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Stella [2.4K]
4 years ago
11

Drinkable Water Systems is analyzing a project with projected cash inflows of $137,400, $189,300, and -$25,000 for years 1 to 3,

respectively. The project costs $236,000 and has been assigned a discount rate of 14 percent. Should this project be accepted based on the discounting approach to the modified internal rate of return? Why or why not? Group of answer choices
Business
1 answer:
Rina8888 [55]4 years ago
8 0

Answer:

MIRR is higher than the discount rate, so this project should be profitable and should be accepted.

Explanation:

using the discounting approach to the MIRR:

NPV = 0 = [(-$236,000 - $25,000) / (1 + MIRR)³] + [$137,400 / (1 + MIRR)] + [$189,300 / (1 + MIRR)²]

Using a financial calculator, MIRR = 17.85%

MIRR (17.85%) is higher than the discount rate (14%), so this project should be profitable and should be accepted.

The modified internal rate of return assumes that the initial investment is financed at the interest rate, while the cash generated by the project is reinvested at the firm's WACC.

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Patty Corporation holds 75 percent of Slider Corporation's voting common stock, acquired at book value. The fair value of the no
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Answer:

1) d. $175,000

2) b. $156,250

Explanation:

1. The computation of net income for 20X9 under the treasury stock method is shown below:-

Net income for 20X9 under the treasury stock method = Janet Operating income + Slider operating income

= $100,000 + $75,000

= $175,000

2. The computation of income assigned to the controlling interest for 20X9 is shown below:-

income assigned to the controlling interest for 20X9 = Janet Operating income + (Slider operating income × Remaining percentage)

= $100,000 + ($75,000 × 75%)

= $100,000 + $56,250

= $156,250

Therefore we have applied the above formulas.

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Inventory costing methods rely heavily on assumptions about the flow of costs. The most widely used inventory valuation method is the FIFO method.

FIFO (First-In, First-Out), LIFO (Last-In, First-Out), Specific Identification, and Weighted Average Cost are the 4 major Inventory costing methods. If your inventory costs are steady or increasing, LIFO is the better option. Businesses with bigger inventories and rising costs appreciate how LIFO reduces profits and taxes while increasing cash flow. If your inventory costs are decreasing, FIFO is the better option.

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