Sheet1Net Present ValueIRRMIRRPaybackDiscounted PaybackProfitabilty IndexDifferential Stream of Cash FlowsDenver - Not different - DON’T do an NPV for Denver.Denver SituationIndia SituationYear012345012345Employees25Wage Rate$30$10.50Productivity per Hour75Productivity per Hour per Employee322.32.6453.041753.041753.04175Hours per day8Days per year250Labor Cost for Denver????Annual Wage Inflation in Denver6%6%6%6%6%6%10%10%10%10%10%Units of production????Demand up 10% / year for five yearsERROR:#VALUE!ERROR:#VALUE!ERROR:#VALUE!ERROR:#VALUE!ERROR:#VALUE!Denver Employeesyy+future hiresIndirect Costs = FIXED COSTS (do not change)Revenue and working capital only relevant if revenue is different in India versus Denver.You can assume its to Denver warehouse or assume to Chicago. Cost of Shipping Denver to Chicago per item0.755.00Shipping Inflation per year4%4%If moved to India - year zero cost reduction120,000If moved to India - need materials sooner(260,000)Cost of Capital? (%)Base rate is 14.8%, then add some premium based on your logic.Years012345Single Stream of Differential Cash FlowsInitial OutlayAnnual differential cash flows -1005060708070NPV$117IRR54%MIRR34%PaybackPI Sinhareeb Neqadimos Professor Fields ASTRONOMY 001 April 22nd, 2020 Midterm Corrections Question 1: The Sky Question 1B) The lunar and the solar calendars both use a change in an object in the heavens to track time, but one is a reflected motion and one is a real motion.  Which calendar is based off of a reflected motion and which real motion of Earth is responsible? - Question 1C) Use the real motion of Earth you didn't use for 1B and describe a reflected motion that it creates. - Question 2A) Give me an example of the ancient Greeks not following the rules of science and explain why they weren't doing the action of science correctly. - Question 3A) Explain one way that the interior, surface, and/or atmosphere of a terrestrial (Earth-type) planet interacts with one of the others. - Question 3B) Why doesn't the brightness of a star decide how hot a jovian (Jupiter-type) planet is, and briefly describe the process that actually does. - Question 3C) The Greenhouse Effect is actually an absorption-line spectrum.  Explain why. - Question 4A) The sun of the other solar system is a M star.  Where would that solar system's ice line be (compared to ours) and why? - Question 4B) Before I can use the blackbody curve to figure out the temperature of one of those planets from its color, what has to be true about that planet? - Question 4C) One terrestrial (Earth-type) planet in that other solar system is covered with craters and another one has almost no craters.  How could both planets be the same age? - Question 5A) First, give me two different possible reasons why the light did not go on.  Then, describe two experiments you could perform that would be able to distinguish between your two reasons (in more sciencey words, give me two hypotheses and come up with new observ.

1. Sheet1Net Present ValueIRRMIRRPaybackDiscounted
PaybackProfitabilty IndexDifferential Stream of Cash
FlowsDenver - Not different - DON’T do an NPV for
Denver.Denver SituationIndia
SituationYear012345012345Employees25Wage
Rate$30$10.50Productivity per Hour75Productivity per Hour
per Employee322.32.6453.041753.041753.04175Hours per
day8Days per year250Labor Cost for Denver????Annual Wage
Inflation in
Denver6%6%6%6%6%6%10%10%10%10%10%Units of
production????Demand up 10% / year for five
yearsERROR:#VALUE!ERROR:#VALUE!ERROR:#VALUE!ER
ROR:#VALUE!ERROR:#VALUE!Denver Employeesyy+future
hiresIndirect Costs = FIXED COSTS (do not change)Revenue
and working capital only relevant if revenue is different in India
versus Denver.You can assume its to Denver warehouse or
assume to Chicago. Cost of Shipping Denver to Chicago per
item0.755.00Shipping Inflation per year4%4%If moved to India
- year zero cost reduction120,000If moved to India - need
materials sooner(260,000)Cost of Capital? (%)Base rate is
14.8%, then add some premium based on your
logic.Years012345Single Stream of Differential Cash
FlowsInitial OutlayAnnual differential cash flows -
1005060708070NPV$117IRR54%MIRR34%PaybackPI
Sinhareeb Neqadimos
Professor Fields
ASTRONOMY 001
April 22nd, 2020
Midterm Corrections
Question 1: The Sky
Question 1B) The lunar and the solar calendars both use a
change in an object in the heavens to track time, but one is a
reflected motion and one is a real motion. Which calendar is

