John asks Mary if she’s like to go to a concert two weeks from Friday. Mary says yes and John buys the tickets for $95 each. Two weeks later he shows up at Mary’s house to pick her up. Her mom says she’s not home and she’s gone to the beach. John texts Mary but she doesn’t answer. He decides to sue her for the $95. Will he win? Why or why not?

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John Campbell, an employee of Manhattan Construction Company, claims to have injured hisback as a result of a fall while repairing the roof at one of the Eastview apartment buildings. Hefiled a lawsuit against Doug Reynolds, the owner of Eastview Apartments, asking for damages of$1,500,000. John claims that the roof had rotten sections and that his fall could have beenprevented if Mr. Reynolds had told Manhattan Construction about the problem. Mr. Reynoldsnotified his insurance company, Allied Insurance, of the lawsuit. Allied must defend Mr.Reynolds and decide what action to take regarding the lawsuit.Some depositions and a series of discussions took place between both sides. As a result,John Campbell offered to accept a settlement of $750,000. Thus, one option is for Allied to payJohn $750,000 to settle the claim. Allied is also considering making John a counteroffer of$400,000 in the hope that he will accept a lesser amount to avoid the time and cost of going totrial. Allied’s preliminary investigation shows that John’s case is strong; Allied is concerned thatJohn may reject their counteroffer and request jury trial. Allied’s lawyers spent some timeexploring John’s likely reaction if they make a counteroffer of $400,000.The lawyers concluded that it is adequate to consider three possible outcomes torepresent John’s possible reaction to a counteroffer of $400,000: (1) John will accept thecounteroffer and the case will be closed; (2) John will reject the counteroffer and elect to have ajury decide the settlement amount; or (3) John will make a counteroffer to Allied of $600,000. IfJohn does make a counteroffer, Allied decided that they will not make additional counteroffers.They will either accept John’s counteroffer of $600,000 or go to trial.If the case goes to a jury trial, Allied considers three outcomes possible: (1) the jury mayreject John’s claim and Allied will not be required to pay any damages; (2) the jury will find infavor of John and award him $750,000 in damages; or (3) the jury will conclude that John has astrong case and award him the full amount of $1,500,000.Key considerations as Allied develops its strategy for disposing of the case are theprobabilities associated with John’s response to an Allied counteroffer of $400,000 and theprobability associated with the three possible trial outcomes. Allied’s lawyer believe theprobability that John will accept a counteroffer of $400,000 is 0.10, the probability that John willreject a counteroffer of $400,000 is 0.40, and the probability that John will, himself, make acounteroffer of Allied of $600,000 is 0.50. If the case goes to court, they believe that theprobability the jury will award John damages of $750,000 is 0.50, and the probability that thejury will award John nothing is 0.20.Perform and analysis of the problem facing Allied Insurance and prepare a report that summarizes your findings and recommendations. Be sure to include the following items:1 a decision tree2 A recommendation regarding whether Allied should accept John’s initial offer to settle the claim for $750,0002 A decision strategy that Allied should follow if they decide to make John a counteroffer of $400,0004 A risk profile for your recommended strategy

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John Crockett Furniture Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Joan Samuel, a recently graduated finance MBA. The production line would be set up in unused space in Crockett’s main plant. The machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. Further, the firm’s inventories would have to be increased by $25,000 to handle the new line, but its accounts payable would rise by $5,000. The machinery has an economic life of 4 years, and Crockett has obtained a special tax ruling that places the equipment in the MACRS 3 year class. The machinery is expected to have a salvage value of $25,000 after 4 years of use. The new line would generate $125,000 in incremental net revenues (before taxes and excluding depreciation) in each of the next 4 years. The firm’s tax rate is 40% and its overall weighted average cost of capital is 10%.a)Construct the project’s cash flows over its 4 year life. Based on these cash flows, what are the project’s NPV and IRR? Do these indicators suggest that the project should be undertaken?b)Assume now that the project is a replacement project rather than a new or expansion, project. Describe how the analysis would differ for a replacement project.c)Explain what is meant by cash flow estimation bias. What are some steps that Crockett’s management could take to eliminate the incentives for bias in the decision process?d)In an unrelated analysis, Joan was asked to choose between the following two mutually exclusive projects:Expected Net Cash Flowyear Project S Project L-100,00033,50033,500- 33,500- 33,500The project provides a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital.(1)what is each project’s initial NPV without replication? Can you use the information to determine which project should be chosen? Explain.(2)Now apply the replacement chain approach to determine the project’s extended NPVs. Which project should be chosen? Explain.(3) Repeat the analysis using the equivalent annual annuity approach. Which project should be chosen? Explain.(4)Now assume that the cost to replicate Project S in 2 years will increase to $105,000 because of inflationary pressures. How should the analysis be handled now, and which project should be chosen? Explain.e)Crockett is also considering another project that has a physical life of 3 years, that is, the machinery will be totally worn out after 3 years. However, if the project were abandoned prior to the end of 3 years, the machinery would have a positive salvage value. Here are the project’s estimated cash flows:year Initial Investment & Operating CFs End-of-Year Net Abandonment Value5,0003,1002,0000 Using the 10% cost of capital, what is the project’s NPV if it is operated for the full 3 years? Would the NPV change if the company planned to abandon the project at the end of year 2? At the end of year 1? What is the project’s optimal life? Explain. Additional Requirements Level of Detail: Show all work

1. What is each project’s initial npv without replication?Answer: The NPVs, found with a financial calculator, are calculated as follows:Input the following: CF0 = -100000, CF1 = 60000, NJ = 2,…

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1. John entered into a 2 year agreement with the Blue Mountains City Council to lease a café at a popular National Park scenic spot famous for its views overlooking the Grose Valley. The café was very successful but after 6 months a sewerage disposal works was set up near the café. Business suffers badly and after seeing his customers decrease rapidly John leaves the business and refuses to pay any further rent. The Council sues. Discuss. Also, is there any further evidence that may make your decision as to the outcome any clearer? 

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John has graduated from a local university with a degree in industrial management and joined his father’s company as executive vice-president of operations. Dad wants John to prove himself and decided to assign a project to John. 20% of the company’s sales are derived from sale of swimming pool kits for homes. The company does not install these kits, buyers have to find their own installing experts. John has to determine whether or not they should get into that business. 

John remembered a method called the Work Breakdown Structure (WBS) that he thought might serve as a useful tool to estimate costs. Also, the use of such tool can be passed along to the site supervisor to help evaluate the performance of work crews. Help John to create WBS and come up with a cost estimate for installing home swimming pool kits at the front-yard or back-yard of homes. 

Prepare WBS which indicates all the deliverables of installing swimming pool kits at homes.

Assign an approximate duration and cost for each WBS element.

List what are risks that can be identified in this project.

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