Week 6 Finance help

Please complete the attached 3 questions  and homework/quiz on pearson. Thank you

Week 6 – Assignment Problems

P1.
Wren Manufacturing is in the process of analyzing its investment decision-making procedures. The two projects evaluated by the firm during the past months were Project 263 and 264. The basis variables surrounding each project analysis, using the

IRR

decision technique, and the resulting decision actions are summarized in the following table.

15 years

Basic Variables	Project 263	Project 264
Cost	$64,000	$58,000
Life		15 years
IRR	8%	15%
Least-cost financing
Source	Debt	Equity
Cost (after-tax)	7%	16%
Decision
Action	Accept	Reject
Reason	8% IRR > 7% cost	15% IRR < 16% cost

a. Evaluate the firm’s decision-making procedures, and explain why the acceptance of Project 263 and rejection of Project 264 may not be in the owner’s best interest.

b. If the firm maintains a capital structure containing 40% debt and 60% equity, find its weighted average cost using the data in the table.

c. If the firm had used the weighted average cost calculated in part b, what actions would have been indicated relative to projects 263 and 264.

d. Compare and contrast the firm’s actions with your findings in part c. Which decision method seems more appropriate? Explain why.

P2.
Barry Carter is considering opening a music store. He wants to estimate the number of CDs he must sell to break even. The CDs will be sold for $13.98 each, variable operating costs are $10.48 per CD, and annual fixed operating costs are $73,500.

a. Find the operating breakeven point in number of CDs.

b. Calculate the total operating costs at the breakeven volume found in part a.

c. If Barry estimates that at a minimum he can sell 2,000 CDs per month should he go

into the music business?

d. How much EBIT will Barry realize if he sells the minimum 2,000 CDs per month

noted in part c?