Manvir purchased a franchise agreement to distribute electronic gadgets for 9 years. The agreement cost $1,700,000 and she had to make investments of $875,000 for the first 2 years to set up her showroom. The franchise generated $1,075,000 in profits each year from the 1st year to 9 years afterwards. At the end of year 9, she sold the furniture in her showroom for $110,000. a. What is the Internal Rate of Return (IRR)? b. Should she have proceeded with this plan if her cost of capital was 14%?
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OLA #11.3
Manvir purchased a franchise agreement to distribute electronic gadgets for 9 years. The agreement cost $1,700,000 and she had to make investments of $875,000 for the first 2 years to set up her showroom. The franchise generated $1,075,000 in profits each year from the 1st year to 9 years afterwards. At the end of year 9, she sold the furniture in her showroom for $110,000.
a. What is the
b. Should she have proceeded with this plan if her cost of capital was 14%?
Please reply using details with algebra
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- During the last five months of the year, Dwana opens a new Internet telecommunications business called Dwan-Com. Dwan-Com bills 50,000 of revenues, but receives only 40,000 cash. Dwan-Com incurs 3,000 of supply expenses, and 41,000 of labor costs. Dwan-Com pays for 2,200 of the supplies and 38,000 of the labor costs in the current year. a. What is Dwan-Coms taxable income if it elects the cash method of accounting? b. What is Dwan-Coms taxable income if it elects the accrual method of accounting? c. What method of accounting do you recommend that Dwan-Com elect?Jocelyn runs her own photography business and has done for the past 10 years. Her business income has remained relatively stable over the last 5 years, at around $1m. On 20 May 2021 Jocelyn purchased a new digital camera for $4,400. Assume that the camera as having an effective life of 5 years according to the Commissioner's ruling. On 1 September 2021, Jocelyn decided to upgrade her camera in order to produce the highest quality brochures, photos and documents for her clients. She paid $12,000 for the latest high-end digital camera. She traded in her old camera for $2,400 when she purchased her new camera. Assume the effective life of the new camera is 5 years. While the cameras are for Jocelyn's use in her business, she has sometimes used them to take family photos and photos of her hiking trips due to the superior quality of the cameras. Jocelyn’s personal use of the cameras amounts to 10%. Jocelyn is registered for GST (so you must account for this). Step through the criteria,…“Louis's firm had the following situations during the year: Louis's CEO purchased a Ferrari for personal use and charged it to the company. Louis added five additional weeks to its fiscal year so it could improve its income. The accounting period for the previous years were 52 weeks. Equipment with a cost of £100,000 is reported at its market value of £150,000. Recently, Louis purchased a beach house for his personal use. However, he plans on using it for company retreats and for hosting large clients. Hence, he decided to list the asset and the corresponding liability for this reason (he used a loan to purchase this asset). Louis included £10,000 in accounts receivable and retained earnings for a service that he will provide next year. Since he is an honest man and will provide the service, he decided to record the amount this year. The company had paid £3,000 for insurance but uses only £2,000 during the period. The accountant has recorded £3,000 as insurance…
- (a) Michael is an Internet service provider. On December 31, 2009, he bought an existing business with servers and a building worth $400,000. During his first year of operation, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000. What was Michael’s: (i) gross investment during 2010 (ii) depreciation during 2010 (iii) net investment during 2010 (iv) capital at the end of 2010 (b) Lori is a student who teaches golf on the weekend and in a year earns $20,000 after paying her taxes. At the beginning of 2010, Lori owned $1,000 worth of books, CDs, and golf clubs and she had…Mr. Don is the director of A-Design Inc., a federally incorporatedcompany in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry. A-Design invested $100,000 in a production machine, which has a useful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company. Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Do a discounted cash flow analysis and determine the best option offered by Mr. Don to his clients, assuming a 10 % per year compound interest rate.Mr. Don is the director of A-Design Inc., a federally incorporatedcompany in Canada, specializing in the design and manufacturing ofarmrests for the wheelchair industry. A-Design invested $100,000 in aproduction machine, which has a useful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company. Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Assuming an interest rate of 5% per year compounded every 6 months over aperiod of 5 years on the money put in the bank, how much will A-Design have in its bank account at the end of the fifth year?
- Mr. Don is the director of A-Design Inc., a federally incorporatedcompany in Canada, specializing in the design and manufacturing ofarmrests for the wheelchair industry. A-Design invested $100,000 in aproduction machine, which has a useful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company. Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Assuming an interest rate of 5% per year compounded monthly over a period of 5 years on the money put in the bank, how much will A-Design have in its bank account at the end of the fifth year?Jowel Smithers and Sonda Richards merged all of their financial resources and opened a mobile phone sales and repair business in the upscale Domain Mall in Los Angeles 10 years ago with an initial investment of $2.5 million. As revenues increased significantly over the first 4 years, they took out salaries that totaled $500,000 each year for the two of them. With increased success, they decided to pay themselves a total of $1.7 million each year from years 5 through 10. They hoped at the initiation of the joint business venture to make 10% per year on the investment in terms of salaries. (a) Determine the equivalent future worth after 10 years of the salaries. (b) If they had been satisfied with a $5 million future worth, calculate the size that the initial investment could have been instead of the $2.5 million, provided they had the funds available.Mr. Don is the director of A-Design Inc., a federally incorporated company in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry.A-Design invested $100,000 in aproduction machine, which has auseful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Assuming an interest rate of 5% per year over a period of 5 years on the moneyput in the bank, how much will A-Design have in its bank account at the end of thefirst year?
- Mr. Don is the director of A-Design Inc., a federally incorporated company in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry.A-Design invested $100,000 in aproduction machine, which has auseful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Do a discounted cash flow analysis and determine the best option offered by Mr. Don to his clients, assuming a 10 % per year compound interest rate.Mr. Don is the director of A-Design Inc., a federally incorporated company in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry.A-Design invested $100,000 in aproduction machine, which has auseful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Calculate the depreciated cost per year of the machine.Mr. Don is the director of A-Design Inc., a federally incorporated company in Canada, specializing in the design and manufacturing of armrests for the wheelchair industry.A-Design invested $100,000 in aproduction machine, which has auseful life of 10 years, and put $10,000 in its bank account. In an attempt to improve company sales and profits, Mr. Don planned tooffer two purchasing options to the clients of his company Option 1:$250 deposit upfront$500 yearly fee for 5 years Option 2:$1300 deposit upfront$300 yearly fee for 3 years Assuming an interest rate of 5% per year over a period of 5 years on the money put in the bank, calculate the simple interest and the compound interest earned by A-Design at the end of the fifth year?