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Aleks04 [339]
3 years ago
14

Perit Industries has $210,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternat

ives are: Project AProject BCost of equipment required$210,000$0Working capital investment required$0$210,000Annual cash inflows$30,000$52,000Salvage value of equipment in six years$9,100$0Life of the project 6 years 6 years
Business
1 answer:
goblinko [34]3 years ago
7 0

Answer:

npv = $92,531.34

NPV = -$13,206.90

Project A should be chosen because it has a higher NPV

Explanation:

Here is the full question :

Perit Industries has $210,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $210,000 $0 Working capital investment required $0 $210,000 Annual cash inflows $30,000 $52,000 Salvage value of equipment in six years $9,100 $0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 15%. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: a. Calculate net present value for each project. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).) b. Which investment alternative (if either) would you recommend that the company accept? Project B Project A

Net present value is the present value of after-tax cash flows from an investment less the amount invested.

NPV can be calculated using a financial calculator  

Project A

Cash flow in year 0 = $-210,000

Cash flow each year from year 1 to 5 = $30,000

Cash flow in year 6 = $30,000 + $9100 = $39,100

I = 15%

npv = $92,531.34

Project B

Cash flow in year 0 = $-210,000

Cash flow each year from year 1 to 6 = $52,000

I = 15%

NPV = -$13,206.90

Project A should be chosen because it has a higher NPV

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Georgia was contacted by the CEO to research if adding a new data center makes sense for the organization from an economic and o
Korolek [52]

Georgia was contacted by the CEO to research if adding a new data center makes sense for the organization from an economic and operational stand point. Georgia agreed to perform "Feasibility Study".

<h3>What is Feasibility Study?</h3>

A feasibility study is an analysis that determines the chance of successfully completing a project by taking into account all pertinent economic, technical, legal, and scheduling issues.

The purpose of feasible study is-

  • An initial investigation of a prospective project or endeavour to assess its merits and viability is known as a feasibility study.
  • An unbiased analysis of a proposed project's technical, economic, financial, legal, and environmental issues is intended to be provided through a feasibility study.

There are four main elements that go into a feasibility study-

  1. Technical feasibility: The process of finding out how you're going to manufacture your good or service to see if it's feasible for your business is called technical feasibility.
  2. Financial feasibility: Your project's financial viability is determined by its financial viability. A cost/benefit analysis is part of a financial feasibility report and it examines
  3. Market feasibility (or market fit): Product-market fit occurs when an entrepreneur spots a gap in the market and develops a solution that consumers desire to purchase.
  4. Operational feasibility: The degree to which a proposed system resolves issues, seizes opportunities identified during scope definition, and satisfies requirements found during the requirements analysis stage of system development is measured by its operational feasibility.

To know more about feasibility study, here

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8 0
2 years ago
Thornton Chicken Corporation processes and packages chicken for grocery stores. It purchases chickens from farmers and processes
maw [93]

Answer:

Chicken drumsticks:

pounds 6,600 -  7,230.22 = -630,22‬

market value: 6,600 - 5,478 = 1,122

Breast:

pounds 13,000 -  9037,88 =       3,962.12

market value: 13,000 - 10.790 = 2,210.00

Changing the allocation method detemriantes whether the drumstick are profitable or not thus, it should be considered which method is better suited.

Explanation:

Joint cost:

9,400 mateirals + 6,868 processing Total =

pounds to allocate cost:

\left[\begin{array}{cccc}Product&Sales&Weight&Cost\\Drumstick&4000&0.44&7230.22\\Breast&5000&0.56&9037.8\\\\Total&9000&1&16268\\\end{array}\right]

using market value:

\left[\begin{array}{cccc}Product&Sales&Weight&Cost\\Drumstick&6600&0.3367&5478\\Breast&13000&0.6633&10790\\\\Total&19600&1&16268\\\end{array}\right]

Then, we calcualte the gross margin under each method

Chicken drumsticks:

pounds 6,600 -  7,230.22 = -630,22‬

market value: 6,600 - 5,478 = 1,122

Breast:

pounds 13,000 -  9037,88 =       3,962.12

market value: 13,000 - 10.790 = 2,210.00

3 0
2 years ago
Assume you have a brand new baby today. You plan to make 18 $1,000 annual deposits in her college savings account, starting on h
aleksley [76]

Answer:

After her 18th birthday the balance will be $41,301

Explanation:

Balance right after the 18th birthday is calculated using the formula for future value of annuity

FV = PMT \times \frac{(1+i)^{n}-1}{i}

Annual payment PMT = 1,000

Interest rate i = 0.09

Deposits are made for 18 years: n = 18

The balance in her account will then be:

FV = 1,000 * ( 1.09^18 - 1 ) / 0.09

     = $41,301

7 0
3 years ago
The yield to maturity on a discount bond is: equal to both the coupon rate and the current yield. equal to the current yield but
dlinn [17]

Answer:

greater than both the current yield and the coupon rate.

Explanation:

A discount bond is a bond that at the point of issuance, it's less than its face or par value.

When a bond is trading for less than its face value in the market, it's known as a discount bond.

The yield to maturity on a discount bond is greater than both the current yield and the coupon rate. This simply means that the coupon rate is usually lower than the yield to maturity of the discount bond.

Additionally, the yield to maturity can be defined as the bond's total rate of return required by the secondary market while the coupon rate is defined as the annual interest of a bond divided by its face value.

For instance, when a bond is issued at a par or face value of $5,000, at maturity the investor would be paid $5,000. But because bonds are being sold before its maturity, it would trade below its face value.

Hence, a bond with the face value of $5,000 could trade for as low as $4,800, thus making it a discount bond.

8 0
3 years ago
February 1, 2018, Salisbury Company purchased land for the future factory location at a cost of $112,000. The dilapidated buildi
Maru [420]

Answer:

The cost of the land should be recorded as $108,350

Explanation:

Land cost =                                     $112,000

Demolition dilapidated building = $2,200

Legal fees - title search =               $1,450

Cost of land = Land cost - Demolition dilapidated building - Legal fees - title search

Cost of land = $112,000 - $2,200 - $1,450

Cost of land = $108,350

6 0
3 years ago
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