Sometimes when people are under pressure they forget things that they have memorized. Sometimes its answers for a test and sometimes they forget how to walk, your body will just shut down under pressure.
Just try to relax and think of something else of a few, then move on to the next question, it will come back to you.
Answer:
$210,000.
Explanation:
Given:
Cost of goods sold = $420,000
Sales revenue = $800,000
Operating expenses = $170,000
Question asked:
What amount will the company report for operating income ?
Solution:
As we know, Operating Income = Gross Profit- Operating Expenses
First of all we will find gross profit,
Gross Profit = Net Sales – Cost of goods sold
= $800,000 - $420,000
= $380,000
Now, Operating Income = Gross Profit- Operating Expenses
= $380,000 - $170,000
= $210,000
Therefore, consider the following year-end information for a company, its Operating Income is $210,000.
Answer:
Testerman Construction Co.
Internal rate of return method in analyzing capital expenditure:
Present value of expenditure = $149,630
Present of cash inflows annuity = $149,630 (using 20% discount rate and present value annuity factor of 3.3251 x $45,000)
NPV = $0 (PV of cash outflow - PV of cash inflow)
Therefore, the IRR = 20%
Explanation:
a) Data and Calculations:
Investment cost = $149,630
Annual net cash flows = $45,000
Investment period = 6 years
Annuity of future cash flows = 3.3251
b) Testerman’s IRR (Internal Rate of Return) is a capital budgeting and analysis tool which determines the discount rate that makes the present value of future inflows equal to the present value of outflows from a project. This IRR helps the managers to determine the projects that add value and are worth undertaking. IRR is based on assumptions. Similar projects with the same IRR will differ in returns due to the differences in timing and the size of the cash, the amount of debts and equity used to generate the returns, and the assumption of a constant reinvestment may which IRR makes.
The break even point would be 1850000, and as Mercantile made 2000000, the margin of safety would be 150000.