Tag: homeworks and essays

Google has invested $450 million + working capital of $50 million to convert an old paper mill in Hamina, Finland into a state-of-the-art data centre. The project has a lifespan of 10 years . The rationale for the investment is to increase capacity and position the company for a push into the cloud computing market where Amazon Web Services currently dominates.

 

 

 

1. Google’s sales of cloud computing services are $800 million in 2013. Sales revenue is expected to grow at 20 percent p.a. even without the new data centre.

 

 

 

2. It is expected that the Hamina data centre will add 3.50 percent p.a. to sales revenue. Therefore, in year 1 (2014) sales revenue would be $960 million without the new centre. With the new centre it will be 3.50 percent more, or $993.6 million. Note: this is different than simply increasing the growth rate of sales by 3.50 percent to make a total of 23.50 percent p.a. Don’t take my word for it, try it!

 

 

 

3. Wages are a variable cost. The data centre will employ 90 people in 2014. The wages cost will be $6,000,000 in 2014. Wages costs are expected to grow by 2 percent p.a. in each subsequent year.

 

 

 

4. Other variable costs associated with running the data centre will amount to $21,000,000 in 2014. These other variable costs will also grow at 2 percent p.a. in each subsequent year.

 

 

 

5. Fixed costs will amount to $2,000,000 in 2014. These are expected to grow by 3 percent p.a. in each subsequent year.

 

 

 

6. Further injections of working capital will be required in 2016 and 2019. $55,000,000 will be required in each of these years. All working capital is returned at the end of the project.

 

 

 

7. The depreciation rule that should be applied is ‘straight-line-to-zero’.

 

 

 

8. The taxation rate that should be applied throughout the analysis is the average corporate taxation rate in the United States. This is 25 percent.

 

 

 

9. If you record a negative EBIT in any given year, taxes should be set to $0.00 for that year.

 

 

 

10. The corporate finance team recommends a discount rate of 12.50 percent be used to evaluate the investment.

 

 

 

 

 

In Google’s assessment, the key to the project is the savings that it may be able to obtain on electricity. Data centres require a lot of electricity. In 2010, for example, Google consumed 2.26 terawatt hours of electricity (about the equivalent of annual usage of 200,000 households). In fact, in 2010, data centres run by companies like Microsoft, Amazon and Facebook were responsible for 1.5% of the world’s total electricity usage . Powering the internet consumes 10% of the world’s electricity each year . Google is a leader in renewable energy. 34% of its annual power consumption comes from renewable sources .

 

 

 

 

 

The data centre in Finland has a number of electricity saving features:

 

 

 

1. Finland has a moderate climate. Air conditioning is not usually necessary even on the hottest summer days . Of course, winter becomes very cold.

 

 

 

2. The facility in Hamina used to be a paper mill. When Google acquired it, the facility had a seawater intake tunnel taking in cold water from the Gulf of Finland. This now forms the heart of a seawater cooling system that further reduces the need for air conditioning units.

 

 

 

3. Usually, electricity usage suffers from ‘leakage’. Google’s data centre will run at 80% efficiency (only 20% ‘leakage’) versus an industry average of 40% (60% leakage) :

 

 

 

 

 

The standard measurement of data centre efficiency is called power usage effectiveness, or PUE. A perfect number is XXXXX meaning all the power drawn by the facility is put to use. Experts considered 2.0—indicating half the power is wasted—to be a reasonable number for a data centre. Google was getting an unprecedented 1.2.

 

 

 

 

 

3. The final efficiency feature takes advantage of the renewable energy initiatives that have been developed in many European countries over the past several decades in tandem with Scandinavia’s integrated electricity grid that connects countries like Finland with nearby Sweden. In particular, Google will access 72 MW p.a. of wind power from a facility in Sweden.

 

 

 

 

 

These efficiency measures translate into cash flows:

 

 

 

1. Google will save $48,000,000 in 2014 electricity generation costs by shifting capacity from existing data centres to Hamina. This saving is expected to grow by 11% per year. This comes from two sources. First, as electricity gradually becomes more expensive, the efficiencies become worth more in dollar terms. Second, the Finnish government will provide tax concessions for efficient electricity generation.

 

 

 

 

 

 

 

Your Task

 

 

 

1. Use the financial information given below to compute a NPV and IRR for the investment in the Hamina data centre.

 

 

 

2. Perform a ‘sensitivity analysis’ on your results by reworking the NPV and IRR calculations across a range of operating cash flows: – 20 percent, – 10 percent, + 10 percent, + 20 percent of the original operating cash flow numbers .

