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WITCHER [35]
3 years ago
8

A given investment project will cost RM400,000. Incremental annual cash flows after taxes are expected to be RM80,000 per year f

or the life of the investment, which is 5 years. There will be no salvage value at the end of the 5 years. The required rate of return is 14%. On the basis of the profitability index method, should the investment be accepted?
Business
1 answer:
erastova [34]3 years ago
6 0

Answer:

Based on the profitability index method, the investment should not be accepted.

It does not produce enough cash flows to justify the investment.

Explanation:

The profitability index method measures the present value of benefits for by dividing the present value of benefits by the present of initial investments.

The present value of initial investment in this project remains RM400,000.  The present value of incremental annual cash flows of RM80,000 after taxes for 5 years will be equal to:

RM80,000 * 3.668 = RM293,440

Then the next step is to divide the present value of benefits by the initial investment as follows:

RM293,440/RM400,000 = 0.7336 = 73.36%

The implication is that the present value of the benefits is less than the initial investment costs.  The project should then be rejected.

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Which statement is not correct about the business-society interdependence?
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3 years ago
Holton Company has the following equivalent units for July: materials 20,000 and conversion 18,000. Production cost data are:
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$3.55; $3.13

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Calculation to determine what The unit production costs for July are:

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<h3>What do we mean by asset?</h3>

A resource having economic worth that a person, business, or nation owns or manages with the hope that it will someday be useful is referred to as an asset. A company's balance sheet lists assets. They are acquired or produced to raise a company's value or improve the operations of the company. Physical commodities like equipment, real estate, raw materials, and inventories are considered assets. Intangible objects like patents, royalties, and other forms of intellectual property are also considered assets.

To know more about asset visit:

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