Novak Corp. had the following account balances at year-end: Cost of Goods Sold $61,200; Inventory $14,550; Operating Expenses $2
1 answer:
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Answer:
attached answer
Explanation:
To draw the FPP we have to calculate either the formula or calcualte two points in the curve to draw the line.
Mowed Land Trimmed bushed
0(0 hours x 3 per hour) 20 (4 hours x 5 per hour)
3(1 hours x 3 per hour) 15 (3 hours x 5 per hour)
6(2 hours x 3 per hour) 10 (2 hours x 5 per hour)
9(3 hours x 3 per hour) 5 (1 hours x 5 per hour)
12(4 hours x 3 per hour) 0 (0 hours x 5 per hour)
Answer: The project should be accepted.
Explanation:
The Internal Rate of Revenue is used to evaluate projects before they are accepted. It is a rate that equates the Net Present Value of cashflows to zero.
If the IRR is higher than the Required return then the Project will be accepted because it means that NPV will be higher than zero. The reverse is true.
Given the cashflows in the question, the IRR is;
= 18.8% according to Excel.
With the IRR higher than the required return of 8%, the project should be accepted.