 

 

 

3. Drawing on your initial analysis (point 1) and your sensitivity analysis (point 2), explain whether the project is likely to create market value for Google

 

 

Before starting on this assignment, make sure to thoroughly review the required background materials. Make sure you fully understand both the basic concepts as well as how to calculate payback period, NPV, IRR, and WACC. Submit your answers in a Word document. Make sure to show your work for all quantitative questions and fully explain your answers using references to the background readings for any conceptual questions. Questions 1 and 2 will require Excel. Attach an Excel file to show your computations for Questions 1 and 2.

Case Assignment

1. The table below gives the initial investment and expected cash flows over the next five years for two different projects. Assume that the industry you are in expects a return of 10%, which you use as the discount rate in net present value (NPV) calculations and as the required rate of return for purposes of deciding on projects. Also, assume that management only wants to invest in projects that pay off within four years.

For each project, compute the payback period, NPV, and internal rate of return (IRR). Then explain whether each project should be accepted based on these three criteria.

	Project A	Project B
Initial Investment	$40,000	$28,000
Year	Cash Flows
1	$10,000	$10,000
2	$10,000	$13,000
3	$10,000	$5,000
4	$10,000	$5,000
5	$10,000	$6,000

2. Suppose you are planning on becoming a vendor at the arena where your favorite sports team plays. You are trying to decide between opening up a souvenir stand selling T-shirts, caps, etc., with your sports team’s logo or opening up a hot dog and beer stand. It is more expensive to open up the hot dog and beer stand because you need to purchase a license to serve alcohol and you need to spend money to comply with health department regulations. Revenue from the souvenir stand is likely to be unpredictable because fans of your favorite team tend to want to purchase hats and T-shirts only when the team is winning. Revenue from hot dogs and beer seem to be a little more steady since fans want to eat and drink regardless of whether the team is winning. Below is a table with the initial investment cost of each type of stand and the annual payments you expect over the next five years. The annual payments will be different depending on how well your team does. Therefore, you will estimate how much cash flow you will get depending on whether your team does better than expected (optimistic), the same as the past few years (most likely), and worse than expected (pessimistic). Use a discount rate of 8%.

Based on the table below, answer the following items:

A. Calculate the net present value (NPV) for each type of stand under each of the three scenarios. Calculate the range of possible NPV values for each type of stand.

B. Based on your answer to A) above and your own guesses about how well you think your favorite team will do over the next five years, which type of stand would you rather invest in?

	Souvenir Stand	Hot Dog and Beer Stand
Initial Investment	$100,000	$150,000
	Annual Cash Inflows (5 Years)
Outcome
Pessimistic	$30,000	$50,000
Most likely	$50,000	$60,000
Optimistic	$70,000	$70,000

3. Suppose you are a corn farmer in your home state. You have to decide between two projects. One project is to purchase new equipment for your farm that will help boost your profits for the next 10 years. You also find out that you can purchase a large banana farm in Brazil for the same price as the equipment, and at the current market price for bananas you will make a lot more profit than you would from purchasing new corn farming equipment. After asking around, you find out that the standard discount rate for evaluating the NPV of the farming project is 6%. Most farmers in your home state seem to use this rate successfully. However, you don’t know any other banana farmers and you don’t know too much about farming in Brazil, so you have to make a guess on an appropriate discount rate for the Brazilian banana farm. Based on the concepts from the background readings, would you say the Brazilian banana farm will need a lower or higher discount rate? A lot larger or smaller, or only a little?

4. Calculate the following:

A. The cost of equity if the risk-free rate is 2%, the market risk premium is 8%, and the beta for the company is 1.3.

B. The cost of equity if the company paid a dividend of $2 last year and is expected to grow at a constant rate of 7%. The stock price is currently $40.

C. The weighted average cost of capital (WACC) if the company has a total value of $1 million with a market value of its debt at $600,000 and a market value of its equity at $400,000. Its cost of debt is 6% and its cost of equity is 15%. The tax rate it pays is 25%.

5. Suppose you own a chain of dry cleaners and the WACC you’ve been using to make decisions on new purchases of dry cleaning equipment is a steady 9%. Recently, gambling has been made legal in your home town so you decide to expand and open up a casino. Should you use the same WACC to evaluate purchases of casino equipment? Why or why not? What are some alternatives to using the same WACC to make decisions on casino equipment? Explain your reasoning, and make references to concepts from the background readings.

Assignment Expectations

· Answer the assignment questions directly.

· Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.

· For computational problems, make sure to show your work and explain your steps.

· For short answer/short essay questions, make sure to reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper, including pages 11-14 on in-text citations. Another resource is the “Writing Style Guide,” which is found under “My Resources” in the TLC Portal.

