$ 600 & \$ 1,000 & \$ 1,500 \\ \hline \end{array}$$

a. What is the internal rate of return of this investment?

b. What is the decision rule for judging the attractiveness of investments based on internal rate of return?

c. Should DuraTech implement the proposed process improvement?

Define an aquifer. How common are aquifers in the United States?

DuraTech Manufacturing is evaluating a process improvement project. The estimated receipts and disbursements associated with the project are shown below. MARR is 6 percent/year. |End of Year |Receipts |Disbursements

|--|--|--| |0 |$0 |$5,000 | |1 |$0 |$200 | |2 |$2.000 |$300 | |3 |$4.000 |$600 | |4 |$3,000 |$1,000 | 5 $1,600$1,500

a. What is the present worth of this investment?

b. What is the decision rule for judging the attractiveness of investments based on present worth?

c. Should DuraTech implement the proposed process improvement?