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irakobra [83]
3 years ago
5

Hardware is adding a new product line that will require an investment of $ 1 comma 450 comma 000. Managers estimate that this in

vestment will have a​ 10-year life and generate net cash inflows of $ 320 comma 000 the first​ year, $ 280 comma 000 the second​ year, and $ 230 comma 000 each year thereafter for eight years. The investment has no residual value. Compute the ARR for the investment.
Business
1 answer:
ozzi3 years ago
6 0

Answer:

6.83%

Explanation:

The computation of the accounting rate of return is shown below:

As we know that

Average accounting rate of return = Average annual operating income ÷ Initial Investment

where,

Average annual operating income is

Year 1 net cash inflow           $320,000

Year 2 net cash inflow          $280,000

Years 3-10 ($230,000 × 8)    $1,840,000

Total net cash flows                $2,440,000

Less: Total depreciation      ($1,450,000)

                                              $990,000

Divided it by years of life         ÷ 10  years

Average annual operating income $99,000

So,

Average accounting rate of return is

= $99,000 ÷ $1,450,000

= 6.83%

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mojhsa [17]
Capital structure increases the ability of the company to find new wealth- creating investment opportunities.
4 0
3 years ago
Read 2 more answers
For each of the following corporate formations, (1) write the amount of gain or loss that will be recognized by the shareholders
Maslowich

Answer:

Back Stop, Inc.

1. The amount of gain or loss that will be recognized by the company:

a. $30,000 gain

b. $80,000 loss

2. The corporation's basis in the property after the transfer:

a. $150,000

b. ($80,000)

Explanation:

1) Data and Calculations:

a. Building $150,000 Capital, Kelly $120,000 Unrealized gain $30,000

b. Unrealized loss $80,000 Capital, Kelly $80,000

2) The building contributed by Kelly is worth $150,000 for the corporation.  However, the contribution by John is worth nothing in real terms.  Instead, an unrealized loss is being suffered by the corporation.

3 0
2 years ago
ohansen Corporation uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The
Elodia [21]

Answer:

The right solution is "$ 2.50 per DLH".

Explanation:

The given values are:

Rent,

= $ 15,000

Factor equipment's depreciation,

= $ 8,000

Indirect labor,

= $ 12,000

Production supervisor's salary,

= $ 15,000

Estimated DLHs,

= 20,000

The total manufacturing overhead will be:

= Rent+Factory's \ equipment \ depreciation+Indirect \ labor+Production \ supervisor's \ salaryOn substituting the given values, we get

= 15000+8000+12000+15000

= 50,000 ($)

Now,

The predetermined overhead rate will be:

=  \frac{50000}{20000}

= 2.50 \ per \ DLH ($)

3 0
3 years ago
The 2014 balance sheet of steelo, inc., showed current assets of $4,630 and current liabilities of $2,190. the 2015 balance shee
Ostrovityanka [42]

Hello!

Working capital in 2014 is
4,630−2,190=2,440
Working capital in 2015 is
5,180−2,830=2,350

change in net working capital, or nwc
2,350−2,440=−90

Good luck!

8 0
3 years ago
Below are various transactions that a local corporation had occur during the month. For each transaction, indicate the transacti
Debora [2.8K]

Answer:

Explanation:

As per accounting equation,

Assets =  Liabilities + Owners Equity

Following would be the effect of the transactions:

A. Received $50,000 in cash from sale of common stock

This transaction would increase the assets as cash is an asset at the same time it would increase capital or owners equity by the same amount.

So this will cause an increase in amount on both sides by $50,000

B. Borrowed $20,000 from the local bank by signing a note promising to pay loan plus interest in 2 years

This would result into an increase in the liability by the money borrowed at the same time would increase cash balance i.e the assets.

Thus it will increase the accounting equation by $20,000.

C. Paid $8000 for the purchase of an equipment

This increases the assets balance at the same time reduces the cash balance. Since both equipment and cash are assets, the net effect of the transaction on equation would be NO EFFECT.

D. Provided services to customer on account

This would increase debtors or accounts receivables balance and at the same time would increase sales.

So the effect would be an increase on the assets side of the equation. Also since this represents a credit sale, this would increase the profits which would form part of reserves which in turn increases the owners equity.

Thus, an increase in assets and owners equity which shall increase the equation by $5000

E. Received $ 5000 from customers above

This shall increase cash balance and at the same time reduce debtors balance by $5000. Since both are assets, the transaction will have NO EFFECT.

F. Paid $1,200 for one years worth of insurance in advance

Premium paid in advance is a prepaid expense and an asset. This shall increase prepaid expenses and at the same time reduce cash by the same time so it will have NO EFFECT on the equation.

G. Paid $800 to employees for salaries

This reduces the profits by $800 i.e owners equity and at the same time reduce cash (an asset).

So the equation will decrease by $800.

H. Purchased supplies costing $1,400 on account

This refers to credit purchases which shall increase the purchases balance which in return would reduce profits and hence owners equity. At the same time it will create a liability for creditors which shall increase the balance of liabilities by the same amount. So NO CHANGE

5 0
3 years ago
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