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nlexa [21]
3 years ago
13

Hire someone to manage the restaurant for the next year and retire. This will require the owner to spend​ $50,000 now, but will

generate​ $100,000 in profit next year. In one year the owner will sell the restaurant for​ $350,000. 3.Scale back the​ restaurant's hours and ease into retirement over the next year. This will require the owner to spend​ $40,000 on expenses​ now, but will generate​ $75,000 in profit at the end of the year. In one year the owner will sell the restaurant for​ $350,000. If the discount rate is​ 15%, then the alternative which the owner should choose​ is:
Business
1 answer:
AnnZ [28]3 years ago
5 0

Answer:

The first alternative is better and should be selected because it generated a higher NPV

Explanation:

To determine the better alternative , we will compare the Net present value of the two options. The option with the higher NPV would be selected

NPV = Present value of cash inflow - initial cost

PV of inflow = 1.15^(-1) × 100,000   + 1.15^(-1) × 350,000=$ 391,304.3478

NPV = 391,304.3478   - 50,000= $341,304.3478

NPV =$341,304.34

PV of inflow = 1.15^(-1) × 75,000   + 1.15^(-1) × 350,000=369565.2174

NPV = 369,565.2174  - 40,000 =$329,565.2174

NPV =$329,565.21

The first alternative is better and should be selected

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Superior Company has provided you with the following information before any year-end adjustments: Net credit sales are $131,750.
aleksklad [387]

Answer:

$3,553

Explanation:

Credit losses = Net credit sales × Historical percentage of credit losses

= $131,750 × 3%

= $3,953

Allowance for doubtful account has a credit balance of $400

The estimated bad debt expense can therefore be calculated as:

Bad debt expense = Credit losses - Allowance for doubtful accounts credit balance

= $3,953 - $400

= $3,553

Hence, the estimated bad debt expense using the percentage of credit sales method is $3,553

5 0
3 years ago
Under ASC 606, the transaction price generally should be adjusted for the effect of the time value of money when
luda_lava [24]

Answer:

B. The selling price of the product and the consideration promised in the contract differ significantly.

Explanation:

"While determining the transaction price, an entity shall adjust the amount of consideration with respect to the time value of money, if the timing of payment to be made by customer under the contract provides some significant benefit of financing to the customer or the entity for the transfer of goods or services to the customer. The Significant financing benefit could be explicit or implicit in the contract.

The idea behind the significant financing component is that entity should consider the revenue based on the price that a customer would have paid at the time of transferring the goods or services to the customer by the entity i.e. Cash Selling Price (If the payment was made immediately)."

Reference: Prasenjit. “ASC 606: Step 3 – Determining the Transaction Price.” RevGurus, 25 Mar. 2019

6 0
3 years ago
Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30-year, 5% mortgage (where the mortgage factor is
tigry1 [53]

Answer:

option (c)  $167,597.77

Explanation:

Data provided in the question:

Monthly mortgage payment = $900

Duration of loan, n = 30 years = 360 months

Interest rate = 5%

Monthly rate of interest = 5% ÷ 12 = 0.4167% = 0.004167

Now,

Mortgage loan can he afford

= Monthly mortgage payment × [ (1 - ((1 + r)ⁿ)⁻¹ ) ÷ r ]

= $900 × [ (1 - ((1 + 0.004167)³⁶⁰)⁻¹ ) ÷ 0.05 ]

= $167,597.77

Hence,

The answer is option (c)  $167,597.77

7 0
2 years ago
Taylor loves the lifestyle associated with being a salesperson, allowing her to take a day off during the week and make it up on
Readme [11.4K]

Answer: Flexibility

Explanation:

  According to the question, Taylor likes the flexible values so that she creates her own comfortable schedule.

The flexibility in the schedule provide the job satisfaction and balanced the life as she loves the lifestyle of being sales person.

It also helps in reduce the stress if you are satisfied with the work-life balance and also increase the productivity of an organization. Therefore, Flexibility is the correct answer.

3 0
2 years ago
Brad always buys and uses Nike brand golf balls. If he finds a Titleist or Callaway ball in the rough, he gives it away. Brand l
Vikentia [17]

Answer:

B. reduced the price elasticity of demand for its products

Explanation:

3 0
3 years ago
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