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julia-pushkina [17]
3 years ago
9

Windsor Manufacturing is considering a project with an internal rate of return of 12%, an annual rate of return of 18%, and a 5-

year useful life. The cost of the project is $150,000 and it has a $6,000 salvage value. Windsor uses straight-line depreciation. What is the annual net income of the project? A : $9,360 B : $8,640 C : $14,040 D : $12,960
Business
1 answer:
irinina [24]3 years ago
3 0

Answer:

Option (C) $14,040

Explanation:

Data provided in the question:

Internal rate of return = 12%

Annual rate of return = 18% = 0.18

Cost of the project = $150,000

Salvage value = $6,000

Now,

Annual return = ( Expected net income ) ÷ ( Average investment )

or

Expected net income = Annual return × Average investment

= 0.18 × [ ( Cost of the project + Salvage value ) ÷ 2 ]

= 0.18 × [ ( $150,000 + $6,00 ) ÷ 2 ]

= 0.18 × $78,000

= $14,040

Option (C) $14,040

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14%

Margin of Safety:

[(current sales - break even)/current sales] * 100

(12900-11094)/12900] *100

(1806/12900)*100

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6 0
3 years ago
RuthAnn is 28 years old and is retiring at the age of 65. When she retires, she estimates that she will need an annual income of
inessss [21]

Answer:

Yes

Explanation:

From her current age of 28 to her retirement age of 65, RuthAnn has (65 - 28 =) 37 more years to work.

If she saves 11% of her annual income of $36,278.13 into a 401(k), she will be setting aside (11% * 36,278.13 =) $3,990.59 into the 401(k) account annually.

At 7.1% compounding rate, in 37 years, RuthAnn would have set aside an amount estimated by the future value of an annuity formula.

FV = \frac{A(1+r)^{n} - 1}{r}

where FV is the future value, the amount that would have been set aside,

A = is the annual savings,

r = is the compounding rate, and

n = is the number of years.

Therefore, the total amount that would be saved up after 37 years =

FV = \frac{3,990.59(1+0.071)^{37} - 1}{0.071}

= (3,990.59 * 11.6535)/0.071

= $654,990.31.

By spending $32,523 annually from an account earning 7.1% compound interest rate for 30 years, the present value of the total amount needed by RuthAnn today that will be sufficient for her retirement spending can be estimated using the present value of an annuity formula.

PV = \frac{A(1 - (1+r)^{-n}}{r}

= PV = \frac{32,523(1 - (1.071)^{-30}}{0.071}

= (32523 * 0.8723)/0.071

= $399,574.83.

Since the amount saved up ($654,990.31) is more than the total amount required for RuthAnn's retirement ($399,574.83), RuthAnn has more than sufficient to meet her Retirement goal.

Specifically, the amount she has saved up can support a maximum annual spending which can be estimated from the present value of an annuity formula.

PV = \frac{A(1 - (1+r)^{-n}}{r}

where PV = the amount saved up, $654,990.31,

A = the annual spending which we are estimating,

r = the 7.1% compound interest rate,

n = the number of years to retirement.

654,990.31 = \frac{A(1 - (1.071)^{-30}}{0.071}

= 654,990.31 = (A * 0.8723)/0.071

= A = 654,990.31/0.8723 * 0.071

= A = 53,312.29

Thus, the amount saved up can support a maximum retirement spending of $53,312.29, which is higher than the $32,523 annual income needed by RuthAnn for her retirement.

6 0
3 years ago
A portfolio with a 30% standard deviation generated a return of 15% last year when T-bills were paying 6.0%. This portfolio had
jarptica [38.1K]

Answer: 0.3

Explanation:

The Sharpe ratio is simply used by organizations and investors in order to compare the return on an investment to its risk.

From the question, we are informed that a portfolio has a 30% standard deviation generated a return of 15% last year when T-bills were paying 6.0%.

The Sharpe ratio will be:

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= 0.09/0.3

= 0.3

4 0
3 years ago
ABC Corporation has declared a rights offering to stockholders of record on Friday, December 10th. Under the offer, shareholders
VashaNatasha [74]

Answer:

The value of a right is $1

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Value of total rights = $29 - $19 =$10

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4 0
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statuscvo [17]

Answer:  evoked set

               

Explanation:

In simple words, evoked set refers to the collection of brands that initially comes in the mind  of the consumer when he or she is willing to buy a product in market. These are the brands that are of high significance to the customer and that individual customer completely trust such brand.

Every producer in the market wants to be in the evoked set of the consumer as there is a high probability that customer will choose to buy their willing commodity form such a set. However, positioning in evoked set cannot be marked quickly as it depends on various factors such as duration, quality and price etc.

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