1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Anni [7]
3 years ago
9

X-treme Vitamin Company is considering two investments, both of which cost $10,000. The cash flows are as follows:Year Project A

Project B1 $12,000 $10,0002 8,000 6,0003 6,000 16,000a) Which of the two projects should be chosen based on the payback method?b) Which of the two projects should be chosen based on the net present value method? Assume a cost of capital of 10 percent.c) Should a firm normally have more confidence in answer a or answer b?

Business
1 answer:
liq [111]3 years ago
8 0

Answer:

A) Project A = 0.83 year

B) NPV of Project B = $14,609.66

C) Answer B

Explanation:

Requirement A

We know,

Payback period = Last year with negative cumulative cash flows + (Absolute value of last year's cumulative cash flow ÷ Cash flow of the following year's negative cumulative cash flow)

Or, Payback period = A + ( B ÷ C)

                             Project A                                       Project B

Year   Cash Flow   Cumulative Cash Flow    Cash Flow  Cumulative Cash Flow

0 (A)   -$10,000      -$10,000 (B)                     -$10,000        -$10,000 (B)

1           $12,000 (C)      2,000                           $10,000(C)                 0

2              8,000         10,000                               6,000             6,000

3              6,000         16,000                              16,000           22,000

Payback period for project A = 0 + ($10,000 ÷ 12,000) = 0 + 0.833 = 0.83 year

Payback period for project B = 0 + ($10,000 ÷ 10,000) = 0 + 1 = 1 year

X-treme Vitamin Company should choose project A because it can return the investment earlier than project B.

Requirement B

We can use excel to find the Net Present Value for both the projects with a cost of capital of 10%.

The following image shows the NPV for project A and B.

From the calculation of NPV, X-treme Vitamin Company should choose project B as that project yields more present cash flows.

Requirement C

A firm should generally have more confidence in answer b because money can produce more logical sense than a year. Yes, it is easy to understand how many years a company will need to get back its cash flow. Still, the present value of cash flows provides a more specific evaluation of how to utilize the initial investment.

You might be interested in
On January 1, 2018, Red Flash Photography had the following balances: Cash, $21,000; Supplies, $8,900; Land, $69,000; Deferred R
Nutka1998 [239]

Answer:

See explanation

Explanation:

Red Flash Photography

Journal Entries

1. Debit     Cash                 $29,000

Credit       Common Stock               $29,000

(issuing common stock for cash that will increase the cash)

2. Debit    Cash                               $44,000

   Debit    Accounts Receivable    $39,000

 Credit           Service Revenue                   $83,000

(Provided services on account and cash)

3. Debit    Salaries expense            $32,000

Credit               Cash                                     $32,000

(Paid salaries to workers)

4. Debit    Prepaid Rent                   $21,000

Credit               Cash                                     $21,000

(Paid rent in advance for cash)

5. Debit    Supplies                          $31,000

Credit                  Accounts payable            $31,000

(Purchase supplies on account means liability will increase)

6. Debit    Dividends                        $2,900

Credit                   Cash                                 $2,900

(Paid cash dividends to the shareholders)

7 0
3 years ago
There is little relationship between CSR behaviors and consumer reaction to the products and services of the firm according to s
Korvikt [17]

Answer: false

Explanation:

CSR behavior are simply behavioral aspects of CSR. According to the definition of corporate social responsibility, companies should conduct their business in a way that gives back to the society at large.

The statements that there' little relationship between CSR behaviors and consumer reaction to the products and services of the firm according to survey results listed in the Harvard Business Review is not true.

8 0
3 years ago
A company uses LIFO. At the beginning of the current year its inventory was $200,000, and at the end of the current year its inv
andriy [413]

Answer:

FIFO ending inventory = $290000

Explanation:

given data

current year inventory = $200,000

end of the current year inventory = $250,000

start of the year LIFO reserve = $30000

end of the year  LIFO reserve = $40,000

solution

LIFO reserve is difference between inventory using LIFo and inventory using FIFO

so

FIFO ending inventory = LIFO ending inventory + LIFO reserve ...............1

put her evalue we get

FIFO ending inventory = $250000 + $40000

FIFO ending inventory = $290000

7 0
3 years ago
The national accounts of Parchment Paradise are kept on​ (you guessed​ it) parchment. A fire in the statistics office destroys s
Mama L [17]

Answer:

GDP [Expenditure Approach] is $7,040,  Depreciation is $920

Explanation:

The formula for calculating GDP [Expenditure Approach] is Consumption expenditure + Investment + Government expenditure + Exports − Imports

Mathematically,

Y = C + I + G +  (X − M)

Where C = $7,000, I = $160, G = $180, (X-M) = -$300

Y = 7000 + 160 + 180 - 300 = $7,040  

GDP [Expenditure Approach] is $7,040  

Depreciation = GDP - NDP

NDP = wages + profits + interest + rent + net factor income of unincorporated businesses

Where wages = $5,900, profits + interest + rent = $220, net factor income from abroad = $0

NDP = 5900 + 220 + 0 = $6,120

Applying Depreciation = GDP - NDP, we have:

Depreciation = 7040  - 6120 = $920

N.B: The depreciation is a measure of the statistical discrepancy between the GDP and NDP

7 0
3 years ago
Brush Industries reports the following information for May: Sales $ 915,000​ Fixed cost of goods sold 103,000​ Variable cost of
VMariaS [17]

Answer:

$559,000

Explanation:

Data provided as per the question below:-

Sales = $915,000

Variable cost of goods sold = $253,000

Fixed cost of goods sold = $103,000

The computation of gross margin is shown below:-

Gross Margin = Sales - Variable cost of goods sold - Fixed cost of goods sold

= $915,000 - $253,000 - $103,000

= $915,000 - $356,000

= $559,000

6 0
3 years ago
Other questions:
  • Lisa is a manager at a thriving marketing company. Her boss recently gave her authorization to increase her department’s yearly
    14·1 answer
  • Phillis and Trey are married and file a joint tax return. For 2019, they have $4,800 of nonbusiness capital gains, $2,300 of non
    14·1 answer
  • Authority is decentralized, tasks and rules are flexible, and employees are given a lot of freedom at reliable copy products, wh
    15·1 answer
  • In fiscal 2016, Microsoft Corp. reported a statutory tax rate of 35% and an effective tax rate of approximately 15%. The 2016 in
    6·1 answer
  • Handy Hiking produces backpacks. In 2018, its highest and lowest production levels occurred in July and January, respectively. I
    9·1 answer
  • All of the following are associated with reporting controllable costs except:a. At lower levels, management have fewer controlla
    5·1 answer
  • Give an example of both impression management and face-work from your daily life. For example, if you go on a first date or a jo
    15·1 answer
  • SKRAM Corporation is appealing directly to the shareholders of IDNIC Corporation to acquire shares of IDNIC stock. This appeal i
    10·1 answer
  • Briefly state the reasons why a company would not wish to distribute all its profits to its shareholders.​
    9·1 answer
  • Specifics
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!