2. based off of a reflected motion and which real motion of Earth
is responsible?
-
Question 1C) Use the real motion of Earth you didn't use for 1B
and describe a reflected motion that it creates.
-
Question 2A) Give me an example of the ancient Greeks not
following the rules of science and explain why they weren't
doing the action of science correctly.
-
Question 3A) Explain one way that the interior, surface, and/or
atmosphere of a terrestrial (Earth-type) planet interacts with one
of the others.
-
Question 3B) Why doesn't the brightness of a star decide how
hot a jovian (Jupiter-type) planet is, and briefly describe the
process that actually does.
-
Question 3C) The Greenhouse Effect is actually an absorption-
line spectrum. Explain why.
-
Question 4A) The sun of the other solar system is a M star.
Where would that solar system's ice line be (compared to ours)
and why?
-

3. Question 4B) Before I can use the blackbody curve to figure out
the temperature of one of those planets from its color, what has
to be true about that planet?
-
Question 4C) One terrestrial (Earth-type) planet in that other
solar system is covered with craters and another one has almost
no craters. How could both planets be the same age?
-
Question 5A) First, give me two different possible reasons why
the light did not go on. Then, describe two experiments you
could perform that would be able to distinguish between your
two reasons (in more sciencey words, give me two hypotheses
and come up with new observations to test those hypotheses).
-
Question 5B) So far this semester we’ve talked about how to
tell which idea is better, as well as which evidence is better.
Now, which of the experiments you created in 5A are more
trustworthy/stronger/better than the other? Explain why.
-
Question 6A) What is the source of gravity? (in other words,
what creates gravity?)
-

4. Question 6B) How does gravity result in Kepler’s 2nd and
3rd Laws?
-
Question 6C) How does Kepler’s 2nd Law help prolong the life
of a comet?
-
Question 6D) For which planets is gravity a power source? Why
only those planets?
-
Question 6E) [____] also does one other thing. If I hold two
objects and then let go of them, if there was no atmosphere they
will hit the ground at the same time. If one object has more
[____] it feels more gravitational force from Earth. Newton's
2nd Law says that if there is more force, then there is more
effect. So it is natural to think that the object with more [____]
should hit the ground first. What is the second thing that
[____] does, and why does it result in objects hitting the
ground at the same time?
·
Straight Supply
Straight Supply is a major supplier of medical components to
large pharmaceutical corporations. Bonnie Straight is a second
generation CEO of the company founded by her father forty

5. years ago. Originally established in Moorhead, Minnesota,
Bonnie moved the company operations to Denver ten years ago
so she could see the mountains from her office window.
The Denver location proved profitable for Straight Supply as
the company could take advantage of a larger pool of labor and
find and train skilled employees to assemble quality products
efficiently. The location also made it easier for shipping around
the country as many trucking companies were looking for loads
out of the Denver area. Additionally, Bonnie could more easily
take advantage of business and medical conferences.
An unexpected benefit of being headquartered in Denver was
the close proximity to Colorado Springs and the many Christian
organizations based in the area like Focus on the Family.
Bonnie became an active contributor to several of these
organizations and was invited to serve on the board of some of
them. Her work in the medical supply area also provided
opportunities to help worthwhile causes through the donation of
medical supplies and materials to these organizations. At least
ten percent of company profits were donated to Christian
organizations every year.
One of Straight Supply’s most successful products is an insulin-
monitoring pump, which monitors and measures insulin
concentrations and automatically injects insulin into diabetic
patients. Due to the technical nature of this pump and its
critical function, exacting standards are needed in its design and
manufacture. There are several critical components requiring
highly skilled labor and the finest quality materials.
Recently, a competitor, began promoting a similar insulin
monitoring and pump type product. One of the large
pharmaceutical companies, which has been a major customer of
Straight, indicated that they were giving serious consideration
to the competitors product. This customer wanted to give

6. Straight Supply every opportunity to continue business with
them since they have a good relationship, which has existed
over a number of years, however, business is business.
Bonnie learned that the competing product was close in quality,
but definitely lower in price. While this other insulin pump did
not have as long a history for product reliability, the competing
company had introduced several successful medical products
over the last few years. There was every indication that the
competitor’s insulin pump could reach the quality standards
required by these major companies at a favorable price.
Straight anticipated that if they wanted to remain a product
leader in the insulin monitoring pump product area and maintain
their current customer base, they were going to have to make
their product more competitive. Given that competitors were
able to offer a similar quality product at a lower price meant
that Straight would have to consider lower its selling price.
However, at the same time, they wanted to maintain as much of
the profit margin as possible as this was a critical product to the
overall success of the company.
Bonnie realized that they were going to have to reduce
production costs. Given that the company had produced this
product for some time, they had pretty much taken advantage of
the learning curve phenomena. All production efficiencies and
the resulting cost savings had pretty much been incorporated
into the current cost of the product and it would be difficult to
introduce additional efficiencies of cost savings into the
production process. Material costs were somewhat out of their
control as they had to rely on other suppliers to provide
materials and additionally, material costs was not that great of a
component of the total costs of the product.
When it came to overhead costs, the company used activity
based costing to attempt to get as accurate a measure as possible

