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3 years ago

Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT?

Business

1 answer:

Step2247 [10]3 years ago

7 0

Answer: B. A project's NPV increases as the WACC declines.

Explanation:

NPV is calculated by discounting the future cashflows at the Weighted Average Cost of Capital. This means that if the WACC is lower, the NPV will be higher because cash flow will not be discounted as much and if the WACC keeps going lower, the NPV keeps rising.

For instance, assume a company invested $10,000 and will get cash inflows of $10,000 for 2 years. What is the NPV at 10% and 15%.

NPV at 10% WACC = -10,000 + 10,000/1.1 + 10,000/1.1²

= -10,000 + 9.090.90 + 8,264.46

= $7,355.36

NPV at 15% WACC = -10,000 + 10,000/1.15 + 10,000/1.15²

= -10,000 + 8,695.65 + 7,561.44

= $6,257.09‬

Notice how NPV dropped when WACC increased.

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Teagan Company uses Departmental Overhead allocation to allocate its manufacturing overhead costs. It has identified two depart

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Answer:

Machining:

Allocated MOH= $603

Assembly:

Allocated MOH= $450

Explanation:

Giving the following information:

Machining:

Allocates overhead using machine-hours

Estimated manufacturing overhead: $670,000

Estimated machine-hours= 10,000

Assembly:

Allocates overhead using direct labor hours.

Estimated manufacturing overhead: $450,000

Estimated direct labor hours= 15,000 hours

First, we need to calculate the estimated manufacturing overhead rate for each department:

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Machining:

Estimated manufacturing overhead rate= 670,000/10,000= $67 per machine hour

Assembly:

Estimated manufacturing overhead rate= 450,000/15,000= $30 per direct labor hour.

Job 601:

Machining Department: 9 Machine Hours

Assembly Department: 15 DL hours

To allocate overhead we use the following formula:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Machining:

Allocated MOH= 67*9= $603

Assembly:

Allocated MOH= 30*15= $450

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3 years ago

During 2011, Clark Company manufactured equipment for its own use at a total cost of $2,400,000. The project required the entire

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3 years ago

Ray's Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has esti

xeze [42]

Answer:

By using the EOQ model, ray should order 22.8 units or 23 units each time

Explanation:

Solution

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Ray annual estimated demand for this model is = 1,050 units

The cost of one unit carry is =$105

He estimated each order costs to place = $26

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EOQ = (2*1050*26/105)^.5

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4 years ago

____ occurs when soldiers or employees follow questionable orders, such as when nurses willingly follow a physician's order to g

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Answer:

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3 years ago