p1-3 and p1-4
Cash outflow Cash inflow $ 500 $1,550 5,500 P1-3 Cash flows Sheldon Smith spends many hours monitoring his personal cash flows every month. Sheldon earns 5% on his short-term investments while paying prime plus 2% (prime is 9%) on the mortgage. The cash inflows and outflows for the e. If the new system is implemented, will the firm achieve the primary financial goal Personal Finance Problem month of March are as follows: Item Interest received Mortgage Salary 850 Groceries bill 200 Gas bill 310 Utility bills a. Determine Sheldon's total cash inflows and cash outflows for the month of March. b. What is Sheldon's net cash flow for the month of March? Explain the meaning of the term "net cash flow." c. What advice would you give Sheldon if there is a surplus of funds? d. What advice would you give Sheldon if there is a shortage of funds? 4 Marginal cost-benefit analysis and the goal of the firm Wendy Winter needs to determine whether or not the current warehouse system should be upgraded to a new system. The new system would require an initial cash outlay of $250,000. The current system could be sold for $55,000. The monetary benefit of the new system over the next five years is $325,000 while the monetary benefit of the current system over the same period is $125,000. Furthermore, it is expected that the firm's stock price will increase if the new system is implemented because it will make the firm more cost efficient and cost effective in the long run. a. Identify and describe the analysis Wendy should use to make the decision. b. Calculate the marginal benefit of the proposed new warehouse system. c. Calculate the marginal cost of the proposed new warehouse system. d. What should Wendy's recommendation be to the firm regarding the new warehouse system? Explain your recommendation. of managers