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drek231 [11]
3 years ago
5

BASICS OF CAPITAL BUDGETING You recently went to work for Allied Components Company, a supplier of auto repair parts used in the

after-market with products from Daimler AG, Ford, Toyota, and other automakers. Your boss, the chief financial officer (CFO), has just handed you the estimated cash flows for two proposed projects. Project L involves adding a new item to the firm’s ignition system line; it would take some time to build up the market for this product, so the cash inflows would increase over time. Project S involves an add-on to an existing line, and its cash flows would decrease over time. Both projects have 3-year lives because Allied is planning to introduce entirely new models after 3 years. Here are the projects’ after-tax cash flows (in thousands of dollars): A timeline shows values for Projects L and S over 3 years. The data from the timeline, presented in the format, project, 0, 1, 2, 3, are as follows. L, negative $100, $10, $60, $80. S, negative $100, $70, $50, $20. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. The CFO also made subjective risk assessments of each project, and he concluded that both projects have risk characteristics that are similar to the firm’s average project. Allied’s WACC is 10%. You must determine whether one or both of the projects should be accepted.
Business
1 answer:
artcher [175]3 years ago
7 0

Answer:

Both projects should be accepted as their cash-flow 's present values are all positive once they are discounted at WACC rate.

Explanation:

To find whether one or both projects should be accepted, we have to calculate the present value of the two cash-flows each project generates. Besides, both projects have the same risk characteristics as the firm's average project, WACC should be used as a discount rate.

- Project L present value (in thousands of dollars) = -100 + 10/1.1^1 + 60/1.1^2 + 80/1.1^3 = $18.783

- Project S present value (in thousands of dollars) = -100 +70/1.1 + 50/1.1^2 + 20/1.1^3 = $19.985

As both projects generate positive discounted cash-flow, both of them should be accepted.

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Angara Corporation uses activity-based costing to determine product costs for external financial reports. The company has provid
GREYUIT [131]

Answer:

d. $611,100

Explanation:

The computation of the total amount of overhead cost is shown below:

= (Machine related cost ÷ Total machine related cost of product X × Machine related of product X) + (Batch setup cost ÷ Total machine related cost of product X × Machine related of product X) + (General factory cost ÷ total general factory cost of product X × general factory of product X)

= ($362,600 ÷ 14,000 × 6,000) + ($421,500 ÷ 15,000 × 12,000) + ($308,100 ÷ 13,000 × 5,000)

= $155,400 + $337,200 + $118,500

= $611,100

6 0
3 years ago
Cindy earned a 10 percent increase in her salary and received the entire increase at the beginning of the year, with the stipula
sammy [17]

Answer:

Lump-sum salary increase.

Explanation:

A lump-sum salary increase is an amount paid instead of increase in salary. It is not added to the fixed base salary, it is instead given in the form of a single cash payment, as it is the case with Cindy here. This is why it is also known as lump sum bonus, because it is given as a single payment, as it was in Cindy’s case, all given at the beginning of the year.

7 0
3 years ago
"In a telecommunications environment, line errors can be detected by using an echo check."
stepladder [879]

Answer:

The correct answer is letter "A": True.

Explanation:

An echo check is an error-detection test. With this technique, a computer sends data to a different computer of the same network hoping to get a response to verify the correct reception. Besides confirming data breakups, it is useful to reduce data loss during line issues.

7 0
3 years ago
After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring
denis-greek [22]

Answer:

B. The marginal cost of going to Ft. Lauderdale decreases.

Explanation:

Consider marginal cost and benefit before making a purchase.

Marginal cost is the increase or decrease of the cost of a particular actions.

Marginal benefit is the increase or decrease of the benefit of the action.

For example, if two items are identical and priced differently, the marginal benefit increases when the lower price is selected.

If two items are similar but not identical you would have to assess the cost and benefits of each more.

If marginal cost exceeds the marginal benefit you shuold not purchase the item or consider another option.

In this case, the only option that may reverse this desition is that the marginal cost of going to Ft. Lauderdale decreases.

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4 years ago
Ecuador uses the _______ as currency.
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As of 2006, the us dollar is Ecuador 's national currency
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