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Sophie [7]
3 years ago
6

Newman Labs is considering buying equipment, which would enable the company to obtain a five-year research contract. The special

ized equipment costs $650,000 and will have no salvage value when the five-year contract period is over. The estimated annual operating results of the project are as follows:
revenue 750,000expenses (including straight line depreciation) 650,000increase in net income 100,000All revenue from the contract and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes.Refer to the information above. Compute the net present value of this investment, using a discount rate of 12%. (An annuity table shows that the present value of $1 received annually for five years, discounted at 12%, is 3.605.)a. $468,650. b. $179,150. c. $289,500. d. $829,150.
Business
2 answers:
gizmo_the_mogwai [7]3 years ago
4 0

Answer:

Option B. $179,150 NPV  

Explanation:

In this case, there is no taxes which means we will have to ignore the tax implications.

Now, as we know that NPV can be calculated as under:

NPV = Annual Net Cash flow (Step 1) * Annuity Factor - Initial Investment

Here

Initial investment is $650,000

Annuity Factor at 12% is 3.605

Annual Net Cash Flow is $230,000 (Step 1)

So by putting values we have:

NPV = $230,000 * 3.605 - $650,000

NPV = $829,150 - $650,000 = $179,150 NPV

<u>Step 1. Annual Net Cash flow</u>

Here Annual Net cash flow can be calculated as under:

Annual Net Cash Flow = Cash Inflow - Cash Outflow (Step 2)

Cash inflow $750,000

Cash Outflow is $520,000

Which means

Annual Net Cash Flow = $750,000 - $520,000 = $230,000

<u>Step 2. Cash Outflow</u>

Cash outflow is not given but we can find it using the expense $650,000 and eliminating the non cash impact of the expenses included (Depreciation). So we will have to find the depreciation using the straight line basis and deduct it from the aggregated expense for the year to find cash outflow for the year.

Depreciation for the year = (Cost - Salvage Value) / Useful

Depreciation for the year = $650,000 / 5 = $130,000

So the yearly cash outflow is:

Annual Cash Outflow = $650,000 - 130,000 = $520,000

DanielleElmas [232]3 years ago
3 0

Answer:

B

Explanation:

Net present value is a tool used to analyze how profitable a project by deducting the present value the difference between cash inflow and cash outflow over a period of time.

The formula is (cash flow)/(1+r)^i

Revenue - $750,000

Expenses - $650,000

Increase in net income - 100,000

Annual depreciation charge - 650000/5 =$130,000

Discount rate - 12%=3.605

Present cash value =( $100,000+$130000) = $230,000

Please note that depreciation is added back as it is a non cash expenses

Present value of cash flow = annual cash flow * discount rate

=$230,000*3.605 =829,150

Net present value = 829150-650000= 179,150

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Expected volume of production ​50,000 units Actual volume of production ​47,500 units Budgeted fixed overhead​ costs(for 50,000
Westkost [7]

Answer:

Volume Variance= $ 20,000 Unfavorable

Explanation:

The Volume Variance is the difference between actual production (AP) and budgeted production (BP) for a period multiplied by the standard fixed overhead rate (SR)

Volume Variance= (AP-BP) *SR = (47500- 50,000)* 400,000/50,000=

                          = 2,500 * 8=  $ 20,000 Unfavorable

Whenever actual production is less than the budgeted production the fixed overhead charged to production is less than the budgeted cost the volume variance is adverse.

3 0
3 years ago
An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $9,100,
sveticcg [70]

Answer:

$2,343,120

Explanation:

The computation of the after tax salvage value of the asset is shown below:

Written down cost of asset after 4 years = Acquisition cost of an asset - 4 years  depreciation

= $9,100,000 × (100 - 20 - 32 -19.20 - 11.52)%

= $1,572,480

Refer to the MACRS table

Now

Selling price = $2,600,000

Gain on Sale is

= $2,600,000 - 1,572,480

= $1,027,520

So,

Tax on Gain is

= $1,027,520 × 25%

= $256,880

So,

After tax salvage value = Sales Price - gain on tax

= $2,600,000 - $256,880

= $2,343,120

8 0
3 years ago
Which is the best choice to explain why human resource manager is so important to organizations
Zielflug [23.3K]

Answer:

which is the best choice to explain why human resource manager is so important to organizations?

Human resource manager maintains the influx of the organization, they help in recruitment process as well as exempt or sack those that are not needed anymore in the organization.

Explanation:

5 0
2 years ago
Zimway is a small manufacturer of linen. Couture Smart, a big apparel brand buys linen from Zimway in large quantities. Zimway,
harkovskaia [24]

Answer: Buyer dependency

Explanation: Buyer dependency refers to the situation when the supplier of a commodity is heavily dependent on one or two buyers for operating effectively in the market. This situation is common to those organisations that do business to business sales operations.

In the given case, Zimway made a majority of sales to couture and the other buyers purchase from it in small quantities.

Hence, from the above we can conclude that this case illustrates Buyer dependency.

6 0
3 years ago
Which of the following organizations would be MOST likely to face a dynamic/complex environment? a. Oracle b. Whirlpool c. JCPen
alekssr [168]

Answer:

The correct answer is letter "A": Oracle.

Explanation:

Dynamic-complex organizations are those with diverse operations that are constantly changing because of the rapid development of their industry. Firms that fall into this category are mainly technological which products tend to have a short life cycle.

Thus, <em>American cloud-solutions company Oracle can be described as one having dynamic-complex processes.</em>

8 0
3 years ago
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