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SSSSS [86.1K]
3 years ago
9

McFann Co. has two divisions, L and H. Division L is the company's low-risk division and would have a WACC of 8% if it were oper

ated as an independent company. Division H is the company's high-risk division and would have a WACC of 14% if it were operated as an independent company. Because the two divisons are the same size, the company has a composite WACC of 11%. Division H is considered a project with an expected return of 12%. Should McFann Co. accept or reject the prject?
A. Accept

B. Reject

On what grounds do you base your accept-reject decision?

A. Division H's project should be accepted, because its return is greater than the risk-based cost of capital for the divison.

B. Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division.
Business
1 answer:
Goshia [24]3 years ago
8 0

Answer:

B. Reject

B. Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division.

Explanation:

As we can see that the project H Weighted average cost of capital is 14% and the expected rate of return is 12%

So based on this its expected rate of return is less than the cost of capital i.e Weighted average cost of capital

Therefore, the project should be rejected as we compared the Weighted average cost of capital and the expected rate of return

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Farina Foods manufactures a dog food product called Special Scoops. Farina currently has 20,000 bags of Special Scoops in invent
BlackZzzverrR [31]

Answer:

B. process Special Scoops further into Prime Scoops and Canine Sports to increase profits by $37,000.

Explanation:

Calculation to determine what the decision that Farina should make and the reason is

First step is to calculate the Special scoops

Special scoops = 20,000 bags x ($7 - $1.50) - $20,000

Special scoops =20,000 bags x$5.5-$20,000

Special scoops =$110,000-$20,000

Special scoops = $90,000

Second step is to calculate the Prime scoops

Prime scoops = 15,000 bags x $8 + 10,000 bags x $6 - (20,000 bags x $1.50 + $20,000 + $3,000)

Prime scoops =$120,000+$60,000-($30,000+$20,000+$3,000)

Prime scoops = $180,000 - $53,000

Prime scoops = $127,000

Now let calculate the Profit increase

Profit increase =$127,000 - $90,000

Profit increase= $37,000

Therefore the decision that Farina should make and the reason is: PROCESS SPECIAL SCOOPS FURTHER INTO PRIME SCOOPS AND CANINE SPORTS TO INCREASE PROFITS BY $37,000.

5 0
3 years ago
Verma, Inc. sells office furniture. In 2021, it sold 200 desks for $500 each. For each desk sold, Verma distributed a 50% discou
Effectus [21]

Answer:

$12

Explanation:

The standalone price is the price at which the seller (Verma) would sell its products or services (discount coupon) separately to other customers.

to determine the standalone price of the discount coupon we must multiply the change in discount by the expected use of the coupons:

  • change in discount = $150 x (50% - 10%)  = $150 x 40% = $60
  • expected use = 20%

= $60 x 20% = $12

3 0
3 years ago
In a period of rising prices, the inventory method which tends to give the highest reported net income is:
Blizzard [7]

Answer:

b. first-in, first-out.

Explanation:

Generally, there are three methods for estimating the inventory shown below:

1. First-in-first, the company is selling the old products in this way than the new ones, which means first selling the old products and then selling the new ones

2. Weighted average method: Weighted cost is measured by considering the total revenue and total purchase

3. Last-in-first-out: Contrary to the first-in-first-out process, the first sale of new goods, then selling of old goods.

4. Base stock: The process by which the orders of the consumer are fulfilled by holding the less inventory

In the FIFO method, the highest ended inventory results in the lower cost of goods sold at the highest net profits.

7 0
3 years ago
Different ____ levels and _______ requirements affect the choice of market entry
joja [24]
The answer to this question is Risk;Resources
The risk levels will affect your choice in choosing the market because the higher the risk levels, the fewer competition you will tend to face.
The resource requirements, on the other hand, affect your choice by considering which product could be produced in your area that has a competitive advantage compared to other products
3 0
3 years ago
In the process of reconciling its bank statement for January, Maxi's Clothing's accountant compiles the following information:
Troyanec [42]

Answer:

$4,469

Explanation:

Calculation for what The adjusted cash balance per the books on January 31 is

Using this formula

Adjusted cash balance = cash balance per books -bank service charges - EFT automatically deducted - NSF Check

Let plug in the formula

Adjusted cash balance= $5325 - $31 -$500 -$325

Adjusted cash balance= $4,469

Therefore The adjusted cash balance per the books on January 31 is $4,469

5 0
3 years ago
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