Differential Analysis: The Key to Decision Making

Differential Analysis:  The Key to Decision Making

Internet Exercise #1

Go to the Flowers Foods website at http://flowersfoods.com and click on the Virtual Bakery Tour link (accessible from the Company Info pull-down menu). Take the tour of the company’s bakery in Texas. After taking the tour, answer the following questions:

  • What functions have been outsourced?
  • Which parts of the general production process have been automated?
  • Which parts of the bread-line have been automated?
  • Which parts of the production process are still labor-intensive?

 

Week 7 Chapter 8

Capital Budgeting Decisions

Internet Exercise #1

Besides being an environmentally appealing alternative to other methods of generating electrical power, wind turbines can be profitable. The Danish Wind Industry Association maintains a web site at http://www.windpower.org/en/ that allows potential customers to compute the net present value of investments in wind-powered turbines. Click on the Know How button at the top of the home page, then on the Guided Tour link, then on the Economics link, and finally on the Economics Calculator link.

Perform the following and then write a brief paper (5 paragraphs) that summarizes your findings.

  • Review the net present value calculation for the default data that already appears on the screen. What discount rate is being used in this present value calculation? Verify the net present value calculation for the default data that already appears on the screen. (Show your calculations in your paper.)
  • What is the internal rate of return inherent in this default data project?
  • Change the “real” interest rate (i.e. what we think of as the discount rate or the cost of capital) to 12%. What happens to the net present value of the wind turbine? Why did or didn’t it change?
  • Keep the “real” interest rate (i.e., the discount rate) at 12%. What happens to the internal rate of return? Why did or didn’t it change?
  • How high would the price per kWh (i.e., kilowatt hour) for electricity have to be to make this an attractive investment?

 

Week 8 Chapter 9
Master Budgeting
Internet Exercise #1

Use an online yellow pages directory (use internet search engine to locate) to identify a sizable nonprofit or governmental organization in your area with a website. Find out as much as you can about the organization’s operations from its website. (Note that the records of such organizations are often organized by “fund.” Think of a fund as a segment of an organization. You will not be expected to understand or describe why they account for the organization in this manner.) Then contact the organization and, explaining you’re a student completing an assignment, ask for an appointment with the controller or chief financial officer of the organization (or other appropriate financial person) to ask them the following questions:

  • What are the main operations of the organization and how is it organized?
  • How are the organization’s overall budget goals set?
  • What is the process used to build the budget?
  • Who participates in the process and how much input does each participant have?
  • How long does it take to build the budget?
  • What are the main benefits of the budgeting process? How are the budgets used?

Write a brief paper (2 – 3 pages) that summarizes the answers to each of the questions listed above. Your paper should include contact information (person’s name, title, organization name, phone number, email address, etc.) for the controller or chief financial officer with whom you met.