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Murrr4er [49]
3 years ago
9

Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The initial cost of one process was

$130,000 with annual costs of $49,000 and revenues of $78,000 in year 1, increasing by $1000 per year. A salvage value of $23,000 was realized when the process was discontinued after 8 years. What rate of return did the company make on the process? Solve by trial and error and verify i* by spreadsheet.
Business
1 answer:
lesya [120]3 years ago
7 0

Answer:

19.17%

Explanation:

initial cost = -$130,000

cash flow year 1 = $78,000 - $49,000 = $29,000

cash flow year 2 = $29,000 + $1,000 = $30,000

cash flow year 3 = $30,000 + $1,000 = $31,000

cash flow year 4 = $31,000 + $1,000 = $32,000

cash flow year 5 = $32,000 + $1,000 = $33,000

cash flow year 6 = $33,000 + $1,000 = $34,000

cash flow year 7 = $34,000 + $1,000 = $35,000

cash flow year 8 = $35,000 + $1,000 + $23,000 = $59,000

using an excel spreadsheet and the IRR function, we can determine the project's IRR = 19.17%

The IRR is the discount rate at which the NPV of the project would equal 0. If you are going to try to solve it by trial and error you can prepare an equation and then try to solve it by approximation:

$130,000 = $29,000/(1+r) + $30,000/(1+r)² + $31,000/(1+r)³ + $32,000/(1+r)⁴ + $33,000/(1+r)⁵ + $34,000/(1+r)⁶ + $35,000/(1+r)⁷ + $59,000/(1+r)⁸

Just replace r and start increasing or decreasing as the value approaches to $130,000

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3 years ago
The SRT partnership agreement specifies that partnership net income be allocated as follows:
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Answer: Option (C) is correct.

Explanation:

Given that,

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Salary allowance = $20,000

Interest on average capital balance = 10% of 60,000

                                                            = $6,000

Average capital balances for the current year = $60,000

Remainder = 30% of 50,000

                   = $15,000

Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder

                                                = $20,000 + $6,000 + $15,000

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Partner R:

Salary allowance = $25,000

Interest on average capital balance = 10% of 50,000

                                                            = $5,000

Average capital balances for the current year = $50,000

Remainder = 30% of 50,000

                  = $15,000

Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder

                                                = $25,000 + $5,000 + $15,000

                                                = $45,000

Partner T:

Salary allowance = $15,000

Interest on average capital balance = 10% of 40,000

                                                            = $4,000

Average capital balances for the current year = $40,000

Current year net income = $125,000

Remainder = 40% of 50,000

                  = $20,000

Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder

                                                = $15,000 + $4,000 + $20,000

                                                = $39,000

Workings:

Salary allowed = $20,000 + $25,000 + $15,000

                         = $60,000

Interest on average capital balance = $6,000 + $5,000 + $4,000

                                                            = $15,000

Total = Salary allowed  + Interest on average capital balance

        = $60,000 + $15,000

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Remainder = Current year net income - Total

                  = $125,000 - $75,000

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3 years ago
Investments and loans base their interest calculations on one of two possible methods: the the interest and interest methods. Bo
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Answer:

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Explanation:

With compound interest the rate of growth needs to be compounded which is why the time period is used to exponentially adjust it.

With simple interest there is no compounding so the value is simply the interest that will be earned every period (which is a constant value) multiplied by the number of periods and the amount to be invested.

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Answer:

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a.

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= $28.20

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b.

VAlue of all equity firm = Number of share outstanding × Price per share

= 160,000 × $28.20

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Since tax rate is zero, so value of levered firm equal to value of unlevered firm.

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A single server model with infinite calling population, first-come, first-served queue discipline, Poisson arrival rate and expo
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Answer:

3.5 customers

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The computation of the average number of customers in the system is shown below:

= (Arrival rate) ÷ (Service rate - arrival rate)

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=  (210 customers) ÷ (60 customer)

= 3.5 customers

We simply apply the average number of customers formula so that the correct value can come

All other information which is given is not relevant. Hence, ignored it

3 0
3 years ago
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