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
DiKsa [7]
3 years ago
15

Denver Mart is considering a project with a life of 5 years and an initial cost of $136,000. The discount rate is 11 percent. Th

e firm expects to sell 2,200 units a year with a cash flow per unit of $26. The firm will have the option to abandon this project after 3 years at which time it expects it could sell the project for $48,000. The firm is interested in knowing how the project will perform if the sales forecast for Years 4 and 5 of the project are revised such that there is a probability of 50 percent that the sales will be 1,000 units and a probability of 50 percent they will be 2,500 units a year. What is the net present value of this project given your sales forecasts?
Business
1 answer:
Ray Of Light [21]3 years ago
8 0

Answer:

Denver Mart

The net present value of this project given the sales forecasts is:

= $98,400.40

Explanation:

a) Data and Calculations:

Project's estimated life = 5 years

Initial project cost = $136,000

Discount rate = 11%

Initial estimated sales = 2,200 at $26

Revenue in years 1, 2, and 3 each = 2,200 * $26 = $57,200

Sales forecast of Year 4 and 5 revised to 1,750 units

Probability of 1,000 * 50% = 500

Probability of 2,500 * 50% 1,250

Total sales forecast = 1,750 units

Revenue in years 4 and 5 each =  1,750 * $26 = $45,500

Present value of revenue:

Year 1, 2, and 3 = $57,200 * Annuity factor

= $57,200 * 3.102 = $177,434.40

Year 4, PV = $45,500 * 0.659 = $29,984.50

Year 5, PV = $45,500 * 0.593 = $26,9815

Year 1 to 5 added =   $234,400.40

Present value of revenue = $234,400.40

Present value of costs =        136,000.00

Net present value =              $98,400.40

You might be interested in
A scope limitation sufficient to preclude an unqualified opinion always will result when management:__________
vovikov84 [41]

Answer:

The answer is D.

Explanation:

A scope limitation in audit means circumstances hindering an auditor from carrying out his duties according to the audit procedure. A scope limitation can make an auditor issue a qualified opinion or a disclaimer of opinion depending on the materiality of the issue.

Back to the question, a scope limitation sufficient to preclude an unqualified opinion always will result when management refuses to provide a representation letter acknowledging its responsibility for the fair presentation of the financial statements in conformity with General Accepted Accounting Principle (GAAP)

4 0
3 years ago
Freight car loadings over an 18-week period at a busy port are as follows: A- Determine a linear trend line for expected freight
padilas [110]
The linear equation that best fits the given data is
y = 19.19x + 213.53
after data processing

In week 20 and 21, the expected loading is
y = 19.19 (20) + 213.53 = 597.33
y = 19.19 (21) + 213. 53 = 616.52

The week when the load is 776 is
776 = 19.19x + 213.53
x = 29.3 ~ 30 weeks
8 0
3 years ago
Over the past year you earned a nominal rate of interest of 10% on your money. The inflation rate was 5% over the same period. T
Veronika [31]

Answer:

5%

Explanation:

Purchasing power refers to the amount of goods and services a unit of currency can buy.

Purchasing power can be determined by finding the real interest rate.

Real interest rate = Nominal interest rate - inflation rate

10% - 5% = 5%

I hope my answer helps you

5 0
3 years ago
In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. T
Mamont248 [21]

Answer:

D) 137000 39000

Explanation:

Allen  140,000

Daniel 40,000

Capital before admission 180,000

share ratio 3:1

Capital after admission:

180,000 + 40,000 = 220,000

David participation: 20%

220,000 x 20% = 44,000

David investment  40,000

goodwill: 4,000

There is a difference in goodwill which will be supported for the old partner as their current share ratio

Allen 4,000 x 3/4 = 3,000

Daniel 4,000 x 1/4 = 1,000

Capital after David admission:

140,000 - 3,000 = 137,000

40,000 - 1,000 = 39,000

6 0
3 years ago
Which would you rather be owning if there is a decline in market interest rates: long-term bonds or short-term bonds? why?
Thepotemich [5.8K]

Long-term bonds are preferable to hold if interest rates decrease because their price will rise more than the price of short-term bonds, providing a bigger return. Long-term bonds, however, are more susceptible to interest-rate risk. In addition, the longevity of the bonds, not only their term to maturity, is a major factor.

<h3>What are short-term bonds?</h3>

Short-term bonds may offer consistent income with comparatively little risk. When compared to money markets, higher profits can be obtained. Even some bonds are tax-free.

The potential yield of a short-term bond is higher than that of money market investments. Bonds having shorter maturities are often more resistant to changes in interest rates than other types of assets. Purchasing a bond and keeping it until it matures entitles you to the stated principle and interest rates.

To know more about bonds, visit

brainly.com/question/22939161

#SPJ4

3 0
2 years ago
Other questions:
  • What is a misdemeanor?
    15·1 answer
  • Evaluate the product offerings at REI. Select a product category and review the product line at REI, then select a similar compe
    7·1 answer
  • Observations about "youth gone wild" have lead to recent calls to reduce the age of responsibility to allow for younger violent
    9·1 answer
  • 3. Which of the following best defines inflation? a. The rapid increase in the price of a specific good, such as gasoline b. A g
    6·2 answers
  • 2. Jamie Lee and Ross are estimating that they will be putting $40,000 from their savings account toward a down payment on their
    9·1 answer
  • A concern of using 360-degree evaluation is that: a. this system has no scope for employee collusion. b. raters feel accountable
    13·1 answer
  • A tax preparer is part of
    7·2 answers
  • Which of the following should you do during an interview? Question 2 options: Demand specific benefits. Explain why your previou
    7·1 answer
  • This year Andrews achieved an ROE of 24.5%. Suppose next year the profit margin (Net Income/Sales) decreases. Assuming sales, as
    10·1 answer
  • Why should you consider collecting a family of measures when undertaking an improvement?
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!