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Bas_tet [7]
2 years ago
13

Romboski, LLC, has identified the following two mutually exclusive projects:Year Cash Flow (A) Cash Flow (B)0 58,000 58,000 1 34

,000 21,200 2 28,000 25,200 3 20,000 30,000 4 13,600 25,200Requirement1:a) What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).)(b) If you apply the IRR decision rule, which project should the company accept?Requirement 2:(a) Assume the required return is 14 percent. What is the NPV for each of these projects? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)(b) Which project will you choose if you apply the NPV decision rule?Requirement 3:(a) Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)(b) Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)(c) At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)
Business
1 answer:
uysha [10]2 years ago
6 0

Answer:

Year           Cash Flow (A)           Cash Flow (B)

0                    -58,000                   -58,000

1                      34,000                     21,200

2                     28,000                     25,200

3                     20,000                     30,000

4                      13,600                     25,200

Requirement 1:

a) What is the IRR for each of these projects?

using an excel spreadsheet and the IRR function:

Project A's IRR = 28.3%

Project B's IRR = 25.7%

(b) If you apply the IRR decision rule, which project should the company accept?

Project A (its IRR is higher)

Requirement 2:

(a) Assume the required return is 14 percent. What is the NPV for each of these projects?

using an excel spreadsheet and the NPV function:

Project A's NPV = $14,921.37

Project B's NPV = $15,156.64

(b) Which project will you choose if you apply the NPV decision rule?

Project B (its NPV is higher)

Requirement 3:

(a) Over what range of discount rates would you choose Project A?

higher than 14.85%

(b) Over what range of discount rates would you choose Project B?

lower than 14.85%

(c) At what discount rate would you be indifferent between these two projects?

crossover rate calculation

Year           Cash Flow (A)           Cash Flow (B)       differential amount

0                    -58,000                   -58,000                       $0

1                      34,000                     21,200                     $12,800

2                     28,000                     25,200                     $2,800

3                     20,000                     30,000                  -$10,000

4                      13,600                     25,200                   -$11,600

using an excel spreadsheet and IRR function, the cross over rate = 14.85%

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Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $1,350 per
Sergio039 [100]

Answer:

(a) $33750000 (b) $11250000 (c) $22500000

Explanation:

Solution

(a) How much would Ziegler Inc. total income of operating  increase.

Now,

Units * (Cost of purchased from outside supplier - Variable cost)

Thus,

75000 * ($1350 - $900) = $33750000

(b) How much would the Instrument Division's operating income increase

Now,

The Units * (Cost of purchased from outside supplier - Transfer Price)

So,

75000 units * ($1350 - $1200) = $11250000

(C) How much would the Components Division's operating income increase?

Now,

Units * (Transfer Price - Variable cost)

75000 units * ($1200 - $900) = $22500000

3 0
3 years ago
Sunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Hamilton Air. Sunset’s fixed cos
xxTIMURxx [149]

Answer:

See the explanation below.

Explanation:

1 a. Calculate the number of tickets Sunset must sell each month to break even.

Selling price = 6% * $1,500 = $90 per ticket

Variable  cost per unit = $43 per ticket

Contribution margin per unit = $90 – $43 = $47 per ticket

Fixed cost = $23,500

Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $47 =  500 tickets

1 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.

Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $47 = 712.77, or 713 tickets

2 a. Calculate the number of tickets Sunset must sell each month to break even.

Selling price = 6% * $1,500 = $90 per ticket

Variable  cost per unit = $40 per ticket

Contribution margin per unit = $90 – $40 = $50 per ticket

Fixed cost = $23,500

Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $50 =  470 tickets

2 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.

Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $50 = 670 tickets

3 a. Calculate the number of tickets Sunset must sell each month to break even.

Selling price = $60 per ticket

Variable  cost per unit = $40 per ticket

Contribution margin per unit = $60 – $40 = $20 per ticket

Fixed cost = $23,500

Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $20 =  1,175 tickets

3 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.

Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $20 = 1,675 tickets

Comment:

Due a fall in commission, there are appreciable increases in the break-even point and the number tickets that have to be sold to meet a targeted operating income of $10,000.

4 a. Calculate the number of tickets Sunset must sell each month to break even.

Selling price = $60 + $5 = $65 per ticket

Variable  cost per unit = $40 per ticket

Contribution margin per unit = $65 – $40 = $25 per ticket

Fixed cost = $23,500

Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $25 =  940 tickets

4 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.

Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $25 = 1,340 tickets

Comment:

The $5 delivery fee brings about an increased contribution margin higher than before, which makes both the break-even point and the tickets sold to achieve operating income of $10,000 to fall.

6 0
3 years ago
Prepare a statement of cash flows
notsponge [240]

Answer:

Required 1

1. operating activities (OA) and investing activities (IA)

2. financing activities (FA)

3. financing activities (FA), operating activities (OA) and investing activities (IA)

4. financing activities (FA)

5. operating activities (OA)

6. financing activities (FA)

Required 2

<u>All-Star Automotive Company</u>

<u>Statement of cash flows for the year ended 2013</u>

Cash Flow from Operating Activities

Service Revenue                                                $25,000

Salary Expense Paid                                         - $14,000

Utilities Expenses                                               - $2,800

Net Cash from Operating Activities                    $8,200

Cash Flow from Investing Activities

Land Purchase                                                   - $6,000

Proceeds from Sale of Land                               $9,000

Net Cash from Investing Activities                      $3,000

Cash Flow from Financing Activities

Issue of Common Stock                                    $50,000

Loan Payable Acquired                                       $5,000

Repayment of Loan                                           - $2,000

Dividends Paid                                                   - $5,000

Net Cash from Financing  Activities                 $48,000

Movement during the year                                $59,200

Cash and Cash Equivalents at the Beginning    $9,000

Cash and Cash Equivalents at the End            $68,200

Explanation:

Cash Flow from Operating Activities

This section shows the cash derived from daily operating activities of the business .

Cash Flow from Investing Activities

This section shows the cash derived from acquisition or sale of tangible and intangible assets of a long term.

Cash Flow from Financing Activities

This section shows the cash derived from the sources of finance and the repayments thereoff.

5 0
3 years ago
If an organization with a corporate social responsibility (CSR) strategy is faced with heavy losses, it will______.
damaskus [11]

The organization will continue to try to balance profit and social goals.

The primary reasons why companies are in business is to make profit. However, a company must be responsible in terms of performing corporate social responsibility to the community where it operates.

Contributing to societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethically-oriented is what is meant by corporate social responsibility.

However, where an organization is faced with heavy losses, it must continue to balance profit and social goals. When the company makes profit, then salaries will be paid, social goals will be fulfilled.

learn more at : brainly.com/question/22395337

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