7. of appropriate indirect costs to allocate to this particular
product line. While there is never a guarantee of complete
accuracy with the allocation process, top management believed
that their costing procedure was reasonable. This process of
determining total costs was further confirmed by an independent
consulting firm which recommended and implemented their
current cost allocation system.
Outsourcing was quickly becoming the only option for
production of this product. The production process was fairly
labor intensive, involving a skilled workforce to insure that the
critical intricacies and components of the product were properly
assembled. Straight had depended on some of their most
talented work force to assemble this important product.
Naturally, the labor cost on a per part basis was relatively high
due to many factors. The product was made in the Denver
plant, which also had a high cost of living, and the demand for
qualified employees was critical which resulted in a higher
wage rate. Also, well-trained technically skilled individuals
were needed in many disciplines, which also demanded a higher
wage rate. The employees working for Straight were some of
the more dependable with a greater number of years working at
the company which added to the labor costs. The potential for
considerable cost savings in labor was available if the product
could be assembled overseas.
Straight identified a medical supply company in India that
apparently employed a highly skilled work force with
appropriate training in the assembly of similar products. The
labor rate was considerably lower, enough so, that the product
could be shipped to India and back by air for just the assembly
process and money could be saved.
Before making any critical decisions of this nature, Bonnie
thought it best to conduct a financial analysis of alternative
proposals for a five-year time period. The choice for Straight

8. Supply in this situation was to either continue production in
Denver or have the product assembled in India. The production
and finance departments came up with some critical cost factors
to aid in the decision process.
At the Denver plant, 25 employees worked on this specific
product. Their average wage rate including benefits is $30 per
hour. Employees at the Denver plant are able to produce 75 of
the insulin pumps per hour on an eight-hour shift for 250 days
in the year. Indirect costs related to the production of the
insulin pump were allocated to the product at 180 percent of the
direct labor costs. Wage rates will increase at 6 percent per
year. The cost to ship the product to their pharmaceutical
customer in Chicago was $0.75 per item and that shipping cost
would increase 4 percent per year.
If the insulin pump were no longer assembled in Denver, in
addition to a reduction in the labor force, there would be an
immediate one-time reduction in capacity related costs of
$120,000.
For this current year, the anticipated annual demand was equal
to the current production capacity. If Straight Supply maintains
its market share with existing customers, there should be a 10%
increase in demand for this product for each of the next five
years. The annual increase in demand could actually have been
20%; however, top management thought it better to estimate
conservatively given the potential increase in competition.
Additional employees would need to be hired at the Denver
plant to keep up with demand.
Each insulin pump sold for $100 this year with the price
forecasted to increase at five percent per year over the next five
years. Increases in working capital directly associated with the
product have been equal to 12 percent of the total sales revenue
figure.

9. In India the wage rate was only $10.50 per hour, and each
employee could assemble an average of two insulin pumps per
hour. Given this was a new production process at the India
location, learning curve efficiencies could apply to the insulin
pump and it was expected that production levels would increase
15% per year over the next three years before leveling out in the
fourth and fifth years. Also, the hourly rate would increase at
10% per year for each of the next five years. The management
at the India plant promised to hire enough skilled workers to
meet the production demand every year.
Round trip shipping cost to and from India would be at $5.00
per item with that rate increasing at 4% per year. The
additional shipping requirement will increase the production
time by one week. To maintain its just-in-time inventory
philosophy Straight Supply will need to begin the production of
the insulin pump one week earlier so the final product will be
available to the customer at the agreed upon delivery date.
Starting the production process one week sooner will create an
initial cost increase of $260,000 for the earlier ordering of
required materials.
In completing capital budgeting projects, Straight Supply has
used a weighted average cost of capital process to determine a
correct discount rate and then add a premium depending on
perceived additional risk factors. The basic discount rate for
this year is 14.8%. If a new product is being considered a risk
premium of 2.5% is added. If there is a change in a domestic
location a risk premium of 1.5% is added. A project involving
an international element results in a risk premium of from 3.0%
to 6.0% depending upon a number of factors including political
stability, economic security, language and cultural differences,
and governmental factors.

10. Required:
1. Evaluate the two proposed alternatives regarding the insulin
pump.
2. Based upon your evaluation identify which alternative should
be selected and support your decision.
3. Identify some non quantitative factors which might be critical
in this decision making situation.
4. Based on both your quantitative analysis and non quantitative
issues identify which alternative should be selected and support
your decision.
5. How does the consideration of an international opportunity
complicate this decision making process?
6. Explain and give an illustration if possible on how the capital
budgeting process will be incorporated into your business plan?