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3 years ago

Using payback to make capital investment decisions

Business

1 answer:

Romashka-Z-Leto [24]3 years ago

5 0

Answer: Henry should purchase this plant as it pays back in less than the 6 years it will have to be replaced in.

Payback period = 3.7 years

Explanation:

Payback period is a capital budgeting strategy that shows how long it will take for cash inflow to pay off the original investment.

The formula is;

= Year before payback + Cashflow remaining till payback/ Cash inflow in year of Payback

Year before payback

= 1,200,000/ 325,000

= 3.69

= 3 years

Cashflow remaining

= 1,2000,000 - (325,000 * 3)

= $225,000

= Year before payback + Cashflow remaining till payback/ Cash inflow in year of Payback

= 3 + 225,000/325,000

= 3.69

= 3.7 years

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Raymond owns an Accidental Death and Dismemberment Policy with a principal sum of $50,000, and a capital sum of $25,000. After o

schepotkina [342]

Answer:

He will get nothing from the Accidental Policy.

Explanation:

Raymond owns an Accidental policy but he Dies from Coronary artery disease. according to insurance companies policy, he will get nothing when he is dead by any means other than by accident.

Insurance companies have their own regulations and policy.

The insurance company is liable to pay for the incident for which the insurance is taken.

6 0

3 years ago

On September 11, 2016, Home Store sells a mower for $590 with a one-year warranty that covers parts. Warranty expense is estimat

Ad libitum [116K]

Answer:

Sep 11

Dr Cash 590.00

Cr Sales 590.00

Dec 31

Dr Warranty expense 59.00

Cr Estimated warranty liability 59.00

July 24

Dr Estimated warranty liability 41.00

Cr Repair parts inventory 41.00

Explanation:

Home Store Journal entry

Sep 11

Dr Cash 590.00

Cr Sales 590.00

Dec 31

Dr Warranty expense (590*10%) 59.00

Cr Estimated warranty liability 59.00

July 24

Dr Estimated warranty liability 41.00

Cr Repair parts inventory 41.00

4 0

3 years ago

Read 2 more answers

Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $95,000. The annual cash inflows for t

Citrus2011 [14]

Answer:

internal rate of return is 20.463%

Explanation:

given data

Year Cash Flow

1 $48,000

2 $46,000

3 $41,000

equipment cost = $95,000

to find out

Determine the internal rate of return

solution

we consider here internal rate of return is x

so we can say present value of inflows = present value of outflows

equate here

$95000 = $\frac{48000}{(x)} +\frac{46000}{(x)^2} +\frac{41000}{(x)^3}$

solve it we get

x = 20.463 %

so internal rate of return is 20.463%

5 0

3 years ago

Where is market equilibrium located

Lina20 [59]

Answer:

B. at the intersection of supply and demand

Explanation:

Equilibrium is a market condition where there no excess or shortage in demand and supply. It is when the quantity demanded matches the quantity supplied. At equilibrium, buyers and sellers are happy with the prevailing prices.

In a graph showing the demand and supply curve, the equilibrium point is the intersection of the supply and demand curve.

8 0

3 years ago

Product A is normally sold for $9.60 per unit. A special price of $7.20 is offered for the export market. The variable productio

Sophie [7]

Answer:

A. Differential Analysis dated March 16

Reject Accept

Sales revenue per unit $0 $7.20

Variable production cost 0 5.00

Additional export tariff 0 1.08

Total variable costs 0 $6.08

Net income $0 $1.12

B. The special order should be accepted.

2) Product B:

Revenue of $39,500

Variable cost of goods sold of $25,500

Variable selling expenses of $16,500

Fixed costs of $15,000

Operational loss $17,500

Differential Analysis of May 9

Reject Accept

Sales revenue $0 $39,500

Variable costs:

Product $0 25,500

Selling $0 16,500

Fixed costs $15,000 15,000

Total costs $15,000 $57,000

Net loss $15,000 $17,500

B) Product B should be discontinued.

Explanation:

a) Data and Calculations:

Normal selling price per unit of Product A = $9.60

Special order price for the export market = $7.20

Variable production cost = $5.00 per unit

Additional export tariff = $1.08 ($7.20 * 15%)

Total variable production and export costs = $6.08

7 0

3 years ago