# View the step-by-step solution to: 1 )Old Pueblo Engineering Contractors creates six-month

1 )Old Pueblo Engineering Contractors creates six-month “rolling” schedules, which are recomputed monthly. For competitive reasons (they would need to divulge proprietary design criteria, methods, and so on), Old Pueblo does not subcontract. Therefore, its only options to meet customer require-ments are (1) work on regular time, (2) work o overtime, which is limited to 30 percent of regular time, (3) do customer’s work early, which would cost an additional \$5 per hour per month, and (4) perform customer’s work late, which would cost an additional \$10 per hour per month penalty, as provided by their contract. Old Pueblo has 25 engineers on its staff at an hourly rate of \$30. The overtime rate is \$45. Customer’s hourly requirements for the six months from January to June are JANUARY FEBRUARY MARCH APRIL MAY JUNE 5,000 4,000 6,000 6,000 5,000 4,000 Develop an aggregate plan using a spreadsheet. Assume 20 working days in each month 2) 5. Helter Industries, a company that produces a line of women’s bathing suits, hires temporaries to help produce its summer product demand. For the current four-month rolling schedule, there are three temps on staff and 12 full-time employees. The temps can be hired when needed and can be used as needed, whereas the full-time employees must be paid whether they are needed or not. Each full-time employee can produce 205 suits per month, while each part-time employee can pro-duce 165 suits per month. Demand for bathing suits for the next four months is as follows: MAY JUNE JULY AUGUST 3,200 2,800 3,100 3,000 Beginning inventory in May is 403 complete (a complete two-piece includes both top and bottom) bathing suits. Bathing suits cost \$40 to produce and carrying cost is 24 percent per year. Develop an aggregate plan using a spreadsheet. 3) Problem 10-6. Cost of common equity The earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow at 7% per year in the future. Carpetto's common stock sells for \$23.00 per share, its last dividend was \$2.00, and it will pay a dividend of \$2.14 at the end of the current year. a. Using the DCF approach, what is its cost of common equity? b. If the firm's beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? c. If the firm's bonds earn a return of 12%, what will rs be based on the bond-yield-plus-risk-premium approach, using the midpoint of the risk premium range as suggested in studies? d. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpetto's cost of common equity?
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