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sergey [27]
3 years ago
13

Accounting Rate of Return Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. C

obre Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $3,600,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses 1 $6,000,000 $4,800,000 2 6,000,000 4,800,000 3 6,000,000 4,800,000 4 6,000,000 4,800,000 5 6,000,000 4,800,000 Emily Hansen is considering investing in one of the following two projects. Either project will require an investment of $75,000. The expected cash revenues minus cash expenses for the two projects follow. Assume each project is depreciable. Year Project A Project B 1 $22,500 $22,500 2 30,000 30,000 3 45,000 45,000 4 75,000 22,500 5 75,000 22,500 Suppose that a project has an ARR of 30% (based on initial investment) and that the average net income of the project is $120,000. Suppose that a project has an ARR of 50% and that the investment is $150,000. Required: 1. Compute the ARR on the new equipment that Cobre Company is considering. Round your answer to one decimal place. % 2. Conceptual Connection: Which project should Emily Hansen choose based on the ARR
Business
1 answer:
Naddika [18.5K]3 years ago
7 0

Answer:

       Computation of Accounting Profit of the new project

Years        Cash Revenue        Cash expenses  Depreciation      Profit

1                  $6,000,000           $4,800,000         720,000         480,000

2                  6,000,000             4,800,000           720,000        480,000

3                  6,000,000            4,800,000            720,000        480,000

4                  6,000,000             4,800,000          720,000        480,000

5                 6,000,000             4,800,000           720,000         480,000

Accounting rate of return of the new project

                                         =  Average Profit / Initial  investment

                                       =  $480,000/$3,600,000

                                       =  13.3%

2. Project A 's ARR =  30%

   Project B's  ARR = 50%

 New Project's ARR   =  13.3%

Emily Hansen should choose project with highest ARR. Therefore, project B should be selected since it has highest ARR of 50% as compare to others.

                                       

Explanation:

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2. Which statement about the factors of production is correct?
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Answer:

A) A river from which a company draws water is called land.

Explanation:

There are mainly<u> 4 Factors of Production</u> and these are:

<em>1. Labor </em>

<em>2. Land </em>

<em>3. Capital</em>

<em>4. Entrepreneurship</em>

  • <u>Labor doesn't refer to the owner of the company.</u> It refers to the <em>work that is being done in order to finish a particular project or work</em>. This makes choice D incorrect.
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8 0
2 years ago
Which of the following is an example of crowding out? Question 13 options: A decrease in the rate of growth of the money supply
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Answer:

A budget deficit causes an increase in interest rates, which causes a decrease in investment spending.

Explanation:

In domain of economics, crowding out

can be regarded as a phenomenon which take place as a result of increased in involvement of government in market economy sector which substantially has effect on remainder of the market, this effect could be on the supply side, it could be on demand side of the market. An example of crowding out is A budget deficit causes an increase in interest rates, which causes a decrease in investment spending.

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3 years ago
In 2016, 59.7 percent of the adult population (253 million) was employed. If the employment rate increased to 62 percent,
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Answer:

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Explanation:

Below is the calculation:

a. Total number of adult population = 253 million

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Number of employed adult after increase in employment rate = 253 x 62% = 156.86

More people would be working = 156.86 - 151.041 = 5.819 million

b. GDP per capita is $122,000, so increase in GDP = 5.819 x 122000

    Increase in GDP = $709918

8 0
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When it comes to game design, it is false to say that<u> </u><u>Games design </u><u>is not a </u><u>STEM  career</u><u> because it is just abou</u><u>t  making entertainment.</u>

Game design:

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In conclusion, option B is correct.

Find out more on STEM careers at brainly.com/question/20250489.

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