Question #4: Georgia Pacific, Inc. produces a number of products that the company can sell at the split-off point or the company can process the products further and then sold. Use the data below to answer the following questions:

Sales Value Additional Sales Value after

Product at Split-off Variable Costs Further Processing

New lumber $79,800 $12,000 $89,000

Weathered lumber 62,000 14,100 86,800

Pulp 51,000 9,800 65,000

a) What is the additional profit that would result from processing weathered lumber further? Show your calculations.

b) Which products should Georgia Pacific process further? Show your calculations.

c) What is the increase in Georgia Pacifics profit if the appropriate products are processed further?

Question #5: Fontenot Seafood Company is thinking about building a new pier which will cost $280,000. Fontenot expects to get 5 years of use out of the pier, after which it will be sold for $150,000. Fontenot estimates that there will be annual cash flows of $55,000 resulting from the new pier. Fontenots borrowing rate is 8% and it cost of capital is 10%.

Required: Prepare an analysis to calculate the net present value of the pier and discuss whether this pier is a good investment for the Company.