ch16 - CHAPTER 16 SOLUTIONS 16.1 The following is based on...

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16-1 CHAPTER 16 SOLUTIONS 16.1 The following is based on information from the 1998 Annual Report of Merck & Co., Inc., as obtained from their web site at: www.Merck.com . (a) From their mission statement: Merck & Co., Inc. is a leading research-driven pharmaceutical products and services company. Merck discovers, develops, manufactures and markets a broad range of innovative products to improve human and animal health, directly and through its joint ventures.” (b) In 1998, Merck introduced the following five new and important products for improving the quality of life for millions worldwide: Singulair for asthma Maxalt for migraine headache Aggrastat for acute coronary syndrome Propecia for male pattern hair loss Cosopt for glaucoma In addition, key products (Zocor, Fosamax, Cozaar, Hyzaar, and Crixivan) grew steadily in sales. (c) In 1998, Merck had no new acquisitions, but conducted some restructuring with two of their previous acquisitions: Medco Containment Services, Inc. (Merck-Medco) and Astra AB (Astra Merck Inc.). Continued partnerships in 1998 included those with DuPont, Johnson & Johnson and Rhone-Poulenc. (d) Concerns in 1998 included: Expiration of patent protection for several key products. Increasing competition and cost-containment pressures. Health policy challenges. (e) Financial ratio analyses from data in the 1998 statements: (1) Current ratio = current assets/current liabilities = 10,228.5/6,068.8 = 1.69 A g ood, but not highly favorable value. (2) Acid-ratio test = quick assets/current liabilities = (10.228.5 – 2,623.9)/6,068.8 = 1.25 A reasonable, but not highly favorable value. (3) Equity ratio = stockholders’ equity/total assets = 12,801.8/31,853.4 = 0.402 B e l o w t h e p r e f e r r e d m i n i m u m v a l u e o f 0.50. (4) Return on total assets = pretax income/total assets = 8,133.1/31,853.4 = 0.255 25.5% is a very good return.
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16-2 (5) Operating margin = pretax income/net sales = 8,133.1/26,898.2 = 0.302 30.2% is a very good margin. (6) Profit margin = After-tax income/net sales = 5,248.2/26,898.2 = 0.195 19.5% is a very good margin. (f) Stock purchase recommendation: The first three ratios in part (e) are not highly favorable. The last three ratios in part (e) are quite favorable. If patents expire on major products, sales can decrease. Therefore, the stock might be considered a hold.
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16-3 16.2 Total units purchased in 2001 in thousands = 10+5+15+25+20 = 75 or 75,000 Total units sold in 2001 in thousands = 8+75-2.9 = 80.1 or 80,100 Fifo method: Cost of goods sold in thousands = 8 x $ 6 = $ 48 10 x $ 7 = $ 70 5 x $ 8 = $ 40 15 x $ 9 = $135 25 x $10 = $250 17.1 x $10.5 = $179.55 Total cost for 80,100 units = $ 722,550 Lifo method: Cost of goods sold in thousands = 20 x $10.5 = $210 25 x $10 = $250 15 x $ 9 = $135 5 x $ 8 = $ 40 10 x $ 7 = $ 70 5.1 x $ 6 = $ 30.6 Total cost for 80,100 units = $735,600
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16-4 16.3 Assume an MS Process Industries Average Cost Index of 1,103. Annual production rate = 1,500 (365)(24)(0.95) = 12,483,000 metric tons/year or 2,204.6 (12,483,000) = 27.52 billion pounds/year From Eq. (16.5), F PR = (27,520,000,000/10,000,000) 0.6 = 116 Use material factors, F M , of 1.0 for cs, 2.0 for ss, and 1.5 if a combination of ss and cs as with the two methanol reactors. Applying Eq. (16.6), the following is obtained, where the costs of the two reactors are not included because they are like heat exchangers and the recycle compressor is not included.
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ch16 - CHAPTER 16 SOLUTIONS 16.1 The following is based on...

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