Unit III PowerPoint Presentation

Ultimately, a manager o Unit III PowerPoint Presentation
Ultimately, a manager or supervisor within an organization should be responsible for team development. Inevitably, however, differences among team members will arise. Based on the Team-Building Checklist found on page 89 of the textbook, design a PowerPoint presentation that illustrates your understanding of how various problems are diagnosed within a team and how these problems can serve as detriments to team success. Also, discuss the team building cycle and how it can be used to develop activities for solving problems within teams. At least two additional resources should be used in addition to your textbook and each should be cited and referenced properly using APA formatting. The presentation should consist of a title slide, a minimum of six slides of content, and a reference slide.
Unit V Case Study
In any team, problems will arise and team members will have questions about the conflict and how to resolve it. Members across departments must collaborate and contribute to the resolution of any unhealthy form of team conflict. Based on Case One: ElectriGov (found on page 177 in your textbook), answer the following questions:
1. Why is it important for an organization to have a mission?
2. Why is it important for team members to know their roles on a team?
3. Is competition within a team a good or bad thing? Explain your response.
4. Why is it important to set short- and long-term goals when planning a meeting regarding conflicts? Provide examples.
5. Why is it significant for leaders to understand how to resolve conflict and avoid unhealthy agreements?
Your Case Study should be in APA style with a minimum of two pages (not including the title and references pages). r supervisor within an organization should be responsible for team development. Inevitably, however, differences among team members will arise. Based on the Team-Building Checklist found on page 89 of the textbook, design a PowerPoint presentation that illustrates your understanding of how various problems are diagnosed within a team and how these problems can serve as detriments to team success. Also, discuss the team building cycle and how it can be used to develop activities for solving problems within teams. At least two additional resources should be used in addition to your textbook and each should be cited and referenced properly using APA formatting. The presentation should consist of a title slide, a minimum of six slides of content, and a reference slide.

Unit V Case Study

In any team, problems will arise and team members will have questions about the conflict and how to resolve it. Members across departments must collaborate and contribute to the resolution of any unhealthy form of team conflict. Based on Case One: ElectriGov (found on page 177 in your textbook), answer the following questions:

1. Why is it important for an organization to have a mission?

2. Why is it important for team members to know their roles on a team?

3. Is competition within a team a good or bad thing? Explain your response.

4. Why is it important to set short- and long-term goals when planning a meeting regarding conflicts? Provide examples.

5. Why is it significant for leaders to understand how to resolve conflict and avoid unhealthy agreements?

Your Case Study should be in APA style with a minimum of two pages (not including the title and references pages).

In its annual report, WRS Athletic Supply, Inc. includes the following five-year financial summary.

WRS ATHLETIC SUPPLY, INC.

Five-Year Financial Summary (Partial; adapted)

(Dollar amounts in thousands except per share data) 2018 2017 2016 2015 2014 2013

Net Sales $244,524 $217,799 $191,329 $165,013 $137,634

Net Sales Increase 12% 14% 16% 20% 17%

Domestic Comparative Store Sales Increase 5% 6% 5% 8% 9%

Other Income-Net 2,001 1,873 1,787 1,615 1,391

Cost of Goods Sold 191,838 171,562 150,255 129,664 108,725

Operating, Selling, and General and Administrative Expenses 41,236 36,356 31,679 27,408 22,516

Interest:

Interest Expense (1,063) (1,357) (1,383) (1,045) (803)

Interest Income 138 171 188 204 189

Income Tax Expense 4,487 3,897 3,692 3,338 2,740

Net Income 8,039 6,671 6,295 5,377 4,430

Per Share of Common Stock:

Net Income 1.81 1.49 1.41 1.21 0.99

Dividends 0.30 0.28 0.24 0.20 0.16

Financial Position

Current Assets, Excluding Merchandise Inventory $ 30,483 $ 27,878 $ 26,555 $ 24,356 $ 21,132

Merchandise Inventory at LIFO Cost 24,891 22,614 21,442 19,793 17,076 $16,497

Property, Plant, and Equipment, Net 51,904 45,750 40,934 35,969 25,973

Total Assets 94,685 83,527 78,130 70,349 49,996

Current Liabilities 32,617 27,282 28,949 25,803 16,762

Long-term Debt 22,731 21,143 17,838 18,712 12,122

Shareholders’ Equity 39,337 35,102 31,343 25,834 21,112

Financial Ratios

Acid-test Ratio 0.9 1.0 0.9 0.9 1.3

Rate of Return on Total Assets 10.2% 9.9% 10.3% 10.7% 9.6%

Rate of Return on Shareholders’ Equity 21.6% 20.1% 22.0% 22.9% 22.4%

Requirements

1. Analyze the company’s financial summary for the fiscal years 2014-2018 to decide whether to invest in the common stock of WRS. Include the following sections in your analysis, and fully explain your final decision.

