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3 years ago

Capital Budgeting Criteria: Mutually exclusive Projects

Business

1 answer:

valentinak56 [21]3 years ago

5 0

Answer:

Project A would be chosen because the NPV is higher. It means that project A would be more profitable than project B.

Explanation:

To determine which project would be recommended, we have to determine the NPV of each project.

Net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator

For project A

Cash flow in year 1 = $-400

Cash flow each year from year 2 to 4 = $55

Cash flow each year from year 5 to 6 = $225

I = 10%

NPV = $27.42

For project B

Cash flow in year 1 = $-600

Cash flow each year from year 2 to 3 = $300

Cash flow each year from year 4 to 5 = $50

Cash flow in year 6 = $49

I = 10%

NPV = $20.73

Project A would be chosen because the NPV is higher

To find the NPV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

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The Clark Sports Camp operates three sports programs: basketball, lacrosse and field hockey. The camp provides a unique opportun

igor_vitrenko [27]

Answer:

1. Impact on profits:

Contribution Margin = $63,000

Less: Traceable Rent = $10,000

Less: Salary of Director = $10,000

Total avoidable fixed expenses = $20,000

Decrease in Profits = $43,000

Hence, the profits will reduce by $43,000 if the basketball program is eliminated.

3. If the allocated fixed costs can be reduced by $50,000. The program should be dropped since there will be an increase in profits by $7,000 (50,000 - 43,000). The avoidable costs and revenues should be taken into account for the purpose of this decision. If the avoidable costs are more than the revenues, the line should be dropped else not.

Hence, since after considering the reduction in allocated fixed costs, the avoidable costs are greater than revenues, the program should be dropped

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3 years ago

Using XXs for amounts, give the journal entry for each of the transactions, assuming perpetual inventory. (If no entry is requir

lawyer [7]

Answer:

Journal entries

Explanation:

1. Cash Dr XX

To Sales revenue XX

(Being the cash sales is recorded)

Since the cash is received so we debited the cash as it also increases the assets and the sales revenue would be credited as it an income for the company

2. Cost of goods sold XX

To Merchandise inventory XX

(Being the cost of goods sold is recorded)

While calculating the cost of inventory we debited the cost of goods sold and credited the merchandise inventory

1. Account receivable Dr XX

To Sales revenue XX

(Being the cash sales is recorded)

Since the sales is made on account so we debited the account receivable as it also increases the assets and the sales revenue would be credited as it an income for the company

2. Cost of goods sold XX

To Merchandise inventory XX

(Being the cost of goods sold is recorded)

While calculating the cost of inventory we debited the cost of goods sold and credited the merchandise inventory

3 0

3 years ago

Omega Corporation has 10 million shares outstanding, now trading at $55 per share. The firm has estimatedthe expected rate of re

lara [203]

Answer:

WACC without debt is higher by = 1.7%

Explanation:

The weighted Average cost of Capital (WACC) is the average cost of capital for the different sources of long-term capital available to a firm weighted according to the proportion each source of finance bears to the total capital in the pool..

To determine the amount by which WACC would be higher, is the difference between WACC with and without debt.

WACC using debt

Step 1

Cost of debt = Before tax cost of debt × (1-T)

= 7%× (1-0.21) = 5.5%

Step 2

Market value of debt and equity

Market of debt = 200 million

Market value of equity = $55 × 10 = $550 million

Total market value = 550 + 200 = $750 million

Step 3

WACC with debt = ((5.5%× 200) + (12%.× 550))/ 750

= 10.3%

WACC without debt (i.e only equity)

WACC without debt = cost of equity = 12%

Difference in WACC between with and without debt

= 12%- 10.3%

= 1.7%

The WACC without debt is higher by 1.7%

8 0

3 years ago

What are the differences between first-generation OD and second-generation OD? What are the major changes between these two gene

MaRussiya [10]

1st generation: focused on individual growth through t-groups. management practices and employee involvement.
-action research, survey feedback, and sociotechnical systems.

2nd generation: emphasized larger, system-wide concerns such as culture, change management, and organizational development.

I believe there is a little big of both losses and gains. OD is not a one-size fits all approach. therefore different organizations require different aproaches. it is a gain in the sense that we have new experience and research programs, academics have built on the previous practices so they are new and improved. But it is a loss because maybe for a certain company a 1st generation OD practice would work best but it has been over looked or changed so much because of the 2nd generation "gains" they never try it out.

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3 years ago

Mikey is very picky and insists that his mom make his breakfast with equal parts of cereal and apple juice any other combination

timofeeve [1]

Answer: Mikey's mom will buy 80 tablespoons each of cereal and juice. Option C.

Explanation:

We will get the correct option by calculating each option thus:

Cereal = 4 cents per tablespoon.

Juice = 6 cents per tablespoon.

Option A. 40 tablespoons of cereal and 75 tablespoons of juice.

40 tablespoons of cereal X 4 cents = 160 cents = $1.6

75 tablespoons of juice X 6 cents = 450 cents = $4.5

Option A gives a total of $6.1 (WRONG).

Option B. 100 tablespoons of cereal and 67 tablespoons of juice

100 tablespoons of cereal X 4 cents = 400 cents = $4

67 tablespoons of juice X 6 cents = 372 cents = $3.72

Option B gives a total of $7.72 (WRONG).

Option C. 80 tablespoons each of cereal and juice.

80 tablespoons of cereal X 4 cents = 320 cents = $3.2

80 tablespoons of juice X 6 cents = 480 cents = $4.8

Option C gives a total of $8 (CORRECT)

Option D. 40 tablespoons each of cereal and juice.

40 tablespoons of cereal X 4 cents = 160 cents = $1.6

40 tablespoons of juice X 6 cents = 240 cents = $2.4

Option D gives a total of $4 (WRONG)

Therefore, the correct option is C.

3 0

3 years ago