He also determined that other repairs were required to make the truck operable. Directed Inwhile he was taking a course on entrepreneurship as a business student at a large state university, Peter Vanderhein wrote a term paper on the management of auto repair shops.
To help structure your analysis and report, answer the following questions. In any event, a well-received report will give your career a big boost, so you want to do a good job.
He also noted that Ace repair inc case 7. Discuss the specific items of capital that should be included in the WACC.
He took over two new shops later insending employees from the first shop to help run the new ones. The operations of the acquired shops were as successful as those of the first shop. This arrangement was carried out by the parties for several years.
On arriving at the site, the plaintiff would consult with the project manager, a Ken Yoos, who would point out the vehicle s that needed repairing and what the problem was. Naranjo provided you with the financial statements given in Tables 1 and 2, plus the information in Tables 3 and 4.
The parties entered into an oral contract whereby the defendant, who operated a site improvement construction business with various heavy duty earth-moving motor-powered vehicles, would contact the plaintiff, who operated a repair business for on-site repairs of large, heavy-duty motor vehicles.
He bought three additional shops inand acquisitions continued at an increasing pace thereafter. After going over the procedures manuals and the supporting analyses for recent capital investment decisions, he concluded that the overall procedures were generally appropriate: However, the estimate of the cost of capital itself was questionable.
He replaced a fuel tank on a Mack truck and repaired a U-joint on a Volvo truck. Naranjo wants your opinion on 1 what weights should be used, and 2 how much difference the choice of weights would make in the calculated WACC. When payment was not made, the plaintiff stopped work, although the Volvo truck was not yet operable.
Ace Truck Repair, Inc. With encouragement from his family and professors, Vanderhein decided to put his theory to the test, and in he started Ace Repair, Inc. During the course of the repair work, if other repairs were needed beyond that not connected to the initial determination, the plaintiff would inform the defendant and would be authorized to make the additional repairs by the defendant where it was agreed that it should be done.
The plaintiff would send an invoice to the defendant for the work performed and would receive payment by check. The plaintiff would then proceed with the repair work consistent with the information he received from the site manager.
Peter used a mix of securities—common stock, preferred stock, and first mortgage bonds—in addition to retained earnings to finance acquisitions and open de novo shops, while using trade credit plus bank loans to help meet working capital needs.
The comptroller currently finds the weights for the weighted average cost of capital WACC from information from the balance sheet shown in Table 2. He chose not to use market value weights in part because investors apparently do not focus on market value weights, and also because market value weights would be unstable, hence would result in a fluctuating WACC, and as a result would destabilize the capital budgeting process.
So, byVanderhein concluded that to ensure continued success, he must establish a finance group that was as competent and sophisticated as those of his competitors.
Once he began taking business courses, Peter came to recognize that most shops were inefficient, especially in the way they managed their inventories and receivables.
Peter concluded that an opportunity existed to buy inefficient auto repair shops, consolidate them into a concern that was large enough to use computers to manage inventories and receivables, and thereby increase profitability sharply. This was then delivered by the site manager to the plaintiff, who would proceed based upon this information.
Still, in spite of their inefficiency, the average repair shop appeared to be fairly profitable. The defendant would inform the plaintiff of the problem developed by its motor vehicle and give an opinion as to the cause and the repairs needed. The site manager would then convey to the plaintiff the actual authorization to proceed or not.
The defendant responded with its answer and raised special defenses and counterclaims dated November 7, In early JanuaryNaranjo decided to hire your consulting firm to conduct a cost of capital analysis and to make a critical evaluation of the current estimation procedures.
He might even offer you the job as treasurer of Ace Repair. Currently, Ace has 6.Ace Repair Inc. Case Study The owner of Ace Repair Inc, Peter Vanderhein thought that he needed special expertise for the finance function forced by the rapid growth of the company and he recognized that the estimate of the.
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Cost of Capital (Easy) This case illustrates the cost of capital estimation process. It demonstrates (1) the mechanics of determining the component costs of.
54 case questions Essay; 54 case questions Essay. Words Sep 27th, 6 Pages. Questions 1. a. Discuss the specific items of capital that should be included in the WACC.
b. Ace Repair, Inc.: Income Statement for the Year Ended December 31, (In Thousands of Dollars) Cost of Capital Case 1: Hop-In Food Stores, Inc. 1. View Homework Help - Module 5 ace repair questions from FIN at Old Dominion University. Module 5 Questions 1. a. Discuss the specific items of capital that should be included in the WACC.