Unit 1 - Individual project
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Unit 1 IP
Antonio Sosa
Colorado Technical University
Optimizing Marker’s Tattoo Studio's Financial Strategy through Equipment Investment
ACCT 615
11/18/2023
2
Unit 1 IP
Introduction At this juncture, Marker's Tattoo Studio is considering investing $300,000 in new laser treatment equipment, plus an additional $20,000 for installation. It is projected that this expenditure will result in additional yearly margins of $98,000, somewhat offsetting the $10,000 increase in cash maintenance expenses. With a five-year usable life and a $20,000 projected terminal disposal value, the equipment promises to both broaden Marker's service offerings and draw in new customers looking for state-of-the-art tattoo treatments.
Expected Increase in Annual Net Income The projected increase in revenue and the related cash maintenance expenditures account for the majority of the investment's additional yearly net income growth. The increased income from the launch of new client services made possible by the new equipment is represented by the
incremental revenue, which is expected to be $98,000. This number represents the favorable financial effect we expect as a result of higher client involvement and greater service capacity (Datar & Rajan, 2020).
Taking into consideration the $10,000 yearly incremental cash maintenance expenditures,
we are basically accounting for the extra costs related to maintaining the new equipment. It's critical to understand that these expenses are balanced by the significant revenue received, which
has a net positive effect on our income statement. Let's put it into perspective. The calculation of incremental net income is a straightforward subtraction of incremental cash maintenance costs from incremental revenue: Incremental Net Income = Incremental Revenue−Incremental Cash Maintenance Costs. Substituting the values, we find: Incremental Net Income = $98,000 + $10,000 = $108,000. Therefore, the expected increase in annual net income from investing in the
3
Unit 1 IP
new equipment is a substantial $108,000. This figure encapsulates the positive financial impact that this strategic investment is poised to deliver to Marker’s Tattoo Studio.
This increase in net income is more than just a number; it's a real improvement to our long-term viability and financial health. It emphasizes how this investment has the potential to greatly increase our total profitability. As we contemplate the strategic ramifications of this choice, let us not lose sight of the constructive path our studio may take by incorporating this state-of-the-art equipment.
Accrual Accounting Rate of Return In regard to accrual accounting rate of return (AARR) associated with the potential investment in new laser therapy equipment. The AARR is a critical metric that gauges the percentage return on the average investment, providing a comprehensive view of the financial performance from an accrual accounting perspective. In our scenario, the AARR is approximately 32.67%.
This number is obtained by dividing the average yearly accounting profit by the average investment. These two factors are crucial in determining if the planned equipment purchase is financially feasible. The anticipated yearly rise in profit is represented by the average annual accounting profit, which is computed as half of the additional margins at $98,000. Simultaneously, the average investment is $150,000, which is calculated as half of the net investment expenditure (which considers the cost of equipment, installation fees, and terminal disposal value). The estimated yearly return Marker's Tattoo Studio may receive on its typical investment is indicated by the resultant AARR of 32.67%. This metric serves as a valuable tool for decision-makers, offering a nuanced perspective on the potential profitability of the investment. As we explore avenues for strategic growth, the AARR provides critical financial
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Related Questions
It's urgently plz sir please help
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4
Book
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for
Nagano Golf is 16 percent
Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time 0. Next five years (years 1-5) of
sales will generate a consistent cash flow of $440,000 per year. Introduction of new product at year 6 will terminate further cash flows
from this project
Project B Nagano NX-20 High-end amateur clubs that will take an initial investment of $700,000 at time 0. Cash flow at year 1 is
$290,000. In each subsequent year, cash flow will grow at 10 percent per year. Introduction of new product at year 6 will terminate
further cash flows from this project.
Year
e
1
2
3
4
NP-30
-$971,000
440,000
440,000
440,000
440,000
440,000
NX-20
-$700,000
290,000
319,000
350,900
Net present value
Internal rate of return
385,990
424,589
Complete the following table: (Do not round intermediate calculations. Round the…
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Please answer fast please arjent helpin both questions
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Please Write Step by Step Solution
Otherwise i give DISLIKE !!
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Question Content Area
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows:
First Year
Second Year
Third Year
Total
Alpha Project
$31,500
$22,500
$5,000
$59,000
Beta Project
7,000
23,000
28,000
58,000
(Click here to see present value and future value tables)
A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places.
Alpha Project
$fill in the blank 1
Beta Project
$fill in the blank 2
B. Which project should be recommended.
.Please round off anwsers. Thank you
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Question Content Area
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $36,000 and is expected to generate the following cash flows:
First Year
Second Year
Third Year
Total
Alpha Project
$32,500
$22,000
$4,500
$59,000
Beta Project
8,000
23,000
28,000
59,000
(Click here to see present value and future value tables)
A. If the discount rate is 15%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places.
Alpha Project
$fill in the blank 1
Beta Project
$fill in the blank 2
B. Which project should be recommended.
.
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Question 17 of 30
View Policies
-/0.35 :
Current Attempt in Progress
Crane Corp. management is planning to convert an existing warehouse into a new plant that will increase its production capacity by 45
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discount rate is 12.92 percent.
