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seropon [69]
3 years ago
11

Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under th

e first option, Julie would receive a lump sum of $150,000 immediately as her full retirement benefit. Under the second option, she would receive $14,000 each year for 20 years plus a lump-sum payment of $60,000 at the end of the 20-year period. Page 553 Required: If she can invest money at 12%, which option would you recommend that she accept? Use present value analysis.
Business
1 answer:
olchik [2.2K]3 years ago
8 0

Answer:

First option will be recommended.

Explanation:

To determine which option to be taken, we calculate the net present value each option generates. The option generating higher NPV should be recommended.

- Net present value of first option = Lump sum receipt = $150,000.

- Net present value of second option will be found by discounting cash flows at investing rate 12% and calculated as followed:

 +  Present value of 20 equal annual payment of $14,000 + Present value of $60,000 paid in 20 years = (14,000/12%) x [ 1 - 1.12^(-20)] + 60,000/1.12^20 = $110,792.

As net present value of the first option is higher than the second option, first option will be recommended.

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A new manufacturing machine is expected to cost $278,000, have an eight-year life, and a $30,000 salvage value. The machine will
oksano4ka [1.4K]

Answer:

C) 4.2 years

Explanation:

The computation of the payback period is as follows;

As we know that

Payback Period = Initial cost ÷ Annual net cash flow

Here

Initial cost = $278000

Annual net cash flow = Incremental after tax + Depreciation per year

where,  

Depreciation per year = (Original cost - Salvage value) ÷ Estimated Life

= ($278,000 - $30,000) ÷ 8 years

= $31,000

Annual net cash flow is

= $35000 + $31000

= $66000

So,

Payback Period is

= $278000 ÷ $66000

= 4.2 Years

4 0
3 years ago
Using the allowance method, is bad debt expense recognized in
mezya [45]

Using the allowance method, is bad debt expense recognized in the period in which sales related to the uncollectible account are made.

One of the most typical types of bad debt is credit card debt. Lenders issue credit cards, which let you make purchases on credit. These credit cards frequently have exorbitant interest rates that can soon become out of control.

Bad debt costs are typically listed on the income statement as a sales and general administrative expenditure. Accounts receivable on the balance sheet are reduced when bad debts are recognized, but firms still have the right to collect money if the situation changes.

Learn more about bad debts here

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3 0
1 year ago
A performance obligation is:
ANEK [815]

Answer:

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Explanation:.

5 0
3 years ago
If a competitive firm can sell a ton of steel for $500 a ton and it has an average variable cost of $400 a ton, and the marginal
Lena [83]
<span>If a competitive firm can sell a ton of steel for $500 a ton and it has an average variable cost of $400 a ton, and the marginal cost is $600 a ton, the firm should reduce its output. The reason for the reduction of output is the marginal cost it will have. The marginal cost exceeds the selling price of the product which is a bad sign for the company.</span>
8 0
3 years ago
Natalia's role with her new team was to produce periodic reports on the team's progress. Her reports were not in the preferred f
Ede4ka [16]

The most likely cause of Natalia's poor performance is the lack of feedback

<h3>What is lack of feedback in communication?</h3>

In communication, the lack of feedback means the situation whereby a sender fails to get an acknowledgement that his/her message was sent.

Therefore, in conclusion, the most likely cause of Natalia's poor performance is the lack of feedback.

Read more about feedback

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6 0
2 years ago
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