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sasho [114]
3 years ago
5

Your firm is considering a project that will cost $ 4.548 million up​ front, generate cash flows of $ 3.50 million per year for

3 ​years, and then have a cleanup and shutdown cost of $ 6.00 million in the fourth year.
a. How many IRRs does this project​have?



b. Given a cost of capital of 10.0 % should this project be​ accepted?
Business
1 answer:
Alika [10]3 years ago
4 0

Answer:

(a) It will have multiple IRRs

(b) The MIRR calculated is 10.18% . Going by MIRR result , this project will only generate returns that is equal to cost of capital(10%)  .If there are other avaible more viable projects, it should be rejected ( Please see attached computation).

Explanation:

(a) The multiple IRRs occurs when cash flows change sign and result in more than one value for the IRR.

Application of IRR to value an investment is only suitable when the project has normal cash flows, i.e a negative initial cash flow (i.e initial investment) followed by a series of positive cash flows.

In this scenario, we have negative cash flow of $6m  in year 4 which occured after positive cash flow of $3.5m per year from year 1 to 3. This typically make IRR unreliable. To overcome this limitation , we can use Modified Internal Rate of Return (MIRR)

(b) Please see attached for more details.

Download xlsx
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Answer:

Price= $85263,6

Explanation:

We need to calculate the price paid by the City of Hamptonville for playground equipment.

We know the following information:

Direct material= $13000

Direct labor= 160hours*$22hour= $3520

Manufacturing overhead: it is assigned on labor hours.

We need to calculate the value of manufacturing overhead.

Labor hours presupuested= $41800/$22hour= 1900hours

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<u>Manufacturing overhead Job 309= 330*160hours= $52800</u>

Manufacturing cost Job 309= direct material + direct labor + Manufacturing overhead= 13000 + 3520 + 52800= $69320

Price=69320*1.23= $85263,6

6 0
3 years ago
Business solutions's second-quarter 2018 fixed budget performance report for its computer furniture operations follows. the $174
Natasha2012 [34]

Answer:

Variable Expenses

Desk   $115,520

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Variable costs are those will vary will the change in sale or activity level e.g material cost, labor cost etc.

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3 years ago
A milestone is a typical measuring point used when establishing cost control. Which of the following DOES NOT accurately describ
KiRa [710]

Answer:

d. Milestones are developed during risk planning.

Explanation:

A milestone is a typical measuring point used when establishing cost control. Which of the following does NOT accurately describes the use of cost control milestones?Select one:a. Project managers and sponsors often decide the number of milestones jointly.b. Milestones are often identified in the project charter.c. Project managers can use their cash flow projections to determine the funding needed to reach each milestone.d. Milestones are developed during risk planning.

<u>ANSWER</u>

It is not correct that milestones are developed during risk planning but rather they are developed during Project budgeting where the deliverables are identified in terms of the cost to achieve them. Truly as stated in the scenario's options, Project managers can use their cash flow projections to determine the funding needed to reach each milestone. It is in the project planning phase that these milestones are established by Project managers and sponsors jointly.

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