McGee Carpet and Trim installs carpets in commercial offices. Andrea McGee has been very concerned with the amount of time it took to complete several recent jobs. Some of her workers are very unreliable. A list of activities and their optimistic completion time, the most likely completion time, and the pessimistic completion time (all in days) for a new contract are provided in a given table. Following are the activities that are required to install the carpets in the offices: Activity 1 (Measure office room dimensions), Activity 2 (Estimate cost), Activity 3 (Material Requisition), Activity 4 (Workforce Requisition), Activity 5 (Special Tool Requisition), Activity 6 (Installation), Activity 7 (Inspection and customer acceptance).

Activity 2 starts immediately after Activity 1. Activity 3, Activity 4, and Activity 5 start concurrently after Activity 2. Activity 6 does not start until after Activity 3, Activity 4, and Activity 5 are completed. The carpet installation project is complete after Activity 7 is completed. If OT = Optimistic Time, MT = Most Likely Time, and PT = Pessimistic Time, use Program Evaluation Review Estimate (PERT) to compute the statistical time for each activity in the table shown below.

Activities

OT / MT / PT

Activity 1

4 / 6 / 14

Activity 2

5 / 12 / 16

Activity 3

7 / 15 / 23

Activity 4

13 / 16 / 28

Activity 5

17 / 20 / 35

Activity 6

20 / 32 / 50

Activity 7

5 / 6 / 13

Also, (a) Determine the expected completion time and the variance for each activity (b) Determine the total project completion time and the critical path for the project. (c) Determine Early Start (ES), Early Finish (EF), Late Start (LS), and slack for each activity. What is the probability that McGee Carpet and Trim will finish the project in 40 days or less?

Define project management and the necessary requirements.
Analyze implications of changes in project scheduling.
Evaluate application of project management techniques in terms of the firm’s business operational goals and requirements.
Please submit your assignment in an APA formatted paper.

Submitting your assignment in APA format means, at a minimum, you will need the following:

TITLE PAGE. Remember the Running head: AND TITLE IN ALL CAPITALS
ABSTRACT. A summary of your paper…not an introduction. Begin writing in third person voice.

BODY. The body of your paper begins on the page following the title page and abstract page and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The type face should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics except as required for APA level headings and references. The deliverable length of the body of your paper for this assignment is 2-3 pages. In-body academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged.

REFERENCE PAGE. References that align with your in-body academic sources are listed on the final page of your paper. The references must be in APA format using appropriate spacing, hang indention, italics, and upper and lower case usage as appropriate for the type of resource used. Remember, the Reference Page is not a bibliography but a further listing of the abbreviated in-body citations used in the paper. Every referenced item must have a corresponding in-body citation.

 

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1.

Part 1: Interest Rates

Many managers do not understand the various ways that interest rates can affect business decisions. For example, if your company decided to build a plant with a 30-year life and short-term debt financing (renewed annually), the cost of the plant could skyrocket if interest rates were to return to their previous highs of 12% to 14%. On the other hand, locking into high, long-term rates could be very costly also with a long period when low short-term interest rates were to be available. As you can see, the ability to know your economic environment and its impact on projected interest rates can be crucial to making good financing decisions.

Describe two to three macroeconomic factors that influence interest rates in general. Explain the effects of each factor on interest rates.

Now think about the industry in which you are employed or one in which you have past experience. To what macroeconomic factors is your industry most sensitive?

Describe two contemporary factors that seem to be impacting your industry today, and identify their impacts on the interest rates experienced within your chosen industry.

Support your comments with your own experiences, the weekly resources, and/or additional research. Use APA throughout and provide appropriate in-text citations and references.

Part 2: Stock Valuation, Risk and Returns

Stock valuation

https://www.youtube.com/watch?v=DSn1HThfb5w

https://www.youtube.com/watch?v=jfcRUzKZZE8

https://notendur.hi.is/ajonsson/kennsla2008/stock_valuation.pdf

Risk and Returns

https://www.youtube.com/watch?v=3BIIiUyr3-w

The links above contain information on stock valuation, risk and returns. Please review each one of them. Based on the knowledge gained from the materials presented in the links above, complete the following activities:

Present a detailed discussion of what you learned about stock valuation. Provide examples of how your company have used the concepts. Do you believe financing a company’s operation using stock is better than financing with bonds? Why or why not? Support your discussion with a numerical example.

Based on the materials presented in the “Risk and Return” video, present a discussion on why the materials are important in financial decision making. How would you incorporate risk and return in your financing decisions?

2.

In the link below, you will explore how companies compute their cost of capital by computing a weighted average of the three major components of capital: debt, preferred stock, and common equity. The firm’s cost of capital is a key element in capital budgeting decisions and must be understood in order to justify capital projects. In addition, you will also learn capital budgeting techniques including Payback, Net Present Value, Internal Rate of Return, etc.

Cost of Capital:

https://www.youtube.com/watch?v=B8JZhQofRTs

For this Discussion, imagine the following scenario:

You are the director of operations for your company, and your vice president wants to expand production by adding new and more expensive fabrication machines. You are directed to build a business case for implementing this program of capacity expansion. Assume the company’s weighted average cost of capital is 13%, the after-tax cost of debt is 7%, preferred stock is 10.5%, and common equity is 15%. As you work with your staff on the first cut of the business case, you surmise that this is a fairly risky project due to a recent slowing in product sales. As a matter of fact, when using the 13% weighted average cost of capital, you discover that the project is estimated to return about 10%, which is quite a bit less than the company’s weighted average cost of capital. An enterprising young analyst in your department, Harriet, suggests that the project be financed from retained earnings (50%) and bonds (50%). She reasons that using retained earnings does not cost the firm anything, since it is cash you already have in the bank and the after-tax cost of debt is only 7%. That would lower your weighted average cost of capital to 3.5% and make your 10% projected return look great.

Based on the scenario above, post your reactions to the following questions and concerns:

What is your reaction to Harriet’s suggestion of using the cost of debt only? Is it a good idea or a bad idea? Why? Do you think capital projects should have their own unique cost of capital rates for budgeting purposes, as opposed to using the weighted average cost of capital (WACC) or the cost of equity capital as computed by CAPM? What about the relatively high risk inherent in this project? How can you factor into the analysis the notion of risk so that all competing projects that have relatively lower or higher risks can be evaluated on a level playing field?

 

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