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
Leto [7]
3 years ago
14

Ursus, Inc., is considering a project that would have a five-year life and would require a $2,400,000 investment in equipment. A

t the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.):
Sales $ 3,500,000
Variable expenses 2,100,000
Contribution margin 1,400,000
Fixed expenses:
Fixed out-of-pocket cash expenses $ 600,000
Depreciation 480,000 1,080,000
Net operating income $ 320,000
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 14%.

Required:

a. Compute the project's net present value. (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

b. Compute the project's internal rate of return. (Round your final answer to the nearest whole percent.)

c. Compute the project's payback period. (Round your answer to 2 decimal place.)

d. Compute the project's simple rate of return. (Round your final answer to the nearest whole percent.)
Business
1 answer:
Margaret [11]3 years ago
5 0

Answer:

Part 1. NPV $346,465

Part 2. IRR is 19.8%

Part 3. 3 Years

Part 4. 13.33%

Explanation:

<u>Part 1.</u>

Year  Cash Flow   DF at 14%  Discounted Cash flow  

 0         -2,400,000    1.00               -2,400,000  

 1             800,000    0.8772                   701,754  

 2            800,000    0.7695           615,574  

 3            800,000    0.6750          539,977  

 4            800,000    0.5921                  473,664  

 5            800,000    0.5194                  <u> 415,495 </u>

               NPV                                 $346,465

   

<u>Part 2.</u>

Year   Cash Flow   DF at 14%  Disc.Cash flow   DF at 20%   Disc. Cash flow

 0     -2,400,000  1.0000     -2,400,000          1.0000          -2400,000

 1      800,000  0.8772        701,754             0.8333            666,667

 2      800,000  0.7695        615,574          0.6944          555,556

 3      800,000  0.6750        539,977          0.5787          462,963

 4      800,000  0.5921        473,664          0.4823          385,802

 5      800,000  0.5194       <u> 415,495 </u>         0.4019            <u> 321,502</u>

                             NPV              $346,465                                    -$7510

IRR can be calculated by using the following formula:

IRR = R at lower %age  + (R at Higher %age - R at Lower %age) * NPV at lower Percentage / (NPV at Higher %age - NPV at Lower %age)

Now by putting values, we have:

IRR = 14%   +  (20% - 14%)  *  346,465 / (346,465 +  7510)

IRR = 14%   +  5.8%  = 19.8%

<u>Part 3.</u>

Now by putting values, we have:

Payback Period = Initial Investment / Cash flow Per Period

Payback Period = $2,400,000 / $800,000  =  3 Years

<u>Part 4.</u>

As we know that:

Simple Rate Of Return = Net operating income ÷ Initial investment

Now by putting values, we have:

Simple Rate Of Return = $320,000 / $2,400,000 = 13.33%

You might be interested in
Strategic PlanningImagine that IBM has decided to diversify into the telecommunications business to provide online cloud-computi
rosijanka [135]

Answer:

IBM could either diversify by the strategy of market penetration, which consists in increasing the market share in a particular sector (in this case, cloud computing) through more marketing efforts.

Or it could integrate horizontally, acquiring a possible competitor that is more advanced in the cloud-computing business. Or even a start-up with good prospects, because with the amount of capital that IBM has, it could more easily expand the start-up operation as a new internal business division.

4 0
3 years ago
Elvis values the first gravy sandwich at $5, the second at $4.50, and the third at $4. If he buys three sandwiches for $4 each,
12345 [234]

Answer:

Consumer Surplus = $1.50

Explanation:

Consumer surplus is the difference between what a consumer is willing to pay for a given amount of goods or services and what he ends up paying.

Therefore,

Consumer surplus = Amount consumer is willing to pay less amount paid

Given that

Elvis is willing to pay 5 + 4 + 4.50 = 13.50 for three

Price of 3 sandwich = 3 × 4 = 12

Consumer surplus = 13.50 - 12

= $1.50

6 0
3 years ago
Companies need consistency in their HR practices to avoid charges of discrimination. Senior management usually approves broad gu
Romashka [77]

Senior management usually approves broad guidelines for HR activities, like hiring and firing, performance appraisals, promotions, and discipline. These are called standing plans.

<h3>Standing plans </h3>

A standing plan is a business plan that is intended to be used many times. It is designed to guide managerial decisions and actions that tend to be recurring. It is used over a long period, sometimes indefinitely, and is altered as circumstances change.

Examples of standing plans include policies for hiring, employee interaction, procedures for reporting internal issues, or complaints to the HR department, etc. and regulations in terms of what is permitted and what is prohibited in the workplace.

Learn more about standing plans here :

brainly.com/question/13525082

#SPJ4

8 0
2 years ago
Potential competitors may enter an industry and begin to take market share from existing companies. What would be one of the lar
ludmilkaskok [199]

Production costs are high and require high volumes to achieve profitability.

<h3><u>Explanation:</u></h3>

One of the largest challenges that will be faced by the potential competitors when they try to enter an industry will be that they will face that cost of production will be higher and they would require higher volumes for achieving profits. When a company is new to an industry there will be competitors who are already established well on that particular industry.

The challenges and the opportunity that are in existence will be well known to the existing competitors. They already have buyers and suppliers chain. Hence, the new entrant will have higher production cost and also they require higher volumes to achieve profits.

8 0
3 years ago
During a recent​ month, Company planned to provide cleaning services to customers for per hour. Each job was expected to take ho
givi [52]

Answer: B.  $1,050  more than expected.

Explanation:

The company originally planned to have revenue resulting from 30 customers and charging $30 for an estimated 33 hours.

Estimated revenue was;

= 30 * 30 * 3

= $2,700

However, in actuality, they sold to 20 more customers than estimated but only spent 2.5 hours each.

Number of customers = 30 + 20

= 50 customers

Actual revenue

= 50 * 30 * 2.5

= $3,750

Difference is;

= 3,750 - 2,700

= $1,050 more

7 0
3 years ago
Other questions:
  • Dane works as a sales representative for the Better Butter Company. He is about to meet with his manager to review his progress
    5·1 answer
  • Noncash investing and financing activities may be disclosed in: Multiple Choice A note in the financial statements or a schedule
    13·1 answer
  • Calculate the balance of cash using a bank reconciliation (LO4-5) Spielberg Company's general ledger shows a checking account ba
    10·1 answer
  • Industrialization is an important strategy in the fight against poverty. Which of the following is a benefit of an increase in t
    15·1 answer
  • Kristy's health insurance policy benefits max out at $25,000 per year. What is
    11·1 answer
  • Which student simplifies the expression correctly, and why?
    10·1 answer
  • A 401(k) plan and the nonprofit equivalent, called a 403(b) plan, are______ reduction plans that reduce your salary by the amoun
    11·1 answer
  • The resource-based view differs from the institution-based view in that the resource-based view focuses on a firm's _____.
    5·1 answer
  • Which might be an oppotunity cost of the city of aloharetta decision to construt the gateway and green way projects
    14·1 answer
  • If the sales volumes in the east and west regions had been reversed, what would be the company’s overall break-even point in uni
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!