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Murrr4er [49]
4 years ago
9

Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investm

ent follows:
Initial investment (2 limos) $720,000
Useful life 10 years
Salvage value $100,000
Annual net income generated 59,040
LLT's cost of capita 14%
Assume straight line depreciation method is used.
Required:
Help LLT evaluate this project by calculating each of the following:
1. Accounting rate of return.
2. Payback period.
3. Net present value.
4. Without making any calculations, determine whether the IRR is more or less than 15%.
A. Greater than 14%.
B. Less than 14%.
Business
1 answer:
sammy [17]4 years ago
5 0

Answer:

1) Accounting rate of return is 8.2%

2) Payback period is 5.95 years

3) Net present value (NPV) is ($88,643.26)

4) Option B

Explanation:

Initial Investment = $720,000 , Useful life = 10 years , Salvage Value = $100,000

Annual Net Income generated = $59,040 , Cost of capital = 14%

Depreciation = ($720,000 - $100,000) ÷ 10 = $62,000

Annual Cash flows = $59,040 + $62,000 = $121,040

1) Accounting rate of return = (Annual Net Income ÷ Average Investment) × 100

= (59,040 ÷ 720,000) × 100

= 8.2%

2. Payback Period = Initial Investment ÷ Annual Cashflows

= 720,000 ÷ 121,040

= 5.95 years.  

3. PV of cash flows = 121,040 × PVAF(14% for 10 years)

= 121,040 × 5.2161

= $631,356.74

Less: PV of cash outflow = $720,000

Net present value (NPV) = (88,643.26)

4. If IRR = Discount rate, then NPV = 0

If IRR < Discount Rate, Then NPV is negative

If IRR > Discount Rate, Then NPV is positive

Here NPV is negative, so IRR is less than discount rate i.e.14%

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KonstantinChe [14]

Answer:

Depreciation expense =  $4,400

Accumulated depreciation = $13,200

Explanation:

Depreciation: The depreciation is the amount which decreases the value of the asset. It can be by obsolescence, usage, tear and wear, etc.

The annual depreciation is given i.e. $4,400 which will be charged in depreciation expense whereas the accumulated depreciation would be equal to

=  Annual Depreciation × useful life

= $4,400 × 3

= $13,200

5 0
3 years ago
Sometimes the risks posed by a project are deemed unacceptably large compared to the potential benefits, and the ultimate avoida
Pavel [41]

Answer:

TRUE

Explanation:

Sometimes the risks posed by a project are deemed unacceptably large compared to the potential benefits, and the ultimate avoidance strategy is to not perform the project at all.

The major reason for risk identification in risk analysis is to know if there are risks that will either cause the project to fail or erase all the potential benefits of the project.

Risks that have been categorized as both <u>high impact and high probability of occurrence will most likely cause a project to be terminated</u>, or to fail if it is continued in spite of the risks identified.

Such projects can only be performed if they somission critical and their impact and probability of occurrence can be reduced

5 0
3 years ago
if interest rates are positive, the future value of a given sum will always be less than the present value
Alexeev081 [22]

Answer:

False. If interest rates are positive, the future value will always be more than the present value.

Explanation:

Future value is given by:

FV = PV (1 + i)^{n}

wherein, FV=  Future Value

              PV= Present Value

              i = rate of interest per period

              n = number of periods

So, if interest rates are positive, the current investment shall be compounded to arrive at Future value which would turn out to be more than the present value.

For example, $ 100 invested today at 10% per annum, after an year would yield $110. This represents future value.

In case future value is provided as 110$ and rate of interest is given as 10% per annum, such future value discounted at 10% would give $100 today which represents the present value.

Thus, Future value will always be more than the present value if interest rates are positive.

5 0
3 years ago
Use the following information:Beginning cash balance on March 1, $72,000.Cash receipts from sales, $300,000.Budgeted cash paymen
Lynna [10]

Answer and Explanation:

The preparation of the cash budget for the month of March ended is presented below:      

                                              Cash Budget

Particulars                           Amount  ($)

Opening Cash Balance         72,000

Add: Cash Receipts from Sales 300,000

Total Cash Available           372,000

Less:

Cash Payments  

Purchases                             140,000

Salaries                                    80,000

Cash Expenses                     45,000

Repayment of Bank Loan      20,000

Total Payments                    -285,000

Closing Cash Balance              87,000

We simply deduct the all payments from the total cash available so that the ending balance of cash could come

8 0
3 years ago
What responsibility, if any, does fishpeople have to the local fishing industry?​
Evgen [1.6K]

Answer:

IN UK

Explanation:

Contents

Rules for access to waters after the UK leaves the EU

Quota allocations and fishing opportunities

North-East Atlantic Fisheries Commission (NEAFC) Convention Area

Regional fisheries management organisations (RFMOs)

Access to ports

EU and non-EU (third country) vessels landing into UK ports

Import and export of fishery products

Exporting UK-caught fish and fishery products to the EU

Importing EU-caught fish and fishery products to the UK

Labelling and marketing of fishery and aquaculture products

European Maritime and Fisheries Fund

Eels and eel products

Rules for access to waters after the UK leaves the EU

When the UK leaves the EU, the government will control and manage access to fish in UK waters. It will be responsible for managing the UK’s:

territorial waters (out to 12 nautical miles)

Exclusive Economic Zone (out to 200 nautical miles or the median line with other states)

The UK government will make sure that fisheries control and enforcement continue.

UK waters

There will be no change to your rights and responsibilities if you have a UK-registered vessel fishing in UK waters. You must continue to comply with the law and the conditions of your licence, including the economic link criteria.

Non-UK-registered vessels will no longer have automatic access to UK waters. This will be subject to any existing agreements covering territorial waters.

EU and non-EU (third country) waters

There will be no automatic access for UK-registered vessels to fish in EU or non-EU (third country) waters. This will be subject to any existing agreements covering territorial waters.

Quota allocations and fishing opportunities

If you’re a UK quota holder, the UK fisheries administrations will tell you what your allocation will be. They aim to do this in October 2019.

The government will also confirm arrangements for:

non-quota shellfish (scallops, edible crabs and spider crabs)

demersal species under the Western Waters effort regime (demersal species live mainly on or near the sea floor)

There will be no automatic access for:

the UK Fisheries Administrations to exchange fishing opportunities with EU member states

EU member states to exchange fishing opportunities with the UK

North-East Atlantic Fisheries Commission (NEAFC) Convention Area

You can prepare for the UK joining the NEAFC. For UK-registered vessels to continue fishing in the convention area, and landing into the EU, you must hold a current UK domestic licence. You’ll need this before you can apply for an international licence from the relevant fisheries authority.

Please contact your local fisheries authority office if you want further guidance on fishing internationally. You’ll also need to register with the NEAFC’s electronic Port State Control system and complete the Port State Control 1 forms.

Regional fisheries management organisations (RFMOs)

The UK will join all relevant RFMOs as quickly as possible - it will no longer be a member of RFMOs through EU membership. The joining process may take up to 6 months.

During this time, UK vessels may not be able to fish in international waters covered by RFMOs. The Department for Environment, Food and Rural Affairs (Defra) will keep fishermen informed of progress and what the outcome of a decision will mean in practice.

Access to ports

If you have a UK-registered vessel, you’ll no longer have an automatic right to land fish in any EU port. You’ll be allowed access to EU designated ports for:

port services

landings

transhipment

the use of market facilities (where vessels meet EU requirements on illegal, unreported and unregulated fishing)

You must notify the relevant Fisheries Monitoring Centre of your intention to arrive into a designated port. You must notify vessel and catch-related information

6 0
3 years ago
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