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4 years ago

Cash Payback Period, Net Present Value Method, and Analysis

Business

1 answer:

Digiron [165]4 years ago

8 0

Answer:

Plant Expansion

Cash payback period = 2 years

NPV = $304,707.24

Retail Store Expansion

Cash payback period = 2 years

NPV = $309,744.42

Explanation:

Cash payback period measures how long it takes for the amount invested in a project to be recovered from the cumulative cash flows.

Cash payback for the Plant Expansion

Amount invested = $-900,000

Amount recovered in the first year = $-900,000 + $450,000 = $-450,000

Amount recovered in the second year = $-450,000 + $450,000 = 0

The amount invested in the project is recovered In the second year. So, the cash payback period is 2 years.

Cash payback for the Retail Store Expansion

Amount invested = $-900,000

Amount recovered in the first year = $-900,000 + $500,000 = $-400,000

Amount recovered in the second year = $-400,000 + $400,000 = 0

The amount invested in the project is recovered In the second year. So, the cash payback period is 2 years.

The net present value is the present value of after tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator:

Plant Expansion

Cash flow in year 0 = $-900,000

Cash flow in year 1 = $450,000

Cash flow in year 2 = $450,000

Cash flow in year 3 = $340,000

Cash flow in year 4 = $280,000

Cash flow in year 5 = $180,000

I = 15%

NPV = $304,707.24

Retail Store Expansion

Cash flow in year 0 = $-900,000

Cash flow in year 1 = $500,000

Cash flow in year 2 = $400,000

Cash flow in year 3 = $350,000

Cash flow in year 4 = $250,000

Cash flow in year 5 = $200,000

I = 15%

NPV = $309,744.42

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

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miv72 [106K]

Answer:

Coronado Corporation

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Allocation Preferred Stock Common Stock

of Dividends

$87,500 $17,100 ($190,000 * 9%) $70,400 ($87,500 - 17,100)

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of Dividends

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c) The preferred stock is cumulative and participating

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of Dividends

$87,500 $48,944 $38,556

Amount due $17,100 ($190,000 * 9%)

Participation $31,844 = $31,844/$87,500 * 100 = 36.4%

Participation = $87,500 - ($17,100 + $38,556) = $31,844

Explanation:

a) Data and Calculations:

Outstanding capital stock:

9% Preferred stock = 1,900 shares of $100 par value ($190,000)

Common stock = 5,400 shares of $50 par value ($270,000)

Assuming retained earnings = $87,500 to be paid out in dividends.

No preference stock dividends were paid out during the last 2 years.

1) The preferred stock is noncumulative and nonparticipating:

Allocation Preferred Stock Common Stock

of Dividends

$87,500 $17,100 ($190,000 * 9%) $70,400 ($87,500 - 17,100)

2) The preferred stock is cumulative and nonparticipating:

Allocation Preferred Stock Common Stock

of Dividends

$87,500 $51,300 ($190,000 * 9%)*3 $36,200 ($87,500 - 51,300)

3) The preferred stock is cumulative and participating

Allocation Preferred Stock Common Stock

of Dividends

$87,500 $48,944 $38,556

Amount due $17,100 ($190,000 * 9%)

Participation $31,844 = $31,844/$87,500 * 100 = 36.4%

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Answer:Please refer to the explanation section

Explanation:

The question is incomplete, amounts of production costs like Direct Material, direct labour and Variable/Fixed manufacturing overheard were not given, we will explain the absorption cost and variable cost in detail so that the student would be able to calculate absorption cost and variable cost balances easier.

Absorption costing Method

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Total Manufacturing/Production cost = direct labor cost + direct material cost + variable and fixed Manufacturing overheads cost.

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A unit of Finished Goods = Total Manufacturing costs/units produced

Variable costing method

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