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Lady_Fox [76]
3 years ago
9

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:

Business
1 answer:
jeka943 years ago
4 0

Solution:

NPV is calculated as:

NPV = \frac{C1}{1+r} +\frac{C1}{(1+r)^{2} } +\frac{C1}{(1+r)^{3} } + ....... + \frac{C1}{(1+r)^{n} } - A

Initial investment = $16,500,000

Depreciation table:

Recovery Year    7-Year %    Depreciation Booked   Asset Book

                                                                                   Value at the end of Year

1                             14.29            $ 3,029,480               $ 18,170,520

2                            24.49             $ 5,191,880               $ 12,978,640

3                            17.49             $ 3,707,880               $ 9,270,760

4                            12.49             $ 2,647,880               $ 6,622,880

5                             8.93              $ 1,893,160               $ 4,729,720

6                             8.92              $ 1,891,040              $ 2,838,680

7                             8.93               $ 1,893,160                $ 945,520

8                            4.46               $ 945,520                    $ 0

Book value at the end of 5 years  =  $ 4 , 729 , 720

After tax salvage value   =  25 %  ∗  $ 21  , 200 , 000  −  ( 25 %  ∗ $  21,200,000) - $4,729,720 ) * 30%

=  $ 5, 128 ,916

Sales table:

Year           Unit Sales

1                   83,000

2                  96,000

3                 1,10,000

4                  1,05,000

5                   86,000

We calculate the free cash flow of the project : ( Check the attachment )

1)

Using NPV formula

NPV = − $ 7 , 328 , 810.58

2)

IRR is the discount rate (R) when the NPV of the project will be equal to zero.

Solving the equation (1) for R we get:

R = 3.93%

So IRR of the project = 3.93%

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If a family spends its entire budget in a given time frame, the family can afford either 90 cans of vegetables or 60 frozen pizz
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Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division Queensland New South
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Answer:

1. Quuen Land Division

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ROI 11.70%

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Margin 3.50%

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2. New South wale Division

Explanation:

1. Computation for each division's margin, turnover, and return on investment (ROI)

QUUEN LAND DIVISION MARGIN

Using this formula

Margin =Net operating income/Total Sales

Let plug in the formula

Margin =$70,200/ $ 1,080,000

Margin=6.50%

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First step is to determine the Turnover using this formula

Turnover=Total sales/Average Asset

Let plug in the formula

Turnover= $ 1,080,000 /$600,000

Turnover =1.8 times

Now let determine the ROI using this formula

ROI =Margin * Turnover

Let plug in the formula

ROI=6.50%*1.8

ROI=11.70%

NEW SOUTH WALE DIVISION MARGIN

Margin =$ 83,475 / $ 2,385,000

Margin=3.5%

NEW SOUTH WALE DIVISION ROI

First step is to determine the Turnover using this formula

Turnover=Total sales/Average Asset

Let plug in the formula

Turnover= $ 2,385,000 /$530,000

Turnover =4.5 times

Now let determine the ROI using this formula

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Let plug in the formula

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2. Based on the above calculation the divisional manager that seems to be doing the better job

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2 years ago
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