Problem 5-7 Analyzing Transactions

River Wild is considering purchasing a water park in Charleston, South Carolina, for $ 2,050,000. The new facility will generat

Kipish [7]

Answer:

1. Payback period = 3.94 Years

The ARR is $262,750

The NPV is $937,102,

The approximate IRR of this investment is 20.87%

2. The Company should invest in this project as it NPV is positive, payback period is lower than the required Payaback period, ARR is greater than the minimum ARR, IRR is greater than cost of capital

Explanation:

In order to calculate the Payback period ARR, the NPV, and the approximate IRR of this investment we would have to use the following formula:

Payback period = Initial Investment/Annual net Cash inflow

Payback period = $ 2,050,000/$ 520,000

Payback period = 3.94 Years

ARR = Average Net Income/Average Investment

Average Net Income = Annual net Cash Flow - Annual Depreciation

Average Net Income = $ 520,000-$ 2,050,000/8

Average Net Income = $262,750

Average Investment = ($ 2,050,000+0)/2 = $1,025,000

ARR = $262,750/1,025,000

ARR = 25.63%

NPV = -Initial Investment + Annual Cash Inflow *(1-(1+r)^-n)/r

NPV = -$ 2,050,000 + $ 520,000*(1-(1+10%)^-8)/10%

NPV = 937,102.15

IRR = rate(nper,pmt,pv,fv)

IRR = rate(8, $ 520,000,-$ 2,050,000,0)

IRR = 20.87%

The Company should invest in this project as it NPV is positive, payback period is lower than the required Payaback period, ARR is greater than the minimum ARR, IRR is greater than cost of capital

6 0

3 years ago

A global marketing strategy refers to:

FrozenT [24]

<span>A global marketing strategy refers to a marketing strategy used by a firm or a company to be able to compete worldwide. This is used to promote or market its products or services worldwide. This strategy is taken in response to the different international trading aspects and global market conditions. </span>

5 0

3 years ago

troy has $1,250 in an account that pays simple interest of 8% annually b9w much interest will trot have earned by the end of the

VikaD [51]

Answer:

$100

Explanation:

Simple interest is calculated using the formula

I = P x R x T

where I = interest

P= principal amount, $1,250

R= interest rate , 8% or 0.08

T = Time, one year

The interest troy will earn is

I= $1250 x 0.08 x 1

= $100

Troy will earn $100 as interest

4 0

4 years ago

Which of the following is included in the calculation of GDP? a. The purchase of tutoring services from a tutor who holds citize

wlad13 [49]

Answer:

a. The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country

Explanation:

Gross domestic product knowns as GDP provide the total market value of all produced goods/service in a country within particular period of time. It allows to know the Economic growth rate of a particular country.

GDP can be analysed an calculated using three most common ways ;it can be through

1)expenditures

2)production

3) incomes.

It can be calculated by by the summation of all money spent by government or consumer at a particular period of time. Hence nominal GDP is the value.It gives measures on production. It should be noted that The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country is included in the calculation of GDP.

5 0

3 years ago

ConAgra Foods is a global manufacturer of processed and packaged foods with revenues of $11 billion annually. It recently acquir

mojhsa [17]

Answer:

wholly owned subsidiary

Explanation:

A wholly-owned subsidiary is a form of subsidiary arrangement, between two companies, whereby a company is completely owned or its whole stock is bought by another company often referred to as Parent Company after the arrangement or the agreement of the acquisition.

It is also characterized by having control over its resources and specific mission, also operates independently.

Hence, in this case, the right answer is a wholly owned subsidiary

6 0

3 years ago