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harina [27]
3 years ago
15

Suppose Blue Hamster Manufacturing Inc, is evaluation a proposed capital budgeting project (project alpha) that will require an

initial investment of $500,000. The project is expected to generate the following net cash flows:
Year Cash Flow
Year 1 $325,000
Year 2 $425,000
Year 3 $450,000
Year 4 $400,000
Blue Hamster Manufacturing Inc’s weighted average cost of the capital is 10%, and project alpha has the same risk as the firm’s average project. Based on the cash flows, what is project Alpha’s net present value (NPV)?
a. $871,690
b. $1,157,991
c. $1,182,991
d. $757,991
Business
1 answer:
Neko [114]3 years ago
8 0

Answer:

d. $757,991.26

Explanation:

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

= (325,000/1.10) + (425,000/1.10^2) + (450,000/1.10^3) + (400,000/1.10^4)

= $1,257,991.25743

NPV = Present value of inflows - Present value of outflows

NPV = $1,257,991.25743 - $500,000

NPV = 757991.25743

NPV = $757,991.26

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Marigold Corp.reported the following items for 2019: Income tax expense $50000 Contribution margin 120000 Controllable fixed cos
zmey [24]

Answer:

$40,000

Explanation:

The computation of the controllable margin is shown below:

=  Contribution margin - Controllable fixed costs

= $120,000 - $80,000

= $40,000

If we deduct the controllable fixed costs from the contribution margin then the controllable margin can be computed which shows an accurate amount.

All other information which is given is not relevant. Hence, ignored it

3 0
3 years ago
AgCo sells corn in a perfectly competitive market. Say the current market price for a bushel of corn is $4.00. If AgCo prices at
nordsb [41]

Answer:

b. AgCo will sell no bushels of corn.

Explanation:

A perfectly competitive market refers to market has many buyers and sellers will all the market selling the undifferentiated product without any difference.

Some of the others attributes of a perfectly competitive market are that buyers and sellers have perfect information about the price of a good,  no barriers to entry and exit, similar products are being sold, there are free entry and exit to the market, and all sellers are price takers.

All sellers are price takers implies that the price of good is determined or given by the market. Therefore, any attempt to increase the price beyond the price given by the market will result into a zero sale because the buyers will immediately switch to another seller selling at the market price which lower.

Based on the above explanation, AgCo will sell no bushels of corn because its prices at $4.10 per bushel for its corn is higher than the current market price for a bushel of corn of $4.00.

6 0
3 years ago
Presented below are three transactions. Mark each transaction as affecting common stock, dividends, revenue, expense, or not aff
Julli [10]

Answer:

a)Received cash for services performed.

+ Assets  (cash)

+ revenues (fees earned)

This has impact on stockholders equity as the revenues increase the earnings of the business. The company receives an asset (cash increasease of their services, that asset received is what icnrease the value of the company)

b)Paid cash to purchase equipment.

+ Assets (equipment)

- Assets (cash)

This transaction doesn't involve Equity It is just a change in the Assets compositions. It has no impact on the income neither.

Explanation:

6 0
3 years ago
An enhancing qualitative characteristic of accounting information that refers to the financial statement users' ability to utili
Pani-rosa [81]

Answer: Comparability

Explanation:

Comparability describes information that is measured and reported in a similar manner for different companies. It helps users understand the real similarities and differences in economic activities between companies.

6 0
3 years ago
1. You and your best friend are brilliant entrepreneurs who are considering opening your own business tutoring struggling colleg
Anuta_ua [19.1K]

Answer:

a. Accounting profit for the business = $3,500

b. Economic loss = $1,000

c. The two friends can open the business and incur economic loss of $1,000 in the first year of operation.  In subsequent years, the revenue may increase to generate better economic profit.  This is the labor, risk, and reward of entrepreneurship.

d. If the two friends do not go ahead with the business because of the economic loss they suffer in the first year of operation, then they cannot be regarded as entrepreneurs.  They are merely laborers who cannot assume any risk for greater rewards tomorrow.

Explanation:

Cost of business per month:

Operating expenses = $4,000

Lease of building =        2,000

Total expenses =        $6,000

Revenue =                 $10,000

Accounting profit       $4,000

Economic profit:

Revenue =               $10,000

Total expenses =     $6,000

Opportunity costs:

Lost salaries              4,500

Lost Interest                500

Total costs             $11,000

Economic loss =     $1,000

4 0
3 years ago
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