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yarga [219]
3 years ago
14

Hawke Skateboards is considering building a new plant. Bob Skerritt, the company's marketing manager, is an enthusiastic support

er of the new plant. Lucy Liu, the company's chief financial officer, is not so sure that the new plant is a good idea. Currently, the company purchases its skateboards from foreign manufacturers. The following figures were estimated regarding the construction of a new plant.
Cost of plant - $4,160,000
Estimated useful life -15 years
Annual cash inflows - 4,160,000
Salvage value - $2,080,000
Annual cash outflows - 3,682,000
Discount rate - 11%

Bob Skerritt believes that these figures understate the true potential value of the plant. He suggests that by manufacturing its own skateboards the company will benefit from a "buy American" patriotism that he believes is common among skateboarders. He also notes that the firm has had numerous quality problems with the skateboards manufactured by its suppliers. He suggests that the inconsistent quality has resulted in lost sales, increased warranty claims, and some costly lawsuits.

Overall, he believes sales will be $208,000 higher than projected above, and that the savings from lower warranty costs and legal costs will be $62,000 per year. He also believes that the project is not as risky as assumed above and that a 9% discount rate is more reasonable.

Answer each of the following.

a. Compute the net present value of the project based on the original projections.

b. Compute the net present value incorporating Bob's estimates of the value of the intangible benefits, but still using the 11% discount rate.

c. Compute the net present value using the original estimates, but employing the 9% discount rate that Bob suggests is more appropriate.

Business
1 answer:
HACTEHA [7]3 years ago
4 0

Answer: net values are calculated as

a) $4530100

b) $4770400

c) $4631900

Explanation:

detailed calculation and explanation is shown in the image below

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The major difference between a low-cost provider strategy and a focused low-cost strategy is the size of the buyer group to which a company is appealing.

<h3>What is a strategy?</h3>

These are devices company employ to achieve their medium and long term objectives.

Hence, the major difference between a low-cost provider strategy and a focused low-cost strategy is the size of the buyer group to which a company is appealing.

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6 0
2 years ago
DeMarcus has been general manager of the Surf and Turf Club restaurant for many years and always schedules extra staff for the b
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illusion of control.

Explanation:

The illusion of control is the tendency for people to overestimate their ability to control events; for example, it occurs when someone feels a sense of control over outcomes that they demonstrably do not influence.

In the scenario, although Business has been consistently slow on Fridays in recent months, yet DeMarcus decides to continue with the extra staffing.

This is obviously a case of illusion because he has no control over the external business environment and there is no logical reason to continue with extra staffing.

3 0
3 years ago
A periodic review system is __________. a. a term used to indicate the amount of demand b. to be met under conditions of demand
vladimir2022 [97]

Answer:

The correct answer is letter "C": an inventory system that is used to manage independent demand inventory.

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A Periodic Review System is used to keep track of the inventory of a firm after determined periods. Review intervals are set by the company in an attempt to find out the amount of stock needed to fulfill consumers' orders or to reach the company's Target Inventory (TI). This inventory system is used to handle independent demand inventory.

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3 years ago
Vaughn Inc. acquired all of the outstanding common stock of Roberts Co. on January 1, 2020, for $276,000. Annual amortization of
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5 0
3 years ago
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Answer:

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7 0
2 years ago
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