Ariel Company for the manufacture of cotton clothes in Turkey sells 40% of its production in Turkey and sells 10% of its production in Arab countries, and 20% in Europeancountries. The company is studying to find new markets for its products. The administration aims to bring its sales in Europe to 40%. In order to achieve this goal, it willhave to invest heavily. In recent years, therefore, the company decided to build a new facility. The desired new location should be either in Jordan or Tunisia. The followingare the data for the estimates related to each location.JordanTunisInitial investment$4,000,000s3.000.000Estimated useful life10 years10 yearsAnnual cash inflows$1.300,0005900,000Annual cash outflowsS600,000$350,000Annual revenues (accrual)s800,000$600,000Annual expenses (accrual)$400,000$360,000Estimated salvage value$600,000Discount rate12%125Instructions:(aCalculate the cash payback period for each alternative.(b) Calculate the net present value for each alternative.(a Calculate the profitabilit index, for each alternative(d) Calculate annual rate of return, for each altemative(e) Discuss the implications of your findings in each of the previous cases.

Net present value refers to the net current worth of a series of cash flows occurring at different…

Ariel Company for the manutacture of cotton clothes in Turkey sels 40% of its production in Turkey and sels 10s of its production in Arab countries, and 20% in European countries. The company is studying to find new markets for its products. The administration aims to bring its sales in Europe to 40%. In order to achieve this goal, it will have to invest heavily, In recent years, therefore, the company decided to build a new facility, The desired new location should be ether in Jordan or Tunisia. The following are the data for the estimates related to each location. Jordan Tunis Intial investment $400 5300 Estimated useful ife 10 years 10 years Annual cash inflows $1.300,000 s900,000 Annual cash outfiows so0.000 53s0,000 Annual revenues (accrual) S600.000 Annual expenses laccrual) suo0.000 S60.000 Estimated salvage value S600,000 Discount rate 125 125 Instructions (aCalculate the cash payback period for each alternative.

Ariel Company for the manutacture of cotton clothes in Turkey sels 40% of its production in Turkey and sels 10s of its production in Arab countries, and 20% in European countries. The company is studying to find new markets for its products. The administration aims to bring its sales in Europe to 40%. In order to achieve this goal, it will have to invest heavily, In recent years, therefore, the company decided to build a new facility, The desired new location should be ether in Jordan or Tunisia. The following are the data for the estimates related to each location. Jordan Tunis Intial investment $400 5300 Estimated useful ife 10 years 10 years Annual cash inflows $1.300,000 s900,000 Annual cash outfiows so0.000 53s0,000 Annual revenues (accrual) S600.000 Annual expenses laccrual) suo0.000 S60.000 Estimated salvage value S600,000 Discount rate 125 125 Instructions (aCalculate the cash payback period for each alternative.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 14E

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