1. Trend analysis for net sales and net income (use 2014 as the base year).

2. Profitability analysis.

3. Evaluation of the ability to sell merchandise inventory (WRS uses the LIFO method).

4. Evaluation of the ability to pay debts.

5. Evaluation of dividends.

Problem 15-1 : Break-even Quantity: Shapland Inc. has fixed operating costs of $550,000 and variable costs of $41 per unit. If it sells the product for $85 per unit, what is the break-even quantity?

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Problem 15-2: Unlevered Beta: Counts Accounting has a beta of 1.40. The tax rate is 35%, and Counts is financed with 40% debt. What is Counts’ unlevered beta? Round your answer to two decimal places.

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Premium for Financial Risk: Ethier Enterprise has an unlevered beta of 1.25. Ethier is financed with 50% debt and has a levered beta of 1.75. If the risk free rate is 3.5% and the market risk premium is 7%, how much is the additional premium that Ethier’s shareholders require to be compensated for financial risk? Round your answer to two decimal places.

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Problem 15-4 Value of Equity after Recapitalization

Nichols Corporation’s value of operations is equal to $400 million after a recapitalization (the firm had no debt before the recap). It raised $180 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recap. After the recap, wd = 45%. What is S (the value of equity after the recap)? Enter your answer in millions of dollars.

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Problem 15-5 Stock Price After Recapitalization

Lee Manufacturing’s value of operations is equal to $900 million after a recapitalization (the firm had no debt before the recap). Lee raised $514.29 million in new debt and used this to buy back stock. Lee had no short-term investments before or after the recap. After the recap, wd = 4/7. The firm had 35 million shares before the recap. What is P (the stock price after the recap)? Round your answer to the nearest cent.

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Problem 15-6 Shares Remaining After Recapitalization Dye Trucking raised $200 million in new debt and used this to buy back stock. After the recap, Dye’s stock price is $5.25. If Dye had 65 million shares of stock before the recap, how many shares does it have after the recap? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.

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Problem 15-7 Break-even Point Schweser Satellites Inc. produces satellite earth stations that sell for $95,000 each. The firm’s fixed costs, F, are $1.5 million, 50 earth stations are produced and sold each year, profits total $400,000; and the firm’s assets (all equity financed) are $4 million. The firm estimates that it can change its production process, adding $3.5 million to investment and $410,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $12,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $89,000 to permit sales of the additional output. The firm has tax loss carryforwards that render its tax rate zero, its cost of equity is 15%, and it uses no debt.

a. What is the incremental profit? To get a rough idea of the project’s profitability, what is the project’s expected rate of return for the next year (defined as the incremental profit divided by the investment)? Round your answer to two decimal places.

The incremental profit is %

b. Would the firm’s break-even point increase or decrease if it made the change? By how much? Enter your answer as positive number if it increases or negative number if it decreases.

The break-even point changes by units.

Move

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Problem 15-10 Optimal Capital Structure with Hamada

Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6%, and its stock price is $30 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm’s EBIT is $12.401 million, and it faces a 30% federal-plus-state tax rate. The market risk premium is 5%, and the risk-free rate is 4%. BEA is considering increasing its debt level to a capital structure with 50% debt, based on market values, and repurchasing shares with the extra money that it borrows. BEA will have to retire the old debt in order to issue new debt, and the rate on the new debt will be 10%. BEA has a beta of 1.1.

a. What is BEA’s unlevered beta before restructuring? Use market value D/S (which is the same as wd/ws) when unlevering. Round your answer to three decimal places.

Unlevered beta is

b. What are BEA’s new beta after releveraging and cost of equity if it has 50% debt? Round your answers to two decimal places.

The new beta is .

The new cost of equity is %.

c. What is BEA’s WACC after releveraging? Round your answer to two decimal places.

BEA’s WACC after releveraging is %.

d. What is its total value of the firm with 50 % debt? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.

The total value of the firm with 50% debt is $ million.

Write a 1,050- to 1,400-word paper in which you:

Describe the Planning Process Groups of project management.
Explain the difference between project management and operations management.
Define the following five process components and provide relevant examples for each process component:
Initiating Process Group
Planning Process Group
Executing Process Group
Monitoring and Controlling Process Group
Closing Process Group

Format your paper consistent with APA guidelines, Please do spell and punctuation check and Plagiarism needs to be less than 5%. Include all references and websites used.

Write a 1,050- to 1,400-word paper in which you:

Describe the Planning Process Groups of project management.
Explain the difference between project management and operations management.
Define the following five process components and provide relevant examples for each process component:
Initiating Process Group
Planning Process Group
Executing Process Group
Monitoring and Controlling Process Group
Closing Process Group

Format your paper consistent with APA guidelines, Please do spell and punctuation check and Plagiarism needs to be less than 5%. Include all references and websites used.