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3 years ago

The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects:

Business

1 answer:

kari74 [83]3 years ago

4 0

Answer:

PI for the first project = 1 + ($5,673.93 / 87,000) = 1.065

PI for the second project = 1 + ($5,561.23 / $55,000) = 1.101

b. the second project should be chosen because the PI is higher

NPV for 1 = $5,673.93

NPV for 2 = $5,561.23

Explanation:

profitability index = 1 + (NPV / Initial investment)

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

for the first project

Cash flow in year 0 = –$87,000

Cash flow in year 1 = 36,900

Cash flow in year 2 = 47,000

Cash flow in year 3 = 27,000

I = 10%

NPV = $5,673.93

for the second project

Cash flow in year 0 = –$55,000

Cash flow in year 1 = 11,700

Cash flow in year 2 = 34,500

Cash flow in year 3 = 28,500

I = 10%

NPV = $5,561.23

PI for the first project = 1 + ($5,673.93 / 87,000) = 1.065

PI for the second project = 1 + ($5,561.23 / $55,000) = 1.101

b. the second project should be chosen because the PI is higher

To find the NPV using a financial calculator:

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

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Marysya12 [62]

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Explanation:

8 0

2 years ago

Someone please help me.

Elanso [62]

In my understanding, this assignment wants you to evaluate the decision made by the management officer, in her attempt to improve the business position.

First of all, net profit figure shows the profitability of the business. Net profit figure means the total profit earned minus all the costs incurred in running the business. Higher net profit figure in year 1 might indicate a favourable position, as it could be that higher profit is generated from using whatever method/machine they use in year 1, or running this machine incurred less cost. In year 2, they didn't necessarily earn lower profit, but running the new machine might be more costly.

Next, rate of productivity growth refers to the growth in quantity of output produced. If more output can be produced, this means higher efficiency. This means that the efficiency of production in year 2 is more than in year 1.

Thirdly, the number of customer's complaints is important in evaluating the business' goodwill, in this case, its position in the society. Without good relationship with the public, a company may lose its customer. It is always important to keep clients satisfied since they're the source of income to the business. This means that the management decision in year 2 is more favourable than in year 1.

Last but not least, rate of absenteeism can be evaluated in terms of productivity . Higher absenteeism means lower productivity, lower output but higher cost to the business since they're paying salaries to workers who don't produce output to sell. Less output to sell means less income can be earned. In year 1, the business productivity is higher than in year 2.

In year 2, the business has a boost in their efficiency & reputation. Although less profit earned, it is likely that this will grow in the future. Staff attendance can be improved by encouragement such as giving incentives for example, provision of more holidays.

I hope this is helpful!

6 0

3 years ago

One of the advantages of being a limited partner in a real estate investment venture is that you have __________ liability. limi

lara31 [8.8K]

Limited financial liability. It is one of the advantages because the strain of effort and time would be not part of the investment and if the it is successful you're earning even though you're not doing anything. You're only role is able to provide money or resources to the venture.

3 0

3 years ago

Question 6

AleksAgata [21]

Answer:

The answer is,

O To raise money for the corporation.

Explanation:

Issuing share is a method of financing for a corporation. Company can borrow money from external parties such as banks or issue debentures as well. However, the cost of such borrowings tends to be higher than issuing equity stocks and there are many legal necessities as well in such a process.

6 0

3 years ago

Cool Logos buys logo-imprinted merchandise and then sells it to university bookstores. Sales are expected to be $ 2 comma 003 c

Scrat [10]

Answer:

Cost of Goods Sold Budget

October November

Cost of Goods Sold $1,568,000 $1,664,600

Inventory Budget

October November

Total $752,920 $772,800

Purchase Budget

October November

Budgeted Purchases $2,259,320 $2,397,880

Explanation:

Cost of Goods Sold Budget

Gross Profit Margin = 30% therefore Markup is 70%

October November December

Sales $2,240,000 $2,378,000 $2,520,000

Cost of Goods Sold (70%) $1,568,000 $1,664,600 $1,764, 000

Inventory Budget

October November

Base Amount $420,000 $420,000

Based on Sales (20%) $332,920 $352,800

Total $752,920 $772,800

Purchase Budget

October November

Budgeted Sales $2,240,000 $2,378,000

Add Budgeted Closing Inventory $752,920 $772,800

Total Purchases Needed $2,992,920 $3,150,800

Less Budgeted Opening Inventory ($733,600) ($752,920)

Budgeted Purchases $2,259,320 $2,397,880

September Closing Stock is October`s Opening Stock

Therefore September Closing Stock = $420,000 + $1,568,000 × 20%

= $733,600

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3 years ago