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p1-4

2 PART 1 Introduction to Managerial Finance n, monitor, and assess her financial position typically a month. Jane has a savings account, per year while it offers short-term investment Personal Finance Problem 4 P1-3 Cash flows I t is typical for Jane to pla and her bank loans money at 6 percent using cash flows over a given percent. Jane's cash flows during August were as followss Cash outflow $1,000 Interest received S 450 -500 -800 Salary Auto payment Utilities Mortgage -355 -280 -1,200 -222 a. Determine Jane's total cash inflows and cash outflows b. Determine the net cash flow for the month of August. c. If there is a shortage, what are a few options open to Jane? re is a surplus, what would be a prudent strategy for her to follow? anybenefit analysis and the goal of the firm Ken Allen, capital budgeting cars, Inc, has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truc gear line will produce total benefits of $560,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today's dollars) over that same time period. An initial cash investment of $220,000 would required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Show how Ken will apply marginal cost-benefit be analysis techniques to determine the following a. The marginal (added) benefits of the proposed new robotics. b. The marginal (added) cost of the proposed new robotics. c. The net benefit of the proposed new robotics. d. What should Ken recommend that the company do? Why? e. What factors besides the costs and benefits should be considered before the final decision is made? P1-5 Identifying agency problems, costs, and resolutions Explain why each of the follow- ing situations is an agency problem and what costs to the firm might result from it. Suggest how the problem might be handled short of firing the individual(s) involved. a. The front desk receptionist routinely takes an extra 20 minutes of lunch time to 6 run personal errands. gains when the costs come in lower than the estimates. possiblity of a merger in which she would become the CEO of b. Division managers are padding cost estimates so as to show short-term efficiency Iks with a competitor about the the combined

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