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steposvetlana [31]
3 years ago
14

The Tool Box needs to purchase a new machine costing $1.46 million. Management is estimating the machine will generate cash infl

ows of $223,000 the first year and $600,000 for the following three years. If management requires a minimum 12 percent rate of return, should the firm purchase this particular machine based on its IRR? Why or why not?
Yes, because the IRR is 10.75 percent
Yes, because the IRR is 12.74 percent
No, because the IRR is 10.75 percent
No, because the IRR is 12.74 percent
The answer cannot be determined as there are multiple IRRs
Business
1 answer:
dimulka [17.4K]3 years ago
7 0

Answer:

yes, because the IRR is 12.74 percent

Explanation:

given data

present value =  $1.46 million

first year cash inflows c1 =  $223,000

next three years cash inflows c2,c3,c4 = $600,000

rate of return minimum = 12 %

to find out

firm purchase this particular machine based on its IRR

solution

we consider here IRR is = r

we apply here present value formula that is express as

present value = \frac{c1}{(1+r)} +\frac{c2}{(1+r)^2} +\frac{c3}{(1+r)^3} +\frac{c4}{(1+r)^4}  .......1

put here value  

$1.46 million = \frac{223000}{(1+r)} +\frac{600000}{(1+r)^2} +\frac{600000}{(1+r)^3} +\frac{600000}{(1+r)^4}    

solve it we get

r = 12.74%

so here IRR = 12.74% is higher than the rate of return minimum = 12%

so it will create a positive net present value of cash inflows

and project will accepted and firm purchase the machine

so we can say yes, because the IRR is 12.74 percent  

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Tubaugh Corporation has two major business segments--East and West. In December, the East business segment had sales revenues of
Verizon [17]

Answer:

=$422,000

Explanation:

As per the contribution margin concept, the contribution margin per unit is equal to the selling price per unit minus variable costs.

Therefore, the total contribution margin is the sales minus variable costs.

The contribution margin for the west will be sales($930,000) minus variable cost($488,000)

=$930 ,000 - $488,000

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4 0
2 years ago
You are opening up a brand new retail strip mall. You presently have more potential retail outlets wanting to locate in your mal
ExtremeBDS [4]

Answer:

A) Profitability index.

Explanation:

Based on the scenario being it can be said that the most appropriate tool to use in this specific situation would be a Profitability index. This is a ratio that weighs the payoff to the investment of a specific project. It is allows individuals to rank projects on the amount of value that they will be getting from them. Thus allowing you to choose the most optimal projects in situations such as this one.

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2 years ago
If a seller in a competitive market chooses to charge more than the going price, then:
attashe74 [19]

Answer:

d. buyers will make purchases from other sellers

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In the perfect competition structure producers have no power to change prices, as goods are homogeneous. Thus, since products are the same, if the producer raises the price, consumers will consume with other sellers.

3 0
3 years ago
Alpaca Corporation had revenues of $300,000 in its first year of operations. The company has not collected on $20,000 of its sal
madam [21]

Answer: Option (b) is correct.

Explanation:

Given that,

Revenues = $300,000

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Salaries paid = $14,000

Owners invested = $23,000

Borrowed on a five-year note = $23,000

Interest paid = $3,000

Paid for a two-year insurance policy = $6,800

Income tax rate = 9%

Gross Margin = Revenues - Cost of Goods Sold

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                       = $225,000

Profit before tax = Gross Margin - Salaries - Insurance payment - Interest

                          = $225,000 - 14,000 - 3,400 - 3,000

                          = $204,600

Net Income = Profit before tax - Tax at 9%

                    = $204,600 - 18,414

                    = $186,186

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A popular television program called the swan aimed to turn less visually appealing people into more socially acceptable ones by
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