Excel Template
(Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have
different values. When using this template, copy the problem statement from this screen for easy reference to the values you've
been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of
the problem.)
a. What is the payback period? (Round answer to 2 decimal places, e.g. 15.25)
The project's payback period is
years
b. What is the NPV for this project? (Round intermediate calculations and final answers to O…
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Q. 1
purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the
year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects
under consideration by Joyanne McGloire, the company's owner.
McGloire Construction is analyzing its capital expenditure proposals for the
A
в
D
Project A
Project B
Project C
1
Projected cash outflow
Net initial investment
2
3
$3 000 000
$1 500 000
$4 000 000
4
5 Projected cash inflows
Year 1
$1 000 000
1 000 000
1 000 000
1 000 000
$ 400 000
$2 000 000
7
Year 2
900 000
2 000 000
8
Year 3
800 000
200 000
Year 4
100 000
10
11 Required rate of return
10%
10%
10%
1. Because the company's cash is limited, McGloire thinks the payback method
should be used to choose between the capital budgeting projects.
a. List two benefits and two limitations of using the payback method to choose
between projects?
b. Calculate the payback period for each of the three project
Ignore income taxes. Using the payback…
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Please do not give solution in image format thanku
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105-Principles of Financial Management-8-20202
My courses / BUSS 105-8-20202 / General / Final exam BUSS 105 section 8
Dhofar water is installing new equipment at a cost of 140000 OMR. Expected cash flows from this project over the next three years
will be 95000 OMR, 80000 OMR and 65000 OMR. The company's discount rate for such projects is 10 percent. What is the project's
discounted payback period?
Select one:
O a. 1.44 years
O b. None of these
O c. 1.63 years
O d. 2.82 years
O e. 1.81 years
Finish attempt .
ge
24-05- 2021
Jump to...
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Homework, Chapter 26
Average Rate of Return
The following data are accumulated by Watershed Inc. in evaluating two competing capital
investment proposals:
Project A
Project z
Amount of investment
$80,000
$92,000
Useful life
4 years
7 years
Estimated residual value
Estimated total income over the useful life
$8,800
$27,370
Determine the expected average rate of return for each project. Round your answers to one
decimal place.
Project A
Project z
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Question 1
Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:
Year
Unit Sales
1
8300
2
9200
3
10400
4
9800
5
8400
Production of the implants will require GH¢ 150,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales for that year. In the final year of the project, net working capital will decline to zero as the project is wound down. In other words, the investment in working capital is to be completely recovered by the end of the project’s life. Total fixed costs are GH¢ 240,000 per year, variable production costs are GH¢ 190 per unit, and the units are priced at GH¢ 345 each. The equipment needed to begin production has an installed cost of GH¢ 2,300,000. Because the implants are intended for professional singers, this equipment depreciated using the straight-line basis. In five years, this equipment…
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Vijay
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A manager at Shannon's Custom Cabinets is interested in purchasing a computer, software, and peripheral equipment costing $240,000 that would allow company salespeople to demonstrate to custor
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Note: Round your answer to one decimal point de round 4.555 to 4.63
0
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1 Jlgu
übja 1
Flint Systems is considering investing in production-
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calculating the accounting rate of return
$697,000
.A
$348,500
.B O
$67,000
.c O
$630,000
.D
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Assuming that you have beeh appointed finance director of BPX Bhd. The company is
considering investing in the production of an electronic device used in automobile. There are
two mutually exclusive projects available to achieve the plan.
Project I
Return in one year (RM)
60,000
60,000
Project II
State of economy Probability
Good
0.3
58,000
62,000
Moderate
0.5
Poor
0.2
50,000
48,000
Project I or II would require an investment of RM50,000. The company has a current market
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The research director projects that the company's share price will move in line with the market.
Required (in no more than 1,000 words, show all relevant workings)
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i market variance
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iii. systematic risk for Project II
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Chestnut Tree Farms has identified the following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
-$50,000
-$50,000
1
$35,000
$15,000
2
$8,000
$13,000
3
$7,000
$15,000
4
$6,000
$20,000
If forced to choose one of the two projects above, over what range of discount rates would you choose Project A?
Group of answer choices
12.32 percent or less
12.32 percent or more
13.16 percent or less
13.98 percent or less
13.98 percent or more
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Question 16
-/1
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port
Maize Water is considering introducing a water filtration device for
its 20-ounce water bottles. Market research indicates that
1,000,000 units can be sold if the price is no more than $5. If Maize
Water decides to produce the filters, it will need to invest
$2,000,000 in new production equipment. Maize Water requires a
minimum rate of return of 20% on all investments. Determine the
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e.g. 10.50.)
Target cost per unit
$
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- Please Write Step by Step Solution Otherwise i give DISLIKE !!arrow_forwardQuestion Content Area There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $31,500 $22,500 $5,000 $59,000 Beta Project 7,000 23,000 28,000 58,000 (Click here to see present value and future value tables) A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project $fill in the blank 1 Beta Project $fill in the blank 2 B. Which project should be recommended. .Please round off anwsers. Thank youarrow_forwardQuestion Content Area There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $36,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,500 $22,000 $4,500 $59,000 Beta Project 8,000 23,000 28,000 59,000 (Click here to see present value and future value tables) A. If the discount rate is 15%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project $fill in the blank 1 Beta Project $fill in the blank 2 B. Which project should be recommended. .arrow_forward
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