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
slava [35]
3 years ago
10

Products is considering producing toy action figures and sandbox toys. The products require different specialized​ machines, eac

h costing ​$1.1 million. Each machine has a​ five-year life and zero residual value. The two products have different patterns of predicted net cash​ inflows: LOADING...​(Click the icon to view the​ data.) Calculate the sandbox toy​ project's payback period. If the sandbox toy project had a residual value of $ 200 comma 000​, would the payback period​ change? Explain and recalculate if necessary. Does this investment pass Toy Universe​'s payback period screening​ rule?
Business
1 answer:
just olya [345]3 years ago
4 0

Answer:

Answer explained below

Explanation:

A. Calculation of Payback Period

1. For Toy Action Figure

Total Investment = $ 1,000,000

First Two Years' Net Cash Flow= $ 371500 + $ 371500

= $ 743,000

Balance Investment to be Recovered from Third Year Cash Flow= Total Investment - First-two Year Net Cash Flow

= $ 1,000,000 - $ 743,000

= $ 257,000

Third Year Net Cash Flow = $ 371,500

Payback period = 2 Years + (12MOnths* $ 257000) / $ 371,500

= 2 Years + 8.30 Months

= 2 Years 8.30 Months

2. For Sandbox Toy Project

Total Investment = $ 1,000,000

First Two Years' Net Cash Flow= $ 540000 + $ 390000

= $ 930,000

Balance Investment to be Recovered from Third Year Cash Flow= Total Investment - First-two Year Net Cash Flow

= $ 1,000,000 - $ 930,000

= $ 70,000

Third Year Net Cash Flow = $ 310,500

Payback period = 2 Years + (12 Months* $ 70000) / $ 310,500

= 2 Years + 2.71 Months

= 2 Years 2.71 Months

B. ARR of the Projects

1. For Toy Action Figure

Total Cash Flows (Given) = $1,857,000

Total Investment (Given) = $ 1,000,000

Net Income= Total Cashflows - Total Investment

= $ 1,857,000 - $ 1,000,000

, = $ 857,000

ARR Year basis = ($ 857,000 / $ 1,000,000)*100 / 5 Years

= 17.14%

2. For Sandbox Toy

Total Cash Flows (Given) = $1,535,000

Total Investment (Given) = $ 1,000,000

Net Income= Total Cashflows - Total Investment

= $ 1,535,000 - $ 1,000,000

= $ 535,000

ARR Year basis = ($ 535,000 / $ 1,000,000)*100 / 5 Years

 = 10.70%

So, Company Internal Policy for both the Project is Fulfill but as per the calculation shown above company should invest in Toy Action Figure Because It will within the payback period and earn maximum Return to the company,

And

If the Sandbox Toy has $ 200,000 Residual value then also the income will not exceed the Toy figure so answer will not change in this condition also.

You might be interested in
Which of the following countries experienced a decline in total output from 2000 to 2005?
sattari [20]

Answer: The correct answer is "B. Zimbabwe".

Explanation: GDP growth is crucial for an economy, since an increase in it reflects an increase in economic activity. If economic activity picks up, it means that unemployment tends to decrease and that per capita income increases.

In the case of Zimbabwe, population growth is far superior to GDP growth, therefore this makes economic growth much more difficult since there are more people per capita income is diminished.

7 0
3 years ago
Nidal Company reported inventory in the 2020 year-end balance sheet, using the FIFO method, as $185,000. In 2021, the company de
Ksenya-84 [330]

Answer:

Dr Retained earnings $14,000

Cr Inventory $14,000

Explanation:

There is a need to make adjustment to the inventory . Therefore,

Adjusted inventory

= New method of $171,000 - Old method of $185,000

= $14,000 decrease

It is to be noted that a lower inventory will have high costs associated with goods sold hence reduces profit/net income for the previous year by $14,000.

Also, the net income reports to retained earnings account hence decreases retained earnings.

Having made the above adjustment, we can assume that the average cost method was used for 2020 books.

3 0
3 years ago
Read 2 more answers
An appliance manufacturer wants to contract with a repair shop to handle authorized repairs in Indianapolis. The company has set
luda_lava [24]
Although one would repair at the most time of 76 minutes, the other is at most 77.1 minutes. I would pick the second one because they may take longer by 1.1 minutes at most, they also included seconds, which seems more like an honest bid time.
3 0
3 years ago
Last year's asset turnover ratio was 2.0. Sales have increased by 25% and total assets have increased by 10% since that time. Wh
Dmitriy789 [7]

Answer: d. 2.27

Explanation:

Asset Turnover = Total sales / Average Assets

Last years turnover ratio was 2.0 so assume Sales were $20 and Assets were $10 which would give the turnover of 2.0

The new turnover would be;

= (20 * 1.25)/(10 * 1.1)

= 25/11

= 2.27

6 0
3 years ago
A doctor misdiagnoses a serious illness. her partners in the clinic are not liable for her mistake. what kind of partnership do
lesantik [10]
Limited liability partnership
8 0
3 years ago
Read 2 more answers
Other questions:
  • Assume that the full-employment level of output is $2,000 and the price level associated with full-employment output is 100. Als
    11·1 answer
  • Gomez runs a small pottery firm. He hires one helper at $12,000 per year, pays annual rent of $5,000 for his shop, and spends $2
    15·1 answer
  • A high-production operation was studied during an 80-hr period. During that time, a total of seven equipment breakdowns occurred
    11·1 answer
  • The following information is available for Baxter Manufacturing for April:
    12·1 answer
  • Which of the following is a drawback of the corporate structure?
    15·2 answers
  • Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 3.7 pound
    12·1 answer
  • urrent and Quick Ratios The Nelson Company has $1,250,000 in current assets and $500,000 in current liabilities. Its initial inv
    5·1 answer
  • If a VA purchase contract is $340,000 and the funding fee is 1.75% what is the total loan amount?
    10·1 answer
  • What are the limitations of gdp and gnp
    14·2 answers
  • An economy enters an expansion and GDP increases from $34,000 to $40,000. What is the percent change in real GDP? Round your ans
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!