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kkurt [141]
3 years ago
15

Exercise 25-08 Pierre’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new

salon is $262,000. A new salon will normally generate annual revenues of $64,160, with annual expenses (including depreciation) of $40,500. At the end of 15 years the salon will have a salvage value of $76,000. Calculate the annual rate of return on the project.
Business
1 answer:
Bas_tet [7]3 years ago
6 0

Answer: 14%

Explanation:

To calculate the Annual Rate of Return on such a project, you divide the Average net profit that the project is expected to make by the Average investment value.

This in effect compares future income to the investment in the project and so is a very useful tool in analysis.

Annual Rate of Return = Average Net Profit / Average Investment

Average Net Profit.

A new salon will normally generate annual revenues of $64,160, with annual expenses (including depreciation) of $40,500.

The net profit is revenue less expenses so,

= 64,160 - 40,500

= $23,660

Average Investment

The Average Investment is calculated by taking the average of the Initial Value of the project and it's ending value.

Initial value is $262,000 as that was the cost.

The Ending Value is the salvage value of $76,000.

= (262,000 + 76,000) / 2

= $169,000

The Annual Rate of Return is,

= 23,660 / 169,000

= 0.14

= <u>14%</u>

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<span>An elasticity of 2 means that a 1% increase in price will cause a 2% decrease in demand.
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2 years ago
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Answer:1. Cost on warehouse of

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Answer. Debit cost of land.

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The cost of property includes the price of purchase and other related tax e.g vat paid on the property, plants or equipment.

The cost of the asset further includes all cost spent to bring it to the desired state of use while subtracting all income earned in the process and this necessitate the treatment of the cost of raising warehouse and salvage materials.

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Any organization that organizes their people and resources by client because it relies on a few major customers shows an example of <u>customer departmentalization</u>.

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There are four basic types of departmentalization (function, product, customer, and geography). Customer departmentalization depends on the difference between the customer segments so that specialized services could be offered to each segment.

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