Cayuga Cookies Inc. Case Study Assignment Analysis Help With Solution

Posted on April 13, 2017

Cayuga Cookies Inc. Case Study Assignment Analysis Help With Solution

Management Accounting Case: Cayuga Cookies, Inc.
 
The specific course learning outcomes associated with this assignment are:
Determine how capital budgeting is used in long-term financial decisions.
Apply management accounting concepts to identify and process relevant financial information for decision-making purposes.
Use technology and information resources to research issues in financial reporting and analysis.
Write clearly and concisely about financial reporting and analysis using proper writing mechanics.
 
Assignment:
Sophie Morgan, President of Cayuga Cookies, Inc. (CCI), was trying to decide whether to expand the company by adding a new product line. The proposal seemed likely to be profitable and adequate funds to finance it could be obtained from outside investors.
 
CCI had long been regarded as a well-managed company. It had succeeded in keeping its present product lines up to date and had maintained a small but profitable position in a highly competitive industry.
The amount of capital presently employed by the company was approximately $4,000,000, and was expected to remain at this level whether the proposal for the new product line was accepted or rejected. Net income from existing operations amounted to about $400,000 a year, and Morgan’s best forecast was that this would continue to be the income from present operations.
 
Introduction of the new product line would require an immediate investment of $400,000 in equipment and $250,000 in additional working capital. A further $100,000 in working capital would be required a year later.

Sales of the new product line would be relatively low during the first year, but would increase steadily until the sixth year. After that, changing tastes and increased competition would probably begin to reduce annual sales. After eight years, the product line would probably be withdrawn from the market. At that time, the company would dispose of the equipment and liquidate the working capital. The cash value of steps to close the product line at that time would be about $350,000.
 
The low initial sales volume, combined with heavy promotional outlays, would lead to heavy losses in the first two years, and no net income would be reported until the fourth year. The profit forecasts for the new product line are summarized

How it Works

How It works ?

Step 1:- Click on Submit your Assignment here or shown in left side corner of every page and fill the quotation form with all the details. In the comment section, please mention product code mentioned in end of every Q&A Page. You can also send us your details through our email id support@assignmentconsultancy.com with product code in the email body. Product code is essential to locate your questions so please mentioned that in your email or submit your quotes form comment section.
 
Step 2:- While filling submit your quotes form please fill all details like deadline date, expected budget, topic , your comments in addition to product code . The date is asked to provide deadline.
 
Step 3:- Once we received your assignments through submit your quotes form or email, we will review the Questions and notify our price through our email id. Kindly ensure that our email id assignmentconsultancy.help@gmail.com and support@assignmentconcultancy.com must not go into your spam folders. We request you to provide your expected budget as it will help us in negotiating with our experts.
 
Step 4:- Once you agreed with our price, kindly pay by clicking on Pay Now and please ensure that while entering your credit card details for making payment, it must be done correctly and address should be your credit card billing address. You can also request for invoice to our live chat representatives.
 
Step 5:- Once we received the payment we will notify through our email and will deliver the Q&A solution through mail as per agreed upon deadline.
 
Step 6:-You can also call us in our phone no. as given in the top of the home page or chat with our customer service representatives by clicking on chat now given in the bottom right corner.

Features

Features for Assignment Help

Zero Plagiarism
We believe in providing no plagiarism work to the students. All are our works are unique and we provide Free Plagiarism report too on requests.

 

Relevancy
We believe in providing perfect, relevant and 100% accurate solutions to the student as per questions asked. All our experts are perfect in providing that so as to give unique experience to the students.

 

Three Stage Quality Check
We are the only service providers boasting of providing original, relevant and accurate solutions. Our three stage quality process help students to get perfect solutions.

 

 

100% Confidential
All our works are kept as confidential as we respect the integrity and privacy of our clients.

Related Services

Morgan was concerned about the effect this project would have on CCI's overall reported
profitability over the next three years. On the other hand, "eyeballing" the figures in Exhibit 1 led Morgan to guess that if the proposal were analyzed using after-tax cash flows discounted at 10 percent, it might well show a positive net present value, and hence could be a worthwhile investment opportunity.
 
Income Forecast for New Product Line:

YearForecasted Incremental Cash Flow from Operations1 (1) 

Depreciation Expense on New Equipment2 (2)

 

Forecasted Incremental Income Before Tax (3) = (1 + 2)

 

Income Tax3 at 40%

(4)

 

Forecasted Incremental Net Income After Tax4 (5) = (3 + 4)

1(350,000)(50,000)(400,000)160,000(240,000)
2(100,000)(50,000)(150,000)60,000(90,000)
30(50,000)(50,000)20,000(30,000)
4200,000(50,000)150,000(60,000)90,000
5500,000(50,000)450,000(180,000)270,000
61,000,000(50,000)950,000(380,000)570,000
7900,000(50,000)850,000(340,000)510,000
8650,000(50,000)600,000(240,000)360,000

Required:

  • Calculate the nominal and discounted payback periods for this
  • Calculate the net present value and internal rate of return of the proposed
  • Referring to your analysis in parts(1)and(2),what is your recommendation regarding the proposed project under the following three scenarios
  • If CCI was a private company,owned entirely by Sophie Morgan?
  • If CCI was a publicly owned company,with shares owned by a large number of small investors,and Morgan purely a salaried administrator?
  • If CCI was a wholly owned subsidiary of a much larger company and Morgan expected to be a candidate to succeed one of the parent company’stop executives who will retire from the company in about two years from now?

 
Product Code :Case99To get answer for this question, kindly click here (Note: Don’t forget to write the product code in comment section)You can also email us at assignmentconsultancy.help@gmail.com but please mentioned product code in the mail body while sending emails.You can browse more questions to get answer in our Q&A sections here.

Summary
User Rating
5 based on 1 votes
URL