1. A manufacturing company wants to expand its product line. There are two investment projectswhich could help the company achieve its aim. The data for each investment project is shownbelow.Data for the investment projects A and BProject AYearInitial investment outlayCash inflowsPersonnel expensesMaterial expensesMaintenance expenses0.13125,00075,00022,50015,0002,5003,75080,00022,50020,0002,5003,75095,00022,50022,5005,0003,75095,00022,50022,5008,7505,00086,25022,50022,50010,0005,62512,500Other cash outflowsLiquidation valueProject BYearInitial investment outlayCash inflowsPersonnel expensesMaterial expensesMaintenance expenses2.3.4225,000155,000 140,00027,50027,50022,50025,0008,75011,250108,750 93,75027,50027,50022,50022,50015,00017,5003,7503,750125,00027,50024,00014,0004,00015,000Other cash outflows6,2503,750Liquidation valueThe Discount Rate is 8%a. Assess the relative profitability of the two options using the following methods:(i)(ii)The Annuity MethodThe Net Present Value Method(iii)The Internal Rate of Return Method

Equivalent annuity method calculates the constant annual cash flow the project will generate over…

1. A manufacturing company wants to expand its product line. There are two investment projects which could help the company achieve its aim. The data for each investment project is shown below. Data for the investment projects A and B Project A Year Initial investment outlay Cash inflows Personnel expenses Material expenses Maintenance expenses Other cash outflows Liquidation value 1 2. 3 4 125,000 75,000 22,500 15,000 2,500 3,750 80,000 22,500 20,000 2,500 3,750 95,000 22,500 22,500 5,000 3,750 95,000 22,500 22,500 8,750 5,000 86,250 22,500 22,500 10,000 5,625 12,500 Project B 0. 225,000 Year Initial investment outlay Cash inflows Personnel expenses Material expenses Maintenance expenses 3. 4 155,000 140,000 27,500 27,500 25,000 22,500 11,250 8,750 6,250 3,750 108,750 93,750 125,000 27,500 24,000 14,000 4,000 15,000 27,500 27,500 22,500 22,500 17,500 15,000 Other cash outflows 3,750 3,750 Liquidation value The Discount Rate is 8% Assess the relative profitability of the two options using the following methods: (i) (ii) (iii) a. The Annuity Method The Net Present Value Method The Internal Rate of Return Method

1. A manufacturing company wants to expand its product line. There are two investment projects which could help the company achieve its aim. The data for each investment project is shown below. Data for the investment projects A and B Project A Year Initial investment outlay Cash inflows Personnel expenses Material expenses Maintenance expenses Other cash outflows Liquidation value 1 2. 3 4 125,000 75,000 22,500 15,000 2,500 3,750 80,000 22,500 20,000 2,500 3,750 95,000 22,500 22,500 5,000 3,750 95,000 22,500 22,500 8,750 5,000 86,250 22,500 22,500 10,000 5,625 12,500 Project B 0. 225,000 Year Initial investment outlay Cash inflows Personnel expenses Material expenses Maintenance expenses 3. 4 155,000 140,000 27,500 27,500 25,000 22,500 11,250 8,750 6,250 3,750 108,750 93,750 125,000 27,500 24,000 14,000 4,000 15,000 27,500 27,500 22,500 22,500 17,500 15,000 Other cash outflows 3,750 3,750 Liquidation value The Discount Rate is 8% Assess the relative profitability of the two options using the following methods: (i) (ii) (iii) a. The Annuity Method The Net Present Value Method The Internal Rate of Return Method

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 12.4E

See similar textbooks

Similar questions

Deuk Seon have the following investment centers. Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter. Department Invested Assets Income from Operations Rate of Return on Investment Min. Rate of Return Min. Amt. of Income from Operations Residual Income Taek (a) (b) (c) 16% P128,000 P10,000 Jung Hwan P850,000 P153,000 (d) 12% (e) (f) Sun woo P825,000 (g) 20% (h) (i) P24,000 Dong Ryong (j) P129,000 24% (k) P60,000 (l) (a) Determine the missing items, identifying each by number. (b) Which division is most profitable in terms of income from operations? (c) Which division is most profitable in terms of rate of return on investment?
In a company, the development and project team faced two opportunities, and evaluated each opportunity based on basic criteria and the results were Table 2:1 Comparison between opportunity A and opportunity B Standards Standard weight opportunity A opportunity B Consistency with the company's vision. 0.2 5 4 the expected cost. 0.15 4 5 Increase market share. 0.05 4 4 expected return. 0.1 2 3 advanced technology. 0.05 2 4 Expected time to start production. 0.15 4 5 Legislative approval. 0.1 2 5 product price. 0.2 5 4 Note 1: The chance can take a score from 1 to 5 on each criterion Note 2: The weight of the criterion has the relative importance of each criterion compared to the other criteria Based on the result of the comparison, what is the opportunity that the company is supposed to work on? Preparing a Request for Proposals Document (RFP): Before discussing the method of preparing a…
The Company has three potential projects from which to choose. Selected information on each of the three projects follows: Project A Project B Project C Investment required $44,400 $55,700 $53,100 Net present value of project $49,100 $74,100 $69,100 Using the profitability index, rank the projects from most profitable to least profitable. A, B, C B, A, C B, C, A C, B, A
Andrew Oxnard, chief financial officer, has been asked by Harry Pendel, chief executive officer and co-founder of Pendel & Braithwaite, Ltd. (P&B), to analyze two capital investment projects (projects A and B), which are expected to generate the following profit (p)streams: Profit Streams for Projects A and B period ?? ($) ?? ($) 1 100,000 350,000 2 200,000 300,000 3 250,000 200,000 4 300,000 100,000 5 325,000 100,000 Total 1,175,000 1,050,000 Profits are realized at the end of each period. Assuming that P&B is a profit maximizer if the discount rate for both projects is 12%, which of the two projects should be adopted?
The company is in search of resources for a new investment of TL 3,000,000. As a financial manager, a) Find the current weighted average cost of capital according to the resource distribution below. b) What kind of financing strategy would you suggest for the investment project in question?
Question1: 1. Determine the Payback Period and write a conclusion for the two projects E and R based on the information provided in the table below: Year Cash Flow (E) Cash Flow (R) 0 -3700 -2900 1 400 500 2 500 600 3 700 700 4 800 900 5 1000 1100 6 1200 1300 Question2: 1. Discuss the critical importance of work schedule in project management.2. Discuss the contribution of cost estimation in the completion of successful project.3. A firm is planning a project which consists of the following ten jobs and precedence relations are identified with their node numbers: Jobs (i-j) 1-2 1-3 2-3 2-4 2-5 3-5 4-7 5-6 6-7 7-8 Durations (days) 9 5 12 7 8 11 10 3 4 6 a. Draw an arrow diagram representing the project.b. Determine the critical pathc. What is the duration of the project? Question3: A company is planning to purchase a new machine to expand the range of its products.…
NEED ASAP!!! This involves evaluation of (and decision about) projects a) Capital budgeting b) Net present value c) Initial investment outlay The cost of alternative 'A' is $25.000 and the cost of alternative 'B' is $20,000. In managerial accounting, the difference of $5,000 in costs of two alternatives would be termed as: a)differential cost b)extra cost c) additional cost
The company is in search of resources for a new investment of TL 3,000,000. As a financial manager,a) Find the current weighted average cost of capital according to the resource distribution below.b) Discuss, what kind of financing strategy would you propose for the investment project in question.
All the parts are under one questions and per your policy can be answered in full. 3. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Garida Co.: Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,800 5,100 5,000 5,120 Sales price $22.33 $23.45 $23.85 $24.45 Variable cost per unit $9.45 $10.85 $11.95 $12.00 Fixed operating costs $32,500 $33,450 $34,950 $34,875 This project will require an investment of $20,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of…
assuming cost of capital of 10% and then answer the following questions: 1. if the company decides to give a bonus to managers based on Residual Income, Which segment’s manager will get the bonus? a) Segment D b) Segment B c) Segment C d) Segment A 2. If the company decides to give a bonus to managers based on ROA, which segment's manager will get the bonus? a) Segment B b) Segment A c) Segment C d) Segment D
NOTE: Provide a format and show your work (example: N = 6, PV = XXX, I = X%, etc.) 1. As the project manager at Jelz, Inc., you are considering a project that will cost $4,276 and produce cash flows of $1,050 in year 1, $1,250 in year 2, $1,250 in year 3, and $1,550 in year 4. Find the rate of return for the project and determine if you should take the project if your required rate of return is 7.15%. (This is a 2 part question, make sure you answer both parts. Numerical answers should be rounded to 2 decimal places.) 2. You are looking to buy a car. You can afford $550 in monthly payments for five years. In addition to the loan, you can make a $6,000 down payment. If interest rates are 7.25 percent APR, what price of car can you afford (loan plus down payment)? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Please describe NPV, IRR and their relationship. How do you evaluate each for making an investment decision? That is, what is a favorable NPV and IRR for making an investment decision. If you were developing a capital budgeting process at your employer, how would you prioritize your projects? What is the NPV when IRR = WACC, IRR>WACC, and IRR<WACC? There is a duplex for sale in Absecon for $700,000 at this time. It has 2 units that generate a total of $25,000 in gross rent. The property taxes are $4,000, commercial property insurance is $2,000, flood insurance is $1,000, and annual maintenance is $2,000. You expect to sell it in one year at a price growth of 0%. What is the NPV with a WACC of 10%. Is the IRR greater or less than the WACC? Would you invest in